Stock Market Outlook entering the Week of October 3rd = Downtrend
- ADX Directional Indicators: Downtrend
- Price & Volume Action: Mixed
- Elliott Wave Analysis: Downtrend
The stock market outlook kicks off the week in a downtrend, as 2 signals finally turned bearish at the same time during last week’s trading sessions.
The S&P500 ($SPX) opened last week at the 50-day moving average, but it’s actually the 34-day moving average that provided resistance.
The ADX shows a strengthening bearish trend, keeping that signal in a downtrend. Price and volume signal moves from an uptrend back to mixed, as price was unable to hold the 50-day moving average after last Monday. Distribution days are still relatively low.
For Elliott Wave, the market took the second option from last week’s post:
Wave [a] of Wave 4 completed, we’re in Wave [b], and Wave [c] will retest the 4300 low to complete the correction near 4246.
The correction appears to be Minor waves (rather than Minute), so I made a few changes to the wave count.
Concerns over interest rates and inflation are scapegoats for the recent sell-off. Rising rates tend to put a dent in large cap tech stocks, so we may see indexes like the NASDAQ lag small caps. It’s no surprise that the S&P500 struggled lately as well, given that 20% of that index is Apple, Amazon, Google, Microsoft and Facebook.
Timing-wise, the last time we had a ~5% correction was? Last September! It’s possible that we have a similar October in the works too, which would entail a rally back near the all time highs, then a sell-off back to the September low. None of that would be a surprise, given October’s historical volatility.
Best to Your Week!