Weekend Stock Market Outlook – June 12 2022

Stock Market Outlook entering the Week of June 12th = Downtrend

    • ADX Directional Indicators: Downtrend
    • Price & Volume Action: Downtrend
    • Elliott Wave Analysis: Mixed

ANALYSIS
The stock market outlook remains in a downtrend after a dramatic sell-off on Thursday and Friday.  The S&P500 ($SPX) ended the week ~5% lower, and sits ~14% below the 200-day and ~8% below the 50-day.

Technical analysis of daily SPX prices

SPX Price & Volume Chart for the Week of June 12 2022

The ADX signal remains bearish, after coming ever so close to reversing last Tuesday.  The price & volume signal moves back to a downtrend, after picked up two distributions days.

Technical analysis of daily SPX prices

SPX Elliott Wave Analysis for the Week of June 12 2022

Elliott Wave puts the SPX in the last leg (Minor C Wave) of Intermediate (B). The RSI is already in oversold territory, so watch for a positive divergence in the MACD to develop as the market bottoms, similar to the price movement in early march.

COMMENTARY
The latest U.S. consumer price index (CPI) readings were released Friday morning, and came in higher than expected (again). We’ve now reached inflation levels unseen since December on 1981, all while real wage growth continues to slow!

  • Month over Month
    • Headline:  +1.0%  vs  +0.7% expectation
    • Core:          +0.6%  vs  +0.5% expectation
  • Year over Year
    • Headline:  +8.6%  vs  +8.3% expectation (a new, 41-year high)
    • Core:          +6.0%  vs  +5.9% expectation (also a new high)

This print guarantees the Fed will raise interest rates during the policy meeting later this week. Now the question is whether they stick to the 0.5% rate hike schedule they discussed last time around.

The situation isn’t any better across the pond, as the European Central Bank (ECB) is also set to raise interest rates into their own economic slowdown. The ECB confirmed a 0.25% hike in July (its first increase in more than a decade), and hinted at a larger increase in September if inflation remains high.

Adding more uncertainty (i.e. volatility) this week is Friday’s quadruple witching day, with quarterly, monthly, and weekly options set to expire. I’ve read that ~$3 trillion worth of contracts are in play, which is more than enough to impact prices.

Longer term, things continue to weaken for retailers. Three weeks ago, Target (along with Walmart) reported a big earnings miss, and reduced their earnings guidance for the year. Last week, Target announced actions to reduce inventory levels by reducing prices and canceling orders. They also lowered operating margin estimates for the quarter. The ink is barely dry on the first guide down!   It makes me wonder what’s in store for us when the next earnings season kicks off in about 1 months time.

Best To Your Week!


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