Weekend Stock Market Outlook – March 5 2023

Stock Market Outlook entering the Week of March 5th = Uptrend

    • ADX Directional Indicators: Uptrend
    • Price & Volume Signals: Uptrend
    • Elliott Wave Analysis: Mixed

The stock market outlook continues in an uptrend to start the month of March, as a majority of indicators flipped back to to bullish on Friday.  Mixed economic data and negative profit margins don’t inspire much confidence either.  So if you decide to deploy your capital, do so with caution.

The S&P500 ($SPX) rose 1.9% for the week, bouncing off the 200-day moving average on Thursday and reclaiming the 50-day moving average on Friday.

Technical analysis of daily SPX prices

SPX Price & Volume Chart for the Week of March 05 2023

The ADX directional indicators flipped back to an uptrend Friday, after whipsawing twice last week.  The indicator itself declined since first turning bearish 2 weeks ago, suggesting weakening price trends.

The price & volume signal switched back to an uptrend on Friday as well, as the SPX climbed back above the 50-day. The low level of trading volume accompanying the moves on Thursday and Friday is concerning, suggesting that institutional buying was not the reason for the jump higher.

Although the market reversed higher, as expected by the Elliott Wave analysis last week, the signal remains mixed; no change in key levels from last week (3765 and 4196).

Technical analysis of daily SPX prices

SPX Elliott Wave Analysis for the Week of March 05 2023 – Bearish Count

Based on the price action last week, the subdividing count took over for the diagonal count, with a completed Minor 1.  A Minor 2 can be expected take the SPX back towards the February high (4196) in 3 waves.

Technical analysis of daily SPX prices

SPX Elliott Wave Analysis for the Week of March 05 2023 – Bullish Count

After reviewing the long term counts (see updates below), the short-term waves for the bullish count needed to be promoted one level higher, going back to October, in order to stay synchronized. So Minute [ii] Minor 2 completed at the 61.8% retracement level on Thursday. A typical 3rd wave is 1.618 times the size of the 1st wave, putting an initial Minute [iii] Minor 3 target at 4,626.

Economic data releases were basically flat (i.e. little to no change), yielding no clear direction for the state of the economy.  Of course, traditional financial media had not problem spinning each release in the direction they’re currently favoring, which doesn’t help your decision making.

As of Friday, most of the S&P500 companies have reported earnings:  revenue/sales are up 5.6% year over year, while earnings are down 2.9% (per Bloomberg).

As discussed in prior blog posts, sustained inflation would eventually create negative profit margins when a company’s costs rose faster than their prices. During 2022, profit margins declined y/y, but remained positive; companies offset higher costs of doing business with higher prices on goods and services.

Now we look to for inflation to impact the revenue/sales side of the equation, when customers can no longer afford the higher prices and/or cut back on spending all together.

This week, potential market moving events center on employment:  job openings (JOLTS) on Wednesday and non-farm payrolls (NFP) / unemployment data on Friday.

Best To Your Week!

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Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, T1 Alpha, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Long-Term Elliott Wave Updates for March

Technical analysis of weekly SPX prices

SPX Elliott Wave Analysis for the Week of March 05 2023 – Primary Y (Bearish)

Technical analysis of weekly SPX prices

SPX Elliott Wave Analysis for the Week of March 05 2023 – Primary 1 (Bullish)

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