Stock Market Outlook entering the Week of October 1st = Downtrend
- ADX Directional Indicators: Downtrend
- Price & Volume Signals: Downtrend
- Elliott Wave Analysis: Mixed
ANALYSIS
The stock market outlook kicks off October in a downtrend.
The S&P500 ($SPX) fell 0.7% last week, breaking a major level of support; a trendline dating back to the October 2022 low! A quick recovery is needed this week in order for the trend to remain valid. As of Friday’s close, the index was ~3.5% below the 50-day moving average, and ~2% above the 200 day moving average.
SPX Price & Volume Chart for the Week of Oct 01 2023
The ADX directional indicators remain bearish, as does the price/volume indicator. The SPX did start a rally attempt on Wednesday. and will need to show a follow-through on higher than average volume sometime after Monday.
SPX Elliott Wave Analysis for the Week of Oct 01 2023 – Bearish View
No change in Elliott Wave analysis either. The index completed a 3rd Minute wave on Wednesday, but we still don’t know if the Minor wave is corrective (3 wave pattern) or impulse (5 wave pattern).
SPX Elliott Wave Analysis for the Week of Oct 01 2023
The RSI(5) shows a bullish divergence, and the MACD histogram generated an inflection, increasing the probability of rising prices over the next 2 weeks or so. Near-term resistance is at 4430, support at 4238.
Looking at the patterns from a longer term (weekly) viewpoint has something for both bulls and bears. The bullish count shows that the current downtrend should be complete, with an oversold RSI(5), a bounce off the 34 week moving average, and no violation of the Minor 1 high of 4195.
SPX Elliott Wave Analysis for the Week of Oct 01 2023 – Bullish Count
The bearish count shows the SPX in the middle of the first wave down, with a bearish cross-over in the MACD, an increasing rate of change in the MACD histogram.
SPX Elliott Wave Analysis for the Week of Oct 01 2023 – Bearish Count
COMMENTARY
Last week did not disappoint, in terms of money flow and price action, during the week. But you’d be forgiven for not noticing, as the index ended the week almost break-even. Headline PCE for August came in at +3.5% y/y, slightly higher than the +3.4% y/y reading in July. Core PCE fell to +3.9% y/y, from +4.3% y/y in July.
After a lot of hand wringing and gnashing of teeth, the U.S. Senate passed a continuing resolution on Saturday, which was then signed into law. The CR keeps the government funded for another 45 more days. Hopefully, the legislative branch can get their act together and finalize funding within that time period.
This week, we get JOLTS and Non-Farm Payroll data, but the main event starts next week with big banks set kick off Q3 earnings season.
Best to Your Week!
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