Stock Market Outlook entering the Week of February 25th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• On Balance Volume Indicator: Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, with all three signals showing green.

The S&P500 ($SPX) rose 1.7% last week.  The index sits ~5% above the 50-day moving average, and 13% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Feb 25 2024

All three signals show an uptrend in place.  However, the DI+ reading over 40 is a yellow light, especially with the overall ADX showing a weakening trend since the start of the year.

COMMENTARY
Nvidia ($NVDA) was the star of the show last week, coming through with an earnings beat Wednesday evening.  Per T1Alpha, Nvidia’s subsequent rally on Thursday (up 16.4%) was responsible for a third of the SPX’s 2% rally.

Think about that for a moment; ~30% of the move in an index of ~500 stocks came from one, single, company.  That’s amazing.

Thursday also marked the end of another streak: 252 trading sessions without a 2% move in the SPX.

Fighting the market (up or down) is always a losing proposition, so always ensure probabilities are in your favor.  Referring back to the 200-day moving average:  since the start of 1990, we’ve had 8602 trading sessions. The SPX has been 13% or higher than the 200 day moving average for 492 of those sessions.  That’s just 5% of the trading days over the past 34 years.

If the SPX is 15% or higher, the number of sessions drops to 208, or just 2.4%.

Now, I’m not saying a correction is eminent.  The SPX could move sideways for a while, which take the gap lower.  Or we could enter a period like the late ’90s with a lot chop.  In both cases, the probabilities are shifting towards downside risk, rather than upside opportunity.

This week, be on the lookout the latest Durable Goods data on Tuesday, a revised GDP figure on Wednesday, PCE data on Thursday, and ISM manufacturing data on Friday.

Best to Your Week!

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

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