The Safe Investing Blog

Stock Market Outlook entering the Week of November 28th = Uptrend

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

ANALYSIS
The stock market outlook still shows an uptrend in progress, despite a rough week for U.S. stocks.  After reaching an all time high to start last week, COVID concerns derailed the rally and the S&P500 ($SPX) ended the week down 2.2%. The index now sits ~1.5% and 7% above the 50 and 200 day moving averages, respectively.

SPX Price & Volume Chart for the Week of November 28 2021

The ADX directional indicators flipped to a downtrend on Friday, but price/volume signal remains in an uptrend. Price remains above the 50-day moving average, and 2 more distribution days brings the total to 5.

SPX Elliott Wave Analysis for the Week of November 28 2021

Elliott Wave also maintains an uptrend overall, with the S&P in a 2nd wave correction. Not too surprising given the weakness / 5th wave characteristics mentioned last week. With a completed Minor 1, we’re now looking for the bottom of minor 2, which could be anywhere between the current price and the October low near 4275.

The typical expectation for a second wave is a 61.8% retrace of the first wave. Minor Wave 1 was 465 points, so the retrace would be 287 points from the top (4743): 4455 or so (another ~3% drop from Friday’s close).

COMMENTARY
The news of a new COVID strain hit the wires at the worst possible time; ahead of a traditionally low-volume trading day with most market participants away from their desks.  Automated trading programs and algorithms probably keyed on all the news reports related to COVID and sold holdings to be on the safe side.  In that light, Friday’s volatility isn’t too surprising and is most likely a knee-jerk reaction.

That said, corrections are a healthy part of market action, and this one may not be over yet.  Keep an eye on government and corporate responses to the Omicron variant.  Travel bans and lockdowns, even if they’re short-lived, won’t do stock markets any favors.  But they may offer you an early gift, in the form of another buying opportunity heading into year end.

Best to Your Week!

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Stock Market Outlook entering the Week of November 21st = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend, as the S&P500 ($SPX) spent the week grinding higher.  From a moving average perspective, the index starts the week in roughly the same position as it did last week: ~4% and 10% above the 50 and 200 day, respectively.

SPX Price & Volume Chart for the Week of November 21 2021

The ADX continues to highlight bullish price action and trend, as does price/volume.  Friday was a lower close on higher volume, thanks in part to November options expiration.  But the price movement wasn’t larger enough to qualify for a distribution day.

SPX Elliott Wave Analysis for the Week of November 21 2021

Elliott Wave maintains an uptrend.  Both the RSI and MACD show negative divergences verses the rising price action; common for 5th waves, but also a sign of a weak rally.

COMMENTARY
A short trading week on tap in the U.S., due to the Thanksgiving Holiday (markets closed Thursday and shortened trading hours Friday).

Historically, Thanksgiving week is a positive one for the markets, but the possible nomination of the next chairperson of the Federal Reserve is a wildcard this year. Personal spending and income data and the PCE index for October are released on Wednesday, which are sure to add fuel to the inflation debate.

Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of November 14th = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend, as the S&P500 ($SPX) took a bit of a breather last week. The index sits ~4% and 10% above the 50 and 200 day moving averages, respectively.

SPX Price & Volume Chart for the Week of November 14 2021

The ADX continues to highlight bullish price action and trend, as does price/volume.  Elliott Wave maintains an uptrend. The Nov 5 high could be the end of Wave [iii]…that said, the low last Wednesday could have been the end of Wave [iv] as well. Once the first minor wave completes, we’ll have a better idea of potential targets.

SPX Elliott Wave Analysis for the Week of November 14 2021

COMMENTARY
Inflation? Inflation.

As expected (at least if you read this blog), inflation readings continue to come in above expectations on both ends of the economic spectrum. The Producer Price Index (PPI), which measures the inflation seen by people that make something, came in at a whopping 8.6% year over year. The Consumer Price Index (CPI), which measures the price increases that you and I see when we buy something, increased 6.2% y-o-y. This figure is referred to as the “headline” CPI number or “total” inflation.

When you hear or read about the U.S. Fed’s inflation target of 2%, that refers to “Core CPI”. Core CPI excludes food and energy prices from the calculation, because those goods tend to have volatile prices. This omission usually provides the Fed some wiggle room, because inflation levels are almost always lower when you remove two of the biggest components. But even Core CPI rose 4.6% y-o-y, so that measure doesn’t provide the Fed any cover at the moment.

The insidious part about inflation is the impact; what it leaves in its wake.  Next year, prices could be just slightly above today’s level, which would show something like 1% inflation y-o-y. The Fed could claim that all is well!  Prices have stopped going up, and inflation was indeed transitory.

For consumers, the sting of inflation remains, because the prices that we pay are still “high”; they’re just not getting any “higher”. The actual impact of inflation is only transitory for you and me if prices go back down to earlier levels, which requires deflation and deflationary policy.

What does all this mean for your investments?

Near-term, the U.S. economy and inflation are likely to continue their rise.  In that type of environment, stocks and commodities would continue doing well.  As far as sectors are concerned, industrial, technology, and energy would benefit.

Eventually, the inflation numbers will begin to decline, if for other reason than the comparison with 2021’s higher than normal increases.  At that point, growth will be the wildcard.  If economic growth continues, then stocks remain good plays.  If growth slows, then equities aren’t as attractive overall, and defensive sectors like utilities likely to outperform.  In both cases, your asset allocation strategy is key (assets, sectors within asset classes, strategies, etc.).

Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of November 7th = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend, as the S&P500 ($SPX) accelerated higher the first week in November.  The past 5 trading days added another 2% to the S&P’s already impressive October performance. The index sits ~11% above the 200-day, and 5% above the 50-day. Year to date, the S&P500 is up an impressive 25%.

SPX Price & Volume Chart for the Week of November 07 2021

The ADX shows bullish price action and trend, as does price/volume.

SPX Technical Analysis for the Week of November 07 2021

Elliott Wave still shows an uptrend; the 3rd wave of Minor wave 1 rolls on.

COMMENTARY
As signaled for several months, the U.S. Federal Reserve will start to taper monthly bond purchases, reducing them by $15 billion per month. They’re starting from $120 billion per month, so the program won’t be completely stopped until next June.

But the Fed still sees inflation as transitory, so there’s no rush to raise interest rates. Basically, this means that the Fed will continue to provide stimulus to the economy, just not as much as they have been.

Historically, November and December are positive months for the S&P. Add the better than expected October jobs report, and you’ve got good reason to be bullish heading into 2022.

But don’t blindly chase! The VIX hit 15 mid-week, which has been the low end of it’s price range for some time now. The S&P’s price level, relative to the 200 day, is also extended. So use consolidations and corrections to your advantage, knowing that they have a high probability of being a buy the dip opportunities.

Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of October 31st = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend. Happy Halloween!

SPX Price & Volume Chart for the Week of October 31 2021

The S&P500 ($SPX) continued higher to close out October. The index now sits ~9% above the 200-day, and 3% above the 50-day. Over the past 19 trading days, the S&P rose ~325 pts (~7.5%). If that pace continues over the rest of 2021 (43 trading days left), the S&P would end the year near 5300!

The ADX and price/volume indicators remain bullish, and the index added 1 distribution day last week.

SPX Technical Analysis for the Week of October 31 2021

Elliott Wave still shows an uptrend; appears to be the 3rd wave of a Minor 1 wave. A small divergence developed in the RSI; a short, 4th wave correction isn’t out the question near term.

COMMENTARY
While September and October lived up to their reputation as volatile months, October gave investors a lot more treats than tricks this year. Essentially hitting the low on the first trading day, the S&P rallied higher for most of the month!  Not even the disappointing results from Amazon and Apple or rising treasury yields were enough to slow it’s roll.

A little over half of the S&P500 has reported earnings so far, and Q3 earnings continue to exceed expectations (some big tech names notwithstanding).

The biggest issue facing the economy right now isn’t COVID or infrastructure spending packages. It’s the supply chain; more specifically throughput. There’s either too much supply verses the capacity to move it, or there’s not enough supply to meet demand. Underpinning both are labor issues. And unfortunately, there are no easy fixes…let alone quick ones.

With the S&P at all time highs, last week was an excellent time for some profit taking / asset reallocation. The smart move was to prune your winners and move the profits to other areas that were taking a break. That could have been something like commodities, if that’s part of your portfolio.  Or, if you’re focused on stocks, it could have been something like energy/financial sector ETFs…even the Russell 2000 index.

Happy Halloween and Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of October 24th = Uptrend

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

ANALYSIS
A strong week of trading put the S&P500 back at all time high’s and all three signals in the green, so the stock market outlook remains in an uptrend to start the last week of October trading.

SPX Price & Volume Chart for the Week of October 24 2021

The S&P500 ($SPX) rallied again last week, putting the index back at all time highs, albeit a bit extended from technical support levels.  The prior support-turned-resistance trendline did little to slow the advance.

The ADX shows a bullish trend in place, and price/volume action remains in an uptrend as well. The Elliott Wave uptrend remains in place too.

SPX Technical Analysis for the Week of October 24 2021

COMMENTARY
S&P500 companies continue to outperform, in terms of Q3 earnings.  According to FactSet, 84% of companies have beaten EPS estimates to date for Q3, which is tied for the 3rd highest percentage since FactSet began tracking this metric in 2008.

Source: FactSet

I expect some volatility is coming our way this week, in terms of individual stocks names, since so many companies are reporting.  Here are some you might be interested in, courtesy of Earnings Whispers:

Source: Earnings Whispers

Now that we’re back at all time highs, please, please, please don’t get complacent. The S&P500 is up 21% year to date and hasn’t seen a proper 10% correction since the pandemic crash in early 2020.  The best time to prune your positions is when they’re profitable.  If you do so, you can buy more shares when the market corrects again.

Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of October 17th = Uptrend

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

ANALYSIS
Last Thursday’s strong showing put the stock market outlook back into an uptrend, with confirmation from Elliott Wave and price/volume signals.

SPX Price & Volume Chart for the Week of October 17 2021

The S&P500 ($SPX) rallied higher last week, with Thursday’s strong move putting the market back in rally mode. Prices cut through the bearish trendline, and the index closed at it’s 50-day. Trading volume showed a follow-through day as well, putting the price/volume signal back into a uptrend. With a new rally in play, the distribution day count gets reset.

Friday’s close had the ADX directional indicators cross-over by the slimmest of margins. Since they’re essentially equal, the signal shifted to mixed, with the full expectation it will turn into an uptrend shortly.

SPX Technical Analysis for the Week of October 17 2021

For Elliott Wave, market action confirmed the bullish story told by technical indicators last week. The S&P might encounter some resistance as it tests a former support trendline, so it’s still possible that the S&P500 retests something close to 4300.

Longer-term, initial expectations are for Intermediate Waves 1 and 5 to be similar. Intermediate Wave (1) rose 1396 points over 13 weeks. If Intermediate Wave (5) is similar, then we’re looking for a ~1400 pt move from the Wave (4) low over the remainder of 2021. I admit that kind of pattern is hard to imagine right now, as it corresponds to a rally of 27%% from Friday’s close by the beginning of next year (5674 by the first week in January 2022 to be specific)!

COMMENTARY
Banks kicked off the Q3 earnings season with a strong showing. And September retail sales numbers came in strong last week, with a ~14% increase in retail spending over last September.

On the consumer side, inflation is still running above target…not that you needed a report for that info. You see it everyday whenever you spend your money! But it’s even having a large impact on the cost-of-living adjustment for Social Security now, and that hasn’t happened in a long time. The 2022 increase will be almost 6%, and that’s the highest adjustment 1982!

Best to Your Week!

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com are subject to our Terms of Service and Privacy Policy. Not a recommendation to buy or sell any security.