The Safe Investing Blog

Stock Market Outlook entering the Week of January 27th = Uptrend

• 20/50 Day Moving Averages: Uptrend
• Price & Volume Action: Uptrend
• Objective Elliott Wave Analysis: Uptrend

COMMENTARY
No change in signals after a fairly quiet week of trading; the S&P opened at 2671 and closed at 2665.  Zooming out, it looks like prices are at an inflection point.  The S&P closed just above the 2018 Q4 downtrend two weeks ago but didn’t make much progress last week.

2019-01-27 – SPX Trendline Analysis – Weekly

In fact, the S&P appears to have closed below the recent uptrend line; without a real “lower high” closing price, the uptrend was always tentative. So there’s a small chance that the Q4 downtrend isn’t complete.

Switching to the near-term, the S&P ($SPX) found support at the 50-day moving average, but couldn’t sustain the pace its uptrend, as mentioned above.  And prices still haven’t broken the 2018 Q4 downtrend line.

2019-01-27 – SPX Trendline Analysis – Daily

The DI+ / DI- continues to signal a bullish environment.  As mentioned last week, we haven’t seen a lower weekly close in some time.  I could imagine a scenario where prices meet resistance at the 2018 Q4 downtrend and lose some ground before establishing a real uptrend and moving higher the rest of Q1.

2019-01-27 – US stock market averages

The averages start the week above their 50 day moving averages.  Price and volume also looks positive, as the S&P hasn’t seen a distribution day since early January.  And finally, OEW puts the probability of an uptrend at 80% this week, and odds of a bull market at 50%.

On the plus side, any extension of the Q4 downtrend or signal change is likely a buy the dip opportunity.  And no whipsaw last week!

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments.  The goal is to give you to give you an example of how to analyze and continuously improve your own systems.

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of January 20th = Uptrend

• 20/50 Day Moving Averages: Uptrend
• Price & Volume Action: Uptrend
• Objective Elliott Wave Analysis: Uptrend

COMMENTARY
Another solid week of gains in the stock markets has the weekend market outlook showing green.  Reports of progress on a trade deal with China seems to be the catalyst.  Watch the $VIX; it’s approaching 16, which has been a floor during the recent downtrend.  And a short trading week this week, as US markets are closed Monday to observe Martin Luther King Day.

All the indexes start the week above their 50 day moving averages, with the S&P closing above that level on Thursday, which puts this signal back to an uptrend.

2019-01-20 – us stock market averages

Price and volume also looks positive, with prices back above the 50-day moving average and accumulation days outpacing distribution.  Overall, trading volume is still below average, and lower than I’d expect for the speed with which market prices have rebounded.

OEW is evaluating 5 criteria to determine if the market will retest the December low, or if the bear market has already ended:  the size of rally, NDX/NAZ and SPX/DOW wave patterns, rebound percentage from the low, and breadth rise from the low.  Right now, the size/percentage of the rally and NDX/NAZ criteria point to an end to the bear market, putting the odds of an uptrend at 60%.  So this signal moves to an uptrend as well.

2019-01-20 – SPX Trendline Analysis – Daily

The S&P ($SPX) punched through the 2,600 resistance level mentioned in the last update.  The DI+ / DI- crossed over early in the week, supporting the case for an uptrend.  Next up is the downward trendline created in 2018 Q4; piercing that level would confirm an end the bear market.

2019-01-20 – SPX Trendline Analysis – Weekly

Switching to a weekly view, prices appear to have broken the downtrend created in Q4.  But there hasn’t been a higher “low”, in terms of closing prices yet, so it’s hard to define the new uptrend.  Weekly prices have closed at or near the high for the past 4 weeks, creating a steep trendline.  Even a trend drawn through the intra-week lows is steep.  At this rate, the S&P would be back to the 2018 Q3 highs within the next 3-4 weeks!

The situation reminds me of the last week in November 2018.  All the signals went green and everyone pointed towards a year-end rally. Then KABLAMO, prices dropped like a rock.  It just feels like a whipsaw is coming, and within the next week or two, I’ll be writing about a signal change again.  Fool me once, shame on you.  Fool me twice…participate and protect indeed.

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments.  The goal is to give you to give you an example of how to analyze and continuously improve your own systems.

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of January 13th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Mixed
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Constructive price action continues, but so does the downtrend.

All of the indexes are above their 20 day and are posed to test their 50 day moving averages.  Continuing the prior week’s trend, prices rose while trading volume declined; not the best situation for a new uptrend.  A few growth stocks did indeed break-out, but not nearly enough to power the markets higher.  I’m still looking for indexes to break above their 50-day moving average before changing these signals.

2019-01-13 – US Stock Market Averages

OEW continues to signal a downtrend.  Tony reiterated his call that the S&P takes another run at the lows before calling a bottom, and provided some research to bolster the claim:

“While all this was going on we were doing some research into historical market activity that is similar to this. We found five events[…]. In every one of the five instances the market rallied between 7.5% to 13% after the significant low. In four of the five instances, when the rally concluded, the market retested the lows. The one exception still had a 61.8% pullback.

We also looked into momentum measures…there are only three instances. In each of the three instances momentum rose 20% to 25% before the market reversed and went back to retest the lows. It is currently up 17%.

Probabilities suggest a decline soon that mostly likely retests the lows.”

The S&P ($SPX) maintained upward momentum last week, but ran into resistance around 2600.  Prices reached a high of 2595,2597,2596 on Wednesday, Thursday, and Friday, respectively.  Combined with falling trading volumes, we may have just found a near-term high.

2019-01-13 – $SPX Technical Analysis – Daily

Switching to a weekly view, the market closed at its 10-week moving average; could this be contributing to the lack of progress we saw on the daily chart during the back half of last week?

2019-01-13 – $SPX Technical Analysis – Weekly

Either way, the weekly view indicates that we should see a confirmation of direction soon, because the downtrend line rests at 2,650 (+2%), and the 40-week moving average is right around 2,700 (+4%).

Are we out of the weeds?  I have no idea.  I know where I’d like them to go, but the markets tend to discount my opinion…as they do everyone else’s.   The Fat-Pitch has some historical perspective this week, similar to OEW, with a positive twist:

“Sharp falls of at least 15% have a strong tendency to have their original low retested in the weeks/months ahead. But what is notable this time is the exceptional breadth that has driven the indices higher: in the past 70 years, this has never taken place within the context of a bear market. The Christmas low may still get retested, but it seems likely to hold and new highs are probably ahead. Nothing in the stock market is ever guaranteed, but this has been the consistent, historical pattern.”

We’ll need a catalyst to turn the rally into a new uptrend; “FANG” earnings maybe?

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has functioned as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of January 6th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Mixed
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Happy New Year! With payrolls coming in WAY above estimates (73%), and a Fed speech promising “to adjust policy quickly and flexibly” if needed, the markets were in a festive mood last week.

The NYSE and Russell 2000 start the first full week of trading in 2019 above their 20 day moving averages, while the S&P, NASDAQ, and DJIA sit just below that mark.  All of them are still below their 50 day (and 200 for that matter), so no change in the signal.

2019-01-06 – us stock market averages

The price/volume combo shifts to mixed to start the week.  Price action has been constructive, and Friday appears to give us a follow-though day.  But trading volume wasn’t great, few growth stocks are ready to break-out, and prices need to recover their 50-day moving average for a sustainable uptrend to take hold.

OEW continues to signal a downtrend.  Tony still thinks we need to take another run at the lows before calling a bottom and declaring an end to our 3 month bear market.  But that doesn’t mean we can’t or won’t have a small rally first.

After finding support around 2,350, the S&P ($SPX) found another floor near 2,450.  Trading volume wasn’t great, but holiday weeks tend to be that way.  The ADX still shows a bearish trend.

2019-01-06 – spx technical analysis – daily

Switching to a weekly view, prices have some work to do before reaching their next resistance level.

2019-01-06 – spx technical analysis – weekly

It seems that all the pundits have jumped ship and are saying 2019 will be challenging for investors…I guess that means we shouldn’t be surprised to see a massive rally!  Either way, now is a great time to review your trading in 2018 and make improvements to ensure that 2019 will be a profitable year (the “Adjust” part of my process).

For example, in 2017’s performance review, I mentioned that the market outlook may need an upgrade.  The moving average and price/volume signals were very similar, and I was also looking for a way to decrease the impact on “whipsaws” (quick price changes that generate false or bad signals) on trading system performance.

And at the start of Q2, you may have noticed that some trendline analysis, along with the ADX indicator, was added to the market outlook.  The goal was to proactively vet new signals, real-time, during 2018.  I’ll publish a comparison as part of the upcoming 2018 performance review.  And, if there’s an improvement, look for some changes in the weekly posts.

How did your process fair during 2018?  Was it robust enough to handle changes?  What improvements will you be making in 2019?

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has functioned as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of December 30th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Downtrend
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Better late than never?  We had to wait until after Christmas, but Santa Claus delivered a rally.  Not as much as we would have liked, I’m sure, but better than another sell-off.  No change in outlook though.  Equities have some work to do before giving the all clear to put your money at risk.

On the bright side, I don’t think we’re in danger of a 2008-2009 style sell off just yet (see last week’s article “Great Recession Revisited”), so your portfolios should recover a bit.

All the indexes are well below their 20, 50, and 200 day moving averages.

2018-12-30 – US Stock Market Averages

The price/volume combo remains in a downtrend as well.  There are only a handful of names on my growth stock list that have anything even close to resembling a solid price chart.

OEW still calls for a downtrend, and thinks we could take another run at the lows.  But, per their analysis, that could be the end of the downtrend…even the bear market(!).

The S&P ($SPX) found support around 2,350, and looks to have broken the falling trendline in play for most of December.  Prices still have to recover ~10% just to get back to the downward trendline and/or 200-day moving average!  The ADX reflects the bearish we experienced last week.

2018-12-30 – SPX Technical Analysis – Daily

Switching to a weekly view, the 2395 support level held and prices are resting on the 2480 support/resistance level.

2018-12-30 – SPX Technical Analysis – Weekly

After the bounce back, bulls will say we’re a week into a V-shaped recovery.  The bears will say we need another test of the lows to truly bottom.  Our job is to make money or not to lose a lot if we decide to initiate positions.

We’ve got another holiday shortened trading week coming up as we celebrate the new year.

Wishing you investing success in 2019!

Happy New Year!

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has performed as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.