The Safe Investing Blog

Stock Market Outlook entering the Week of March 3rd = 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 almost no change in the underling signals versus last week.

The S&P500 ($SPX) rose 0.9% last week.  The index sits ~5% above the 50-day moving average, and 13.5% above the 200-day moving average (historically elevated).

SPX Price & Volume Chart for the Week of Mar 03 2024

All three signals show an uptrend in place. The DI+ remains over 40 (yellow light).  There were no distribution days during the month of February, although trading volume was below average most of that time.

Taking a look at sectors with the S&P500, the big winner was real estate, which benefiting from the decline in rates last week. The sector rallied 3.3%, outperforming the broader index by almost 2%. Healthcare the worst sector, underperforming by ~2%.

COMMENTARY
90% of Q4 earnings season is complete and the results are in:

• Revenues: +3.4% (y/y)
• Earnings: +10% (y/y)

In case you’re wondering: No, that’s not an earnings recession!  That’s actually pretty solid earnings growth.  Soft-landing indeed.

This week, we get ISM services inflation on Tuesday, JOLTS on Wednesday, and NFP on Friday.  There are also a handful of speeds from the U.S. Federal Reserve, including two from Chairman Powell on Wednesday and Thursday.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 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!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 February 18th = 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 the index sitting just below its 52-week high.

The S&P500 ($SPX) fell -0.4% last week, accounting for only the second weekly drop since the end of October.  The index sits ~4% above the 50-day moving average, and 11.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Feb 18 2024

Both ADX and price/volume signals show an uptrend in place, within minimal institutional selling.  This week’s update sees the return of a third signal, in the form of the On Balance Volume indicator. In replacing Elliott Wave, I wanted to find a signal that was:

1. Available from free charting software like Stockcharts
2. Aligned with passive capital flows (e.g. the large volume of money that’s passively added to index funds via 401k’s)

Per Investopedia, On-balance volume (OBV) is a technical trading momentum indicator that uses volume flow to predict changes in stock price, which seems to fit the bill.  We’ll see how it holds up when the next correction hits.

COMMENTARY
Higher than expected inflation data was an unwelcome surprise for investors, and sent pundits scrambling for new narratives to justify rate cuts this year.

• January CPI (y/y)
  • • Headline
      • Actual      = +3.1%
      • Prior         = +3.4%
      • Expected = +2.9%
    • Core
      • Actual      = +3.9%
      • Prior        = +3.9%
      • Expected = +3.7%

• January PPI (y/y)
  • Headline
    • Actual      = +0.9%
    • Prior         = +1.0%
    • Expected = +0.6%
  • Core
    • Actual      = +2.0%
    • Prior        = +1.7%
    • Expected = +3.%

Immediate reaction from markets was as expected, with longer-term (>10 year) interest rates spiking higher and equities dropping.  That said, equities recovered nicely from each surprise.

Lost in the shuffle were poor retail sales figures, which were down 0.8% month over month, versus the expected for a decline of 0.1%.

A light week on tap for economic data, to be replaced with FOMC minutes on Wednesday and several speeches from Fed officials Thursday.

U.S. equity markets are closed tomorrow (Feb 19th)for President’s Day.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 February 11th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, as U.S. equities continue notching all time highs.

The S&P500 ($SPX) gained 1.4% last week (again).  The index sits ~5% above the 50-day moving average, and 12% above the 200-day moving average.  Since bottoming on October 27, the market has only encountered 1 losing week and rallied ~24%.  Impressive, to say the least.

SPX Price & Volume Chart for the Week of Feb 11 2024

No surprise; no change in the signals this week:  both ADX and price/volume signals show an uptrend in place for the S&P500.  Trading volume has declined slightly since the start of February; not ideal conditions when hitting new, all-time highs, but not a signal to sell either.

COMMENTARY
The S&P500 breached 5,000 for the first time last week.  While there’s nothing “fundamentally” significant about that level, fund managers have been using it for hedging strategies in the options market.

Earnings season is winding down, but that doesn’t mean the fireworks are over.  Artificial intelligence story / semiconductor manufacturer ARM holdings ($ARM) beat estimates after the close on February 7th and the stock price gapped up ~23% overnight.  On the 8th, the stock rallied another 34% intraday, before cooling off a bit at the end of the day.  From the close on the 7th to the close on the 8th, the stock ended up (literally) ~48% higher.  Investors are hoping that price action bodes well for the more widely held stock of Nvidia ($NVDA), which is set to report in a little over a week (Feb 21).

Not every company was so successful; well known names like Paypal($PYPL), Pinterest ($PINS) and Snapchat ($SNAP) were punished for perceived weakness in their financials (revenue, earnings, and/or guidance).

Looking ahead, the latest CPI figures are released on Tuesday, which will once again fire up pundits about the rate cuts.  If inflation comes in higher than consensus, expect some selling pressure on equities.  A lower than consensus data point probably propels U.S. stocks higher.  Later in the week we get retail sales, PPI, and consumer sentiment.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 February 4th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, as U.S. equities continue notching all time highs.

The S&P500 ($SPX) gained 1.4% last week.  The index sits ~5% above the 50-day moving average, and ~11.5% above the 200-day moving average.  Over the past 25 years or so, the $SPX hasn’t spent a lot of time more than 10% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Feb 04 2024

No change in the signals this week:  both ADX and price/volume signals show an uptrend in place.

COMMENTARY
Last week’s QRA provided mixed signals, and a change in reporting methodology.  It appears the U.S. treasury will have a negative issuance in Q2, meaning that some of it’s outstanding debt will be reduced.

The FOMC kept interest rates unchanged, and threw cold water on the idea of a rate cut in March.  Since the market expect several rate cuts this year, the hawkish tone of the press conference was a surprise.

Non-farm payrolls were higher than expected.  Although some adjustments skewed the number higher, it was still a large beat, and even managed to outperform on a year-over-year viewpoint.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 January 28th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, as U.S. equities continue notching all time highs.

The S&P500 ($SPX) gained 1.1% last week.  The index sits ~4.5% above the 50-day moving average, and ~10.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 28 2024

No change in the signals this week:  both ADX and price/volume signals show an uptrend in place.

COMMENTARY
The first estimate of Q4 GDP (i.e. “Advance” estimate) came in at 3.3%, higher than expectations for a 2.0% number.  Government spending continues to outpace consumption and investment.

Meanwhile, PCE was roughly inline with expectations:

• Headline = 2.6% vs 2.6% expected
• Core = 2.9% vs 3.0% expected

This week, financial media is focusing on the FOMC announcement, scheduled for Wednesday afternoon. The Fed is expected to maintain the current level of interest rates, so markets will read between the lines of the post-announcement commentary and dot plot. Given recent economic data (e.g. GDP, PCE, etc.), this week’s meeting is unlikely to derail the current uptrend in U.S. equities.

What IS likely to impact the market is flying below the radar…or was until last year. While all eyes are on the Fed, the U.S. Treasury makes it’s Quarterly Refunding Announcement (QRA) Wednesday morning, which provides details on how the U.S. Treasury will meet it’s financing requirements.

Normally, the QRA is a nothing-burger; but we don’t live in normal times. Without getting too technical, it’s possible for the Treasury can ease overall financial conditions (offset the Fed’s qualitative tightening) by adjusting the mix of long-term and short-term treasuries it sells each quarter. This last occurred on October 30th, and is an underlying reason for the year end rally in stocks.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is 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 January 21st = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: N/A

ANALYSIS
The stock market outlook continues to show an uptrend in place, with the S&P500 ($SPX) gaining 1.2% last week.  The move pushed the index to a new, all time high, exceeding the market top in December 2021.

The index sits ~4.5% above the 50-day moving average, and ~9.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 21 2024

No change in the ADX and price/volume signals based to start the week.  The ADX did flip briefly midweek, but not by a large enough margin to trigger a signal.  On the price/volume side, distribution days remain elevated (5).  Watch for addition selling pressure, especially with the market at all time highs and above key support levels (i.e. 50-day).

For Elliott Wave, reader feedback late last year suggested Elliott Wave was too complex for use for an introductory example of trading signals and systems.  On the other side of that argument, Elliott Wave “purists” never liked the fact that these counts didn’t provide future targets or completed waves.

In either case, using Elliott Wave does require a lot of time…and that’s just to get “bad” at it.  So the stock market outlook will move on, and incorporate a different signal; one that is more data-based like the ADX.

COMMENTARY
December retail sales came in much higher than expected (+o.6% vs +0.3%), in an otherwise quiet week, data-wise.  Aside from all those Fed speeches, monthly option & futures expiration also influenced price and volume action last week; Wednesday was monthly expiration of volatility options (i.e. “vixperation”), and Friday’s monthly option expiration included long-term hedges (i.e. LEAP options).

This week, the market will react to initial estimates of 4th Quarter GDP (Thursday) and December PCE (Friday).

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

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

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 is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.