The Safe Investing Blog

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!

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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.

Stock Market Outlook entering the Week of October 10th = Downtrend

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

ANALYSIS
The stock market outlook remains in a downtrend, as we await confirmation of a new rally.  The S&P500 ($SPX) tried to break a bearish trendline last week, but was unable to do so.

The ADX shows that downtrend strength peaked last week.  That’s good news for bullish investors, even though the signal remains in a downtrend.

SPX Price & Volume Chart for the Week of October 10 2021

From a price and volume perspective, the signal remains mixed.  The S&P picked up another distribution day last week, and price remains below the 50-day moving average.

The total count of distribution days stands at 6, which is a bit elevated, but not too severe.  Of more concern is the cluster of 4 showing high levels of institutional selling the last week of September.  Since we’re testing the bearish trendline again, another burst of high volume selling would indicate the correction isn’t over.

SPX Technical Analysis Chart for the Week of October 10 2021

For Elliott Wave, the ABC corrective pattern appears to be complete, and along with it Intermediate (4).   The technical indicators support this hypothesis; a positive divergence** in the RSI  and a cross-over of the MACD histogram (both circled in green).

I’m watching for a break above the Wave B high or a test of the Wave C low before a signal change.  If the correction is over, the S&P won’t drop below that low, and the S&P500 has moved into Intermediate (5), which could last ~5 months if it mirrors Intermediate (1).

**A positive divergence is a higher low on the RSI, with a corresponding lower low in price, which suggests that traders weren’t as eager to sell at the lower price level.

COMMENTARY
Commodities, particularly energy, are in the news lately, as the price of oil, natural gas, and coal rocket higher. But if you take a peak below the surface, these trends have been in a place for a while…they just haven’t been dramatic enough to reach headline status!

Price chart for Natural Gas | Source: https://tradingeconomics.com/commodity/natural-gas

In the case of natural gas, the price began trending higher back in June of 2020, and really began accelerating in June of this year.

Likewise, coal began it’s uptrend early in 2020, but really began moving in September of that year. The move over the past two months looks like a blow-off top. The move in coal could be over, and you’re just hearing about it now.

Price chart for Coal | Source: https://tradingeconomics.com/commodity/coal

Obviously, neither of these trends are sustainable. But both of them highlight the need to do your own research, rather than wait for headline news.  There’s a reason traders say “Buy the rumor, sell the news”.

On the political front, the U.S. Congress agreed to a temporary deal that raises the debt ceiling and avoiding default. The next round of posturing will pickup again in a month or so. It’s hard to know what the next Fed meeting will bring; will they or won’t they begin to taper their quantitative easing. Inflation is running hot, while labor shortages and supply chain issues continue to stress the economy.

And lets not overlook the recent sabre rattling in the sky over Taiwan. A small misstep could have global implications and render most of our current narrative moot.

10 weeks until Christmas! Given the current environment, now might be a great time to start shopping!

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 3rd = Downtrend

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

ANALYSIS
The stock market outlook kicks off the week in a downtrend, as 2 signals finally turned bearish at the same time during last week’s trading sessions.

SPX Price Chart for the Week of October 03 2021

The S&P500 ($SPX) opened last week at the 50-day moving average, but it’s actually the 34-day moving average that provided resistance.

The ADX shows a strengthening bearish trend, keeping that signal in a downtrend. Price and volume signal moves from an uptrend back to mixed, as price was unable to hold the 50-day moving average after last Monday. Distribution days are still relatively low.

SPX Price Chart for the Week of October 03 2021

For Elliott Wave, the market took the second option from last week’s post:

Wave [a] of Wave 4 completed, we’re in Wave [b], and Wave [c] will retest the 4300 low to complete the correction near 4246.

The correction appears to be Minor waves (rather than Minute), so I made a few changes to the wave count.

COMMENTARY
Concerns over interest rates and inflation are scapegoats for the recent sell-off. Rising rates tend to put a dent in large cap tech stocks, so we may see indexes like the NASDAQ lag small caps. It’s no surprise that the S&P500 struggled lately as well, given that 20% of that index is Apple, Amazon, Google, Microsoft and Facebook.

Timing-wise, the last time we had a ~5% correction was? Last September! It’s possible that we have a similar October in the works too, which would entail a rally back near the all time highs, then a sell-off back to the September low. None of that would be a surprise, given October’s historical volatility.

Best to Your Week!

Stock Market Outlook entering the Week of September 26th = Uptrend

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

ANALYSIS
Despite the correction, the stock market outlook remains in an uptrend because no 2 signals have switched.

The S&P500 ($SPX) gapped down last Monday,  breaking through the 50-day moving average and the price channel pattern.  But by week’s end, most of that damage was undone, with the index closing back above the 50-day.

SPX Price Chart for the Week of September 26 2021

The ADX signal remains bearish, as does the signal.

The price and volume signal switches to an uptrend to start the week.  The index retook the 50-day moving average, and distribution days are low at the moment.

SPX Price Chart for the Week of September 26 2021

Going off of Monday’s Elliott Wave update, it’s possible that:

• The correction is over: Wave 4 completed, and we’re into Wave 5 (shown in grey)

– Or –

• The correction will retest the 4300 low: Wave [a] of Wave 4 completed, we’re in Wave [b], and Wave [c] will complete the correction (probably near the 62% retracement or 4,246)

COMMENTARY
All told, the S&P500 corrected ~5% from the early September high point.  Unless you’re 100% invested in the index, I’d bet your holdings moved a bit more than that…doubly so if you’re holding small cap stocks or anything in the emerging markets.  Outside of the S&P500, many equities took the summer off and have been correcting for the past couple of months.

Let’s not forget that we still have October’s volatility to “enjoy”, and there are still wild cards out there, such as raising the U.S. debt ceiling to avoid default, funding for the U.S. Government, and any real estate related issues coming out of China.

Failure to raise the debt ceiling would have the largest impact on your holdings, but is also the least likely to occur.  That doesn’t mean we can’t or won’t see volatility as politicians posture for the media.

Regardless of the narrative, last week served as another reminder of how quickly prices can move in today’s financial markets. Given the record levels of margin currently being used for trading and investing, this kind of volatility is to be expected.

Source: Advisor Perspectives

Margin debt will also amplify the speed and size of the next bear market, whenever it comes;  bad news for those that are caught unaware, but great news for those with cash to invest (see the kind of bargains there were back int March 2020!).

Make your plunge protection plans now, while the markets are relatively calm, and you can profit when there’s “blood in the streets” so to speak.

Best to Your Week!

Yesterday’s stock market outlook touched on a three potential Elliott Wave counts (Cases 1-3), and I mentioned:

For Elliott Wave, the S&P500 is clearly correcting, but what’s not so clear is whether it’s within an uptrend or the start of a downtrend. So the signal remains mixed.

At the moment, I think we’re still in the 5th Intermediate Wave…probably the 3 minor wave…more to come.

Thanks to today’s market action, I received quite a few emails asking:

1. For the “normal” Case 3 Elliott Wave chart
2. If Case 3 was still my preferred count after today’s sell-off

The answer in both cases is yes.  Even with today’s sell off, the Intermediate 5, Major 3 count is still valid.

SPX Price Chart for September 20, 2021

If we lay in the Fibonacci levels from the start of the current intermediate wave, we see:

• Today’s intraday low of 4305 was 2 points away from the 50% retracement level.
• Today’s close was ~2 points away from the 38% retracement level

The question now is whether tomorrow will be turnaround Tuesday or something else.  If the S&P500 continues to sell-off and head’s below 4257 (the high point for the current Major 1 wave), then the 5th wave scenarios (i.e. Case 1) are much more likely.

COMMENTARY

Today’s U.S. equity market action was ugly, thought the last 30 minutes took out some of the sting.

The narrative behind today’s sell-off was that traders fear spillover effects from the potential collapse of Chinese property developers, particularly a company called Evergrande.  Apparently, Evergrande has ~$300 billion in debt and two of those bills come due this Thursday ($83.5 million  and $36 million).

While they still have 30 days to pay, there’s growing concern they’ll default regardless.  This fear is causing pain for other Chinese property developers: Sinic and Guangzhou R&F saw massive sell-offs themselves.