The Safe Investing Blog

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

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

ANALYSIS
The stock market outlook flipped again early last week, heading into Monday’s session in an uptrend.

The S&P500 ($SPX) bounced off the 50-day moving average last week and rallied back to all time highs.

SPX Price Chart for the Week of June 27 2021

The ADX directional indicators flipped on Monday. The ADX line itself remains far below 20, A few more distribution days dropped off the count, putting the total at 5 and 3 of those will drop off at the end of this week. Combined with a solid rally off the 50-day, the price/volume signal also returns to an uptrend.

SPX Price Chart for the Week of June 27 2021

The S&P made quick work of the question about counts from last week, eliminating the possibility of a completed 5th wave and reaching a new, all-time high.

COMMENTARY
A lot of positive news on the political and economic front continues to support a “buy the dip” mentality.

The Federal Reserve announced that large banks had all passed the annual “stress test”, meaning they are free to restart dividend and/or share repurchase programs.

The Biden administration also reached an agreement on an infrastructure deal, covering ~25% of the “New Jobs Plan”. Let’s face it: any agreement is a positive step in what passes for political negotiations these days. But major market-impacting issues like corporate tax rates remain up in the air.

June’s preliminary Purchasing Managers’ Index (PMI) reading shows continued expansion in economic activity, in spite of labor shortages and bottlnecks in the supply chain.

Corporate credit spreads (the difference in yield between corporate debt and government bonds) hit their lowest level since 2008! Typically, spreads will widen sharply (referred to as a blowout) prior to any sharp decline in the stock market. Then again, government bonds don’t yield that much in the first place, so the bar is pretty low at this point.

And lets not forget that record low interest rates also allow market participants to use margin more cheaply than ever before…which they are happy to do, and is a great enabler for the current bull market.

Investor Credit vs SP – Source: Advisor Perspectives

So it seems like a majority market participants have decided no one wants to “sell the news”.  Just remember that markets drop much faster than they rise, so the next major sell-off may feel more like a bungee-jump rather than an elevator ride.

Best to Your Week!

Stock Market Outlook entering the Week of June 20th = Downtrend

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

ANALYSIS
The stock market outlook uptrend switches to a downtrend to start the week of June 20th.

The S&P500 ($SPX) finally experiences some price movement last week; unfortunately for the uptrend it was to the downside.  The index broke through the support channel, as well as the 50-day moving average, on very high trading volume.

The quadruple witching day didn’t do the market any favors either, with more than $800 billion in options expiring.

SPX Price Chart for the Week of June 20 2021

The ADX signal flipped to a downtrend mid-week. The index added 3 distribution days to the count while 2 dropped off.  With price closing below the 50-day on Friday and the count at 8, the price/volume signal also flips to a downtrend.

SPX Price Chart for the Week of June 20 2021

Elliott Wave shows a corrective wave in progress. I favor the (ii) wave, verses the start of a the [2] primary wave. Either way, a close below 4061 would end the uptrend unless I’ve made a mistake in the count somewhere.

COMMENTARY
Last week, it was the Fed’s response (or lack thereof) to the prior weeks inflation data that made the headlines. They still see the current bought of inflation data as transitory, though they did increase their expectations for inflation this year. Pretty middle of the road stuff there, and similar to the views expressed here last week.

The Fed also adjusted their timeline for potential rate hikes, pulling them forward from 2024 to 2023. Plenty of runway for investors to make adjustments. And they avoided talk of “tapering” their asset purchases…probably keeping in mind the “taper tantrum” from 2013.

Touching the 50-day has been a buy the dip opportunity this year, but I’d want to see a couple of “higher lows” before doing so.

Best to Your Week!

Stock Market Outlook entering the Week of June 13th = Uptrend

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

ANALYSIS
The stock market outlook uptrend remains in place to start the week of June 13th.

The S&P500 ($SPX) starts this week in roughly the same position as laset week, and the week before, and the week before that…~2% above the 50-day and ~11% above the 200 day.

SPX Price Chart for the Week of June 13 2021

The ADX still shows a weak bullish trend in play, but the index didn’t see any distribution last week. The price/volume signal remains mixed though, as the total count still has a couple more days to work off.

SPX Price Chart for the Week of June 13 2021

Elliott Wave continues to show an uptrend.

COMMENTARY
Inflation was on everyone’s mind last week, with the consumer price index (CPI) up 5.0% from a year ago. Core CPI, or the one without food and energy costs, rose 3.8%. Those are pretty steep numbers, even if they really are “transitory” like the Fed suggests. So far, the bond market appears to agree, as yields continue to drop.

The year over year comparison was always going to be dramatic, since economic activity was so depressed last year at this time. But reopening demand, combined with supply chains issues and shortages, is a recipe for higher prices regardless of economic starting points.

I’m assuming we’ll see a spike in inflation and then it will ease off a bit as supply chains get sorted. However, I think inflation levels remain elevated, and just “seem” lower when compared to the spike for year over year comparisons.

Best to Your Week!

Stock Market Outlook entering the Week of June 6th = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend in place to start the week.

The S&P500 ($SPX) hasn’t made much progress since mid-April. Instead, the market has essentially consolidated the gains from the early March low. And as it has for the past 3 or 4 weeks, price sits ~2% above the 50-day and ~11% above the 200 day.

SPX Price Chart for the Week of June 06 2020

The ADX remains below 20, but the directional indicators remain bullish. And we picked up another 2 distribution days.

SPX Price Chart for the Week of June 06 2020

Elliott Wave continues to show an uptrend

COMMENTARY
The May jobs report was a bit below expectations, but that’s probably for the best. Any higher and we would have seen more hand-wringing about the Fed. Much lower and we would have had more hand-wringing about runaway valuations. Instead, we got something in the middle, and that means stay the current course.

So-called value and cyclical stocks have typically outperformed high-growth names when earnings accelerate out of a recession. And we’re seeing this play out in the relative performance of the DJIA and NASD.

Best to Your Week!

Stock Market Outlook entering the Week of May 30th = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend in place to start this week.

SPX Price Chart for the Week of May 30 2020

Fairly flat price action for the S&P500 ($SPX) S&P heading into the Memorial Day holiday.  Currently, it’s trading ~2% above the 50-day and ~11% above the 200 day. Pretty much the same place it was last week.

The ADX remains below 20, indicating the lack of a trend, but price action over the pasts week has been bullish, flipping this signal.

The index picked another distribution day, but two fell off the count. The overall number is still high, so it’s likely this signal will remain mixed for a few of weeks.

SPX Price Chart for the Week of May 30 2020

For Elliott Wave, it looks like the 5th minute wave has finally arrived.

COMMENTARY
First quarter earnings are largely in the books, with a majority of companies exceeding their own revenue projections, as well as analyst expectations. And let’s not forget operating margins; those have also been at record levels.

Since the U.S. is also leading the vaccine rollout, it stands to reason that international equities could see similar out-performance soon.

Short trading week in the U.S., with markets closed in observance of Memorial Day on Monday.

Best to Your Week!

Stock Market Outlook entering the Week of May 23rd = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend in place to start this week; basically starting in the same place it did last Sunday.

The S&P500 ($SPX) sold off to start last week, found support near the 50-day moving average and the support trendline, then rebounded to end the week where it started.  Currently, it’s trading ~2% above the 50-day and ~10% above the 200 day.

SPX Price Chart for the Week of May 23 2020

The ADX remains bearish, but the trend continues to weaken.  The absolute level is below 20, which indicates the lack of a trend and corresponds to the price action in the S&P for the past 2 weeks.

The index picked 3 distribution days last week, but a few fell off the count because the losses for that day were less than 0.2%.  Since the S&P bounced found support at the 50-day, this signal remains mixed.

SPX Price Chart for the Week of May 23 2020

For Elliott Wave, the 4th wave appears to be a running flat pattern.  If so, that would mean the 5th minute wave has finally started.

COMMENTARY
The U.S. economy continues to reopen as spring rolls on and more of the population is fully vaccinated.  The markets have largely overlooked issues in other parts of the world (the conflict in Gaza, India’s COVID-19 troubles, etc.).

Cryptocurrency was the headliner last week, with the big news coming out of China.  The financial committee decided to more closely monitor Bitcoin mining activities in the country, and three financial associations reiterated the 2017 ban on using Bitcoin and other cryptocurrency.

The old saw “don’t try to catch a falling knife” applies to new asset classes like crypto just as much as stocks! No corner of that market was safe, as all the different coins have sold off tremendously.

While crypto trading doesn’t directly impact the stock market, high volatility in an entire asset class does alter capital flows, and capital flows DO impact the stock market directly.  This type of sell off, where the entire asset class moves, is the rationale behind asset allocation and diversification.

On the income investing front, AT&T (T) decided to “resize” it’s payout ratio, which basically means it will cut its dividend at some point in the near future.  The cut is disappointing to some income investors who enjoyed the above average yield the stock provided.

Best to Your Week!