The Safe Investing Blog

Stock Market Outlook entering the Week of July 11th = Uptrend

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

ANALYSIS
The stock market outlook continues in an uptrend this week, even with a slight spike in volatility.

The S&P500 ($SPX) sits at all time highs, with both the ADX and price/volume signals signaling a bullish environment.

SPX Price Chart for the Week of July 11 2021

On the downside, the ADX is still below 20 (weak trend), and we did pick up another pair of distribution days (bringing the total to 4).

SPX Price Chart for the Week of July 11 2021

Elliott Wave also remains in an uptrend, and looks like a corrective 4th wave took place last week (abc); a pretty consistent 4th wave pattern in this rally. If the 4th wave continues, we’ll head lower early next week, with the wave (i) high from mid-June the max decline. If complete, that puts the S&P into the last wave of the Primary 1.

The S&P has had waves extend before, and this count could be wrong, so there’s no guarantee the current uptrend ends anytime soon, 5th wave or not. But the Primary 2 wave will a bear market, whenever it starts, and could retrace the entire pandemic advance! Highly unlikely given all the “support” markets have these days, but still a possibility.

Since the market is up almost 20% for the year, there’s nothing wrong with taking profits and right-sizing your position and portfolio sizes.

COMMENTARY
All eyes were on the 10-year treasury last week, with the yield dropping back to February levels. That’s the opposite direction of the core inflation numbers, indicating that the bond market isn’t overly concerned about the recent spike in inflation…yet.

Best to Your Week!

Stock Market Outlook entering the Week of July 4th = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend to kick-off the first full week in July.

The S&P500 ($SPX) continued to rally last week, adding further distance from it’s recent test of support.

SPX Price Chart for the Week of July 04 2021

Both the ADX and price/volume signals remain bullish. The ADX trend strengthened substantially, while the number of distribution days decreased again.

Price now sits ~3% and 13% above the 50 and 200 day moving averages, respectively.

SPX Price Chart for the Week of July 04 2021

Elliott Wave also remains in an uptrend, currently sitting in the the 3rd wave of the overall Minute 5, Minor 5, Intermediate 5, Primary 1, Cycle 3 count.

SPX Price Chart for the Week of July 04 2021

COMMENTARY
Employment dominated the news cycle last week, with the report hitting the so-called “Goldilocks” zone.  Basically, that means it had enough contradictory information to keep anyone from making changes.  The U.S. added more jobs than expected (Yea!), while the overall employment number rose (Boo!).

A short trading week in the U.S., with markets closed on Monday in honor of Independence Day.

Typically, this week starts that the summer trading season, with more volatility (i.e. “choppiness”) due to lower trading volumes.

Best to Your Week!

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!