The Safe Investing Blog

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!

Stock Market Outlook entering the Week of May 16th = Uptrend

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

ANALYSIS
Last week’s price action made a mess of the stock market outlook signals, but an uptrend remains in place until there’s a confirmation.

A mixed bag last week, with the S&P500 ($SPX) selling-off on inflation concerns, and then attempting a recovery rally to close out the week.

The index is a few points away from closing the price gap created by Tuesday’s opening. We’ll have to see if that event leads to another leg down in price (one possible outcome based on Elliott Wave).

SPX Price Chart for the Week of May 16 2020

The ADX flipped to a bearish trend early last week, but could recover shortly if Thursday/Friday trading continues.

The S&P500 picked up another distribution day, putting the count at 7 and shifting the price/volume signal to mixed (since price is still above the 50-day moving average).

The lack of trading volume on upside days continues to indicate a buy-the-dip mentality. It’s a good sign that people are still willing to buy, even at these elevated valuations. But that also means they need dips to buy, and may leave investors out in the cold when that strategy no longer works.

SPX Price Chart for the Week of May 16 2020

For Elliott Wave, calls for the completion of a 4th wave may have been a bit pre-mature. That, or we completed a 5th wave and it’s all downhill from here (!). The daily chart looks like it’s in the b-wave of a corrective zigzag. Until we reach a new high or close below 3981, the 4th wave remains in play .

COMMENTARY
The SPAC space has been decimated over the past few weeks, and most technology-related companies aren’t far behind. It’s so bad that the talking heads are starting to hedge their messaging, telling investors to lower their return expectations, look for “value” , and consider cyclical industries and international exposure.

On the heel’s of the disappointing jobs report, CPI data came in hot. And that’s even after sandbagging by removing food and energy, which everyone knows are getting more expensive and are a pretty big deal when it comes to the personal finances of individual investors.

As expected, the Fed continues to say that the increase was expected based on all things related to the pandemic, and is likely to be transitory in nature.  Human beings are transitory too, if you make the time frame long enough…

Best to Your Week!

Stock Market Outlook entering the Week of May 9th = Uptrend

• • ADX Directional Indicators: Uptrend
  • Price & Volume Action: Uptrend
  • 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 09 2020

A little more volatility the S&P500 ($SPX) last week, but overall, not much different than the prior 2 or 3. Friday’s rally put the S&P back to all time highs, but came with lower trading volume.

Currently, it’s trading ~5% above the 50-day and ~13% above the 200 day. The time the S&P got within 5% of the 200 was last fall. The ADX shows the overall price action weakening a bit, but it’s still bullish. The index picked up another distribution day, through trading volume remains subdued.

SPX Price Chart for the Week of May 09 2020

For Elliott Wave, price action strengthened a bit last week, so maybe now the 4th wave has ended?

COMMENTARY
Ouch…Friday’s jobs report was a bit on the low side. Everyone expected ~1,000,000 jobs would be added in April…and we got about a quarter of that…a pretty big miss, but that target was probably too optimistic anyway. We’re still just in the initial phases of re-opening.

The markets rallied on the news, because it means interest rate hikes are a little further away than they were on Thursday.

Best to Your Week!

Stock Market Outlook entering the Week of May 2nd = Uptrend

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

ANALYSIS
The stock market outlook shows an uptrend in place to kick-off the month of May.

2021-05-02-SPX Trendline Analysis-Daily

Another fairly flat week for the S&P500($SPX). We again start the week in basically the same position as the past 2 weeks: the index trading ~5% above the 50-day, roughly same distance to the lower trendline.

The ADX still shows a strong bullish trend in play. The index picked up another pair of distribution days last week, so the count is back at 5. Trading volume remains below average, so I’d guess it’s more a sign of profit taking than outright liquidation.

2021-05-02-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, I’m still not sure if the 4th wave ended. Price action remains weak; declining RSI, MACD, and a MACD crossover align with the flat price action we’ve seen lately. Hopefully you’re taking the opportunity to readjust your holdings.

COMMENTARY
So far, about half of the S&P has reported earnings, and by far the majority of those companies beat the estimates. That’s not too surprising, given how bad earnings were a year ago, but still a welcome sign. GDP is recovering, as is consumer spending (which accounts for ~70% of the U.S. economy). Stimulus checks may have helped…just a little. But even businesses were getting in on the act increasing their investment levels by 10% or so.

In other words, it appears the market’s are still in buy-the-dip territory if/when another correction comes our way.  Almost looking forward to it…almost.

Best to Your Week!

Stock Market Outlook entering the Week of April 25th = Uptrend

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

ANALYSIS
The stock market outlook continues to indicate an uptrend in place to start this week’s trading action.

2021-04-25-SPX Trendline Analysis-Daily

A choppy week for the S&P500 ($SPX). We actually saw a small increase in volatility! Since the corrections over the past year have been ~5%, even a small amount of volatility can seem dramatic. But when all was said and done, not much change from last week’s starting point.

We start this week in basically the same position as last week: the index trading ~5% above the 50-day, roughly same distance to the lower trendline.

The ADX shows a strong bullish trend. A few more distribution days fell off the count, but a pair of distribution days popped up and took their place. The overall count is low, so nothing to be concerned about yet.

2021-04-25-SPX Elliott Wave Analysis-Daily-Primary1

For Elliott Wave, it’s possible that the 3rd wave ended on the 16th, and the 4th wave completed last week, which would put the S&P into the 5th wave. The 4th wave could also drag on for a bit more.

Unlike the ADX and price/volume, EW is indicating there’s weakness underneath the price action last week, with the MACD joining the RSI in showing a negative divergence. This type of price action usually occurs during 5th waves (i.e. the end of an uptrend).

If the count is correct, that would mean the end of the Primary 1 wave…or the rally that started at the February low in 2020.

In either case, it’s time to start taking profits and/or right-sizing your allocations. The S&P gained a little more than 10% since the March low, and will likely give back half of that before the signals change.

COMMENTARY
The Biden administration got traders and investors hyperventilating last week, after proposing increased tax rates.  The proposal included:

• Increasing the capital gains tax to 39.6% (currently it’s 20%) for those earning >$1 million per year
• Increasing the corporate tax rate to 28% (currently it’s 21%)

The news shouldn’t have surprised anyone, but markets gonna market.  Biden campaigned on increasing taxes on the wealthy, and is making good on that promise.  Regardless of party affiliation, tax increases are inevitable.  All the stimulus flooding the economy will be paid for by someone.  And by someone, I mean tax payers.  The only difference is how the debt collection will be spread around…which tax rates increase and by how much.

There are still plenty of fundamental reasons to be bullish in the near-term;  an infrastructure bill in the works (more stimulus), low interest rates (lower debt repayment), and global vaccine rollouts (consumer spending). Earnings season rolls on, and most companies have reported better than expected results.  Again, not surprising given the comparison’s are based on the disaster that was Q2 2020.

Best to Your Week!