The Safe Investing Blog

Stock Market Outlook entering the Week of April 4th = 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 the week of April 4th.

2021-04-04-SPX Trendline Analysis-Daily

The S&P500 ($SPX) ended the shortened trading week higher, crossing 4000 for the first time ever. The ADX finally joined the other signals in bullish territory, and 3 more distribution days fell off the count.

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

The Elliott Wave count remains the same as last week, showing the S&P in the third wave of a Minor 5.

COMMENTARY
Last week, the Biden administration unveiled the “American Jobs Plan”, proposing $2+ trillion in new spending over the next 8 years, including:

• $620 billion for transportation infrastructure (roads, bridges, transit, electric vehicles)
• $400 billion for domestic manufacturing and workforce development
• $400 billion for disability/elderly care programs
• $300 billion for housing
• $200 billion for expanded broadband and electrical grid improvements
• $180 billion in research and development focused on clean energy

Our infrastructure could use the help for sure, so this package could do a lot of good if handled correctly (i.e. real improvements are made rather than pork barrel spending and pet projects).

The goal is to make the spending “revenue-neutral”, which is another way of saying tax hikes. Right now, that would be increased corporate taxes. Not quite as high as they were prior to the Trump administrations tax cuts, and still near all time lows, but an increase either way. The last round of cuts were largely absorbed via increased dividends and share buy-backs, so it’s not clear how the increases will be addressed.

Best to Your Week!

Stock Market Outlook entering the Week of March 28th = Uptrend

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

ANALYSIS
The stock market outlook flipped after receiving confirmation of the new uptrend on Friday.  Better late than never, I guess.

2021-03-28-SPX Trendline Analysis-Daily

The S&P500 ($SPX) trended lower for most of the week, before snapping finding support at the rising trendline and the 50-day moving average and snapping back sharply on Thursday and Friday.

The ADX still shows bearish price action in control, while two distribution days fell off the count, and one was added.  Friday’s action qualified as a follow-through day, so the price/volume signal switches to an uptrend with two asterisks.

Asterisk #1:  The number of distribution days is very high, especially considering this rally is just getting started.

Asterisk #2:  The follow-through day occurred outside the 10-day window that you’d typically like to see a strong follow-through.

2021-03-28-SPX Elliott Wave Analysis-Daily-Primary1

The Elliott Wave count shows the S&P is now two waves into a Minor 5.

COMMENTARY
Not much in the way of economic news last week, although the Suez Canal blockage is something to keep an eye on.

One interesting note from the stock market was that as of Friday’s close, the S&P500 has risen ~81% from the market low on March 23, 2020! That’s an amazing 1 year return!

Best to Your Week!

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

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

ANALYSIS
The stock market outlook is still showing a downtrend; confirmation of the new uptrend hasn’t happened yet. The back and forth of price action continues to create “whipsaw” effects (false signals and/or delay new ones).

2021-03-21-SPX Trendline Analysis-Daily

The S&P500 ($SPX) trended lower last week. The ADX flipped back and forth between bullish and bearish readings during the week (ever so slightly), landing in bearish territory at the time of this post. For the price/volume signal, 2 more distribution days were added to the count, bringing the total to 9. That level of selling isn’t great for the start of a new rally, but the market as a couple more days to get its act together. Price is still above the 50-day, so the signal remains “mixed”.

2021-03-21-SPX Elliott Wave Analysis-Daily-Primary1

The current Elliott Wave count shows the S&P is one wave into the Minor 5. I’ve seen many different counts, which is common when the market is trying to figure out which way it wants to go.

COMMENTARY
Last week, many readers took issue with the downtrend signal, because price had just reached an all time high. They’re not “wrong” per se, as anyone looking at a 6 month or 1-year chart can see prices trending higher (myself included). Not to mention how counter-intuitive it is in the face of a massive government stimulus, direct payments to taxpayers, continued bond purchases by the Fed, and a reopening economy.

The questions are actually a good sign; it means readers are thinking for themselves and aren’t blindly following any one signal.

The purpose of the Weekend Market Outlook series is to provide an example of how using rules can limit risk when they’re part of a repeatable decision-making process. That means showing the good with the bad; when rules work and when they don’t. Unfortunately, any rule that limits losses can also limit gains.

If I adjust a signal because I don’t like it, I’ve changed the rules for that one point in time. The “process” is no longer “mechanical” (i.e. repeatable), which makes back-testing and evaluating performance more difficult. Instead, at the end of each year, I analyze whether the system reduced risk and if adjusting the rules could improve long-term performance. Sometimes new rules are better, sometimes they aren’t. At this point, I’m assuming an adjustment will be needed, but you know what people say when you assume.

This week is the one year anniversary of the bottom for the pandemic sell-off. While things are definitely NOT back to normal (unemployment, masks, and vaccines, oh my), the main concern has shifted to interest rates. Treasury yields continue to rise, with investors and traders focused on the 10-year as a sign of inflation. Central banks continue to make the case for keeping interest rates low, and that higher inflation will be tolerated for a while.

Some argue that interest rates aren’t really signaling high inflation as much as they are just returning to normal. Regardless, increasing interest rates are bad news for stocks with valuations that rely heavily on future earnings for any chance at profitability (we’re looking at you SPACs).

Best to Your Week!

Stock Market Outlook entering the Week of March 14th = Downtrend

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

ANALYSIS
The stock market outlook remains in a downtrend to start the week, as we await confirmation of the new uptrend. The current price action is choppy at best, thanks to sector rotation, and that “whipsaw” effect will generate false signals and/or delay new ones.

2021-03-14-SPX Trendline Analysis-Daily

The S&P500 ($SPX) rallied from the 50-day moving average and briefly touched an new all time high, though trading volumes left a lot to be desired.

The ADX shows a weakening “weak” trend, but it’s still bearish. From a price & trading volume perspective, the signal is back to mixed as we wait for confirmation of the rally over the next 9 days (>1.5% gain on higher than average volume prior to March 22nd).

2021-03-14-SPX Elliott Wave Analysis-Daily-Primary1

True to form and as eluded to last week, downtrends  continue to last about 3 weeks in this run up from the pandemic low.  The S&P remained above 3700, and took another run at all time highs.  So the bullish alternative appears to have won out (no surprise there), and the Elliott Wave chart was updated to match.

COMMENTARY
The big news, last week, came out of Washington D.C., with the passage and signing of the American Rescue Plan (ARP).  Among other things, ~$400 billion in direct payments will begin making their way into the hands of consumers via $1400 checks and direct deposits.  That money “should” give the stock market some kind of boost, via increased spending or just outright investment in stocks.

In other news, the S&P500 will be shaking things up a bit on March 22. NXP Semiconductors (NXPI), Penn National Gaming (PENN), Generac Holdings (GNRC) and Caesars Entertainment (CZR) will be added to the index before market’s open on March 22. They’re replacing Flowserve (FLS), SL Green Realty (SLG), Xerox Holdings (XRX) and Vontier (VNT), which are moving to other indexes.

Best to Your Week!