Money
And More
Stock Market Outlook entering the Week of February 14th = Uptrend
ANALYSIS
The stock market outlook shows an uptrend, with prices near the upper bound of a former bullish price channel.
2021-02-14-SPX Trendline Analysis-Daily
The S&P500 ($SPX) is within a bullish trading day of 4,000. The ADX shows a weak trend getting weaker. Price/volume signal remains bullish, and leading high-growth stocks are acting well. But declining trading volume as price reaches new highs remains a big concern, and suggests a lack of conviction from institutions.
2021-02-14-SPX Elliott Wave Analysis-Daily-Primary1
For Elliott Wave, the 5th wave uptrend rolls on. If symmetry with the 1st wave is maintained, the current wave should last a few more days before completing.
COMMENTARY
Still risk on…for now. By all typical valuation measures, stocks are extremely overvalued.
Source: Ned Davis Research (Hat Tip to CMG)
Not too surprising…where else are you going to park your money these days? Even high yield (junk) bonds aren’t going to do it; yields sit at record lows!
Hat Tip to CMG…again
Watch volatility ($VIX). It’s still elevated when compared to the last few years, but nearing the low point of the since the pandemic sell-off. I’d expect it to be closer to 12 before we see a major sell-off (>20%), but that doesn’t mean a minor one isn’t in the cards (<20%).
Best to Your Week!
P.S. The 2020 Annual Performance Report should be out later this week.
Money
“In the last ten years, all you had to do was buy an index fund. In the next ten years, I think risk management, a focus on value, and stock selection are critical. “
And More
2022 RS e-tron GT (Source: Car and Driver)
Stock Market Outlook entering the Week of February 7th = Uptrend
ANALYSIS
The stock market outlook shows an uptrend, as stocks fought back against recent bearishness.
2021-02-07-SPX Trendline Analysis-Daily
The S&P500 ($SPX) bounced off its 50-day moving average and ended the week at an all time high. The ADX still shows a weak trend in place, but the directional indicators flipped to bullish on Friday (just barely). The price/volume signal shifted back to an uptrend thanks to Monday’s bounce and no new distribution days.
A look under the hood, and there is still cause for concern:
Even though there’s an uptrend in place, keep watch. Prices take the stairs up and the elevator down.
2021-02-07-SPX Elliott Wave Analysis-Daily-Primary1
For Elliott Wave, the positive RSI divergence mentioned last week did indeed signal the end of the correction, which on a bit on the small side (only reaching the ~24% retracement level rather than the 38%). The long-term view continues to show substantial negative divergences in RSI and the MACD.
COMMENTARY
We got January’s unemployment report, which showed a decrease from 6.7% to 6.3%. All is well, right?
Again, take a look under the hood. The U.S. saw an increase of 49k was about half of what was expected. And job losses in December were revised upward by 62%! The unemployment rate fell because labor-force participation declined.
More than likely, this information bolsters the case for more fiscal stimulus, which will have a positive effect on the stock market. Infection rates are improving, as is vaccine distribution, so economic activity is likely to improve as well.
Best to Your Week!
P.S. Head on over to Epsilon Theory, read their take on the “Reddit Revolt”, and let me know what you think.
Money
“I could be wrong but I believe inflation will kill confidence. Inflation is the linchpin, the trigger. Inflation will kill the narrative that says the Fed has got our back.”
– Steve Blumenthal
“What happened last week IS Wall Street, and government regulators have ZERO interest in changing it…
The only worry regulators had was degrossing contagion and whether they needed to step in to ensure big financial institutions (including hedge funds) didn’t go belly-up from all of their suddenly excessive risk.”– Ben Hunt
And More
Thoughts?
Source: https://gmauthority.com/blog/2021/02/this-is-the-2022-cadillac-ct4-v-blackwing/
Sources:
Stock Market Outlook entering the Week of January 31st = Uptrend
ANALYSIS
The stock market outlook still shows an uptrend, but there’s bearish price action across the board.
2021-01-31-SPX Trendline Analysis-Daily
The S&P500 ($SPX) price channel broke down last week, and price now rests right on the 50-day moving average. Breaking that level next week would shift the signal AND the overall market outlook, so stay frosty. And price is ~10% above the 200-day, which is still on the high side, historically.
The ADX directional indicators crossed over Wednesday, but the trend is still weak. Two distribution days were added to the count, but the price/volume signal hasn’t flipped just yet.
2021-01-31-SPX Elliott Wave Analysis-Daily-Primary 1
Elliott Wave shows a near term downtrend in place i.e. 4th wave), There was a slight divergence in the RSI at Friday’s low (a positive sign), but the 38% retracement level of the most recent wave is near 3,620, suggesting further downside next week.
The limit for the 4th wave would be the high of the first wave (3,550). Anything further south and the longer-term count needs adjustment. That would also be the point where the signal would flip.
COMMENTARY
So…anything interesting happen in the markets this week?
I feel like I’ve had an entire year’s worth of market-related discussions in the past 5 days. Unless you’ve been under a rock, you’ve heard something about:
But investors who’ve been around awhile have heard this all before; similar games were played back in 2000:
What’s new this time around? The scale of the activity, thanks in part to:
Whether or not Gamestop ($GME) should be priced at $1,000, $500, or $0.50 isn’t the point; it’s worth whatever people will pay for it, and that price will change over time.
Price change from trading isn’t limited to Gamestop. Similar price action occurred last summer in shares of Kodak ($KODK), or during 2018 in shares of Tilray ($TLRY). Lets not forget the prior or current run in Bitcoin. It could be in gold or silver at some point.
Many traders and investors will see profits. Many traders and investors will see losses; that’s the nature of speculation. The size of those changes are all relative to their personal financial situation; your small losses may be huge for me or visa versa.
Of more concern is the potential for a broad shift in asset allocation towards de-risking portfolios. We know that the market is overvalued by almost every measure (see last week’s post). These moves take longer to play out (think a cruise liner turning around), and we’re just along for the ride. Billion dollar losses by hedge funds and market makers tend to cause changes.
Several market commentators have noted that many stocks are besting analyst estimates, then selling off (or at least not rallying). That’s not the behavior of strong bull markets, and suggests this news is already reflected at current price levels.
Coincidentally, some investors I greatly respect say that the market top is in and we’re going to see a major correction. We’ll only know if they’re right in hindsight, and even they acknowledge that they’re probably early. But the fact that they’ve coming out publicly and saying that it’s time to cash out is worth noting.
The stock market has had a good run since November, so don’t be shy about taking some money off the table (e.g. recover your initial investment). Keep your losses small no matter what. You can always buy back in if/when price action improves.
Best to Your Week!
Invest Safely - Valuable, time-saving info about personal finance, money management, and investing.
The Safe Investing Blog 