The Safe Investing Blog

Stock Market Outlook entering the Week of November 8th = Uptrend

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

ANALYSIS

The stock market outlook flipped back to an uptrend last week…may you live in interesting times indeed!  And the S&P500 ($SPX) is knocking on the door of all time highs again.

2020-11-08-SPX Trendline Analysis-Daily

Prices rose during the week, breaking through the 50-day moving average on higher than average trading volume.  Both  the ADX  and price/volume signals flipped to a bullish signal Wednesday.

That said, they’ve paused at the resistance trendline…something to watch this week, as price has bounced between resistance and support since September. The whipsaw price action may not be over just yet.

2020-11-08-SPX Elliott Wave Analysis-Daily-PrimaryC

In the bear camp, the count is back on life support.  Any more upside, and it’s over…again. In the bullish camp, the EW count looks a lot better…we could be in triangle pattern for the 4th wave, or already be in the 5th wave (Minor 3).  If price push higher, that would invalidate the triangle pattern.

2020-11-08-SPX Elliott Wave Analysis-Daily-Primary1

COMMENTARY
Unless you live under a rock, you know that Joe Biden (D) appears to have won the Presidential election in the United States, while Republicans remain in control of the Senate.

On the upside, markets typically perform well when there is gridlock in the U.S. government (meaning opposing parties control Congress and the Presidency), and at the moment, that’s what appears to be the result of the election.  Why?  Because a split usually reduces the likelihood of higher taxes and regulations.

On the downside, recounts are almost a given in states with close races, and the current administration is launching multiple lawsuits to investigate vote counting processes.  This type of uncertainty works against equities.  And we still have a pandemic to deal with, which is bad for business.

Best to Your Week!

Stock Market Outlook entering the Week of November 1st = Downtrend

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

ANALYSIS

The stock market outlook flipped to a downtrend early last week, and continues with that label to start November.

2020-11-01-SPX Trendline Analysis-Daily

The S&P500 ($SPX) fell through the recent support trendline. The ADX continue to worsen last week, moving from mixed to full blown bearish on Monday. Price and volume also accelerated through the 50-day moving average, flipping that signal to a downtrend as well.

2020-11-01-SPX Elliott Wave Analysis-Daily-PrimaryC

The bearish count found new life last week. 3200 is still the key support level.

2020-11-01-SPX Trendline Analysis-Weekly

Not much changed in the monthly view.  The “megaphone” pattern people were discussing back in September held strong.

COMMENTARY
European lock-downs also pushed markets lower over the weekend, thought the economic damage should be reduced compared to earlier this year.

U.S. elections are Tuesday, and it’s really anyone’s guess as to how it will turn out, both from a Presidential as well as a Congressional standpoint. The government continues to drag its collective feet on more economic stimulus, though more spending is almost guaranteed regardless of which party wins at the polls. Speaking of which, it could take some time for the races to be decided this year, due to the number of mail in voters. All of which creates a lot of uncertainty heading into the next few weeks…and stock markets don’t react well to uncertainty.

If you haven’t done so yet, plan to Vote on Tuesday!

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

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

ANALYSIS

The stock market outlook remains in an uptrend, despite last week’s weak price action.

The S&P500 ($SPX) continued to decline last week, but found support near the 50-day moving average.

2020-10-25-SPX Trendline Analysis-Daily

The ADX flipped to a bearish trend ever so slightly (+DI = 24.11 / -DI = 24.73). That’s not enough to change the signal to a downtrend, but mixed is fair game. And it’s definitely something to watch early next week.

Price/volume is still green, and the recent declines haven’t been accompanied by distribution days. And a day or two of price increases on higher than average trading volume couldn’t hurt. Many technology stocks have good looking technical set-ups (think cups w/ handles), so it is a possibility.

Bearish and bullish Elliott Wave charts below. We’ll stick with the prevailing trend until one or there other is invalidated.

2020-10-25-SPX Elliott Wave Analysis-Daily-Primary C

2020-10-25-SPX Elliott Wave Analysis-Daily-Primary 1

COMMENTARY
With just over a week until elections in the U.S., the stage is set for a lot of volatility. On tap this week are earnings for almost 40% of the S&P 500, ongoing stimulus talks, and ever present coronavirus issues.

Global coronavirus cases continue to rise, with many countries hitting daily records. While that’s partly a result of more testing, the percentage of positive results also increased as have hospitalizations. Failure to pass a stimulus package (or a passing something that’s poorly received) and COVID shutdowns would be catalysts to the downside.

From a market perspective, there are fewer unknowns in terms of business and earnings impact versus February. We have better procedures and treatments in place, with several vaccine candidates in final stage trials. Passing a good package, a manageable case count, or positive vaccine trials should push the markets back to new highs.

Even though the signals are relatively bullish, it wouldn’t take much price movement for the outlook to get really bearish. So be prepared for volatility, and adjust your expectations accordingly. It’s unlikely we’ll know the results of the election on election night, but prices will tell you want to do.

Best to your week!

Stock Market Outlook entering the Week of October 18th = Uptrend

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

ANALYSIS

The stock market outlook remains in an uptrend to start this week.

The S&P500 ($SPX) took a a break last week, finding support at the 13 day moving average. That said, price sits ~10% above the 200-day moving average, so we’re getting extended again.

2020-10-18-SPX Trendline Analysis-Daily

The ADX continues to signal bullish price action to start the week. Price/volume picked up a distribution day, but the tally is still low.

2020-10-18-SPX Elliott Wave Analysis-Daily-PrimaryC

I didn’t get a chance to research potential bull counts last week, so I’ve updated the prior charts.

2020-10-18-SPX Elliott Wave Analysis-Daily-Primary1

The only hope for the bears is that prices fall past the 3200 level. If the S&P gets back to all time highs, it’s game over!

COMMENTARY

U.S. retail sales were unexpectedly higher last month, in spite of higher unemployment, lower hiring, and no stimulus package. On the downside, the second wave of the pandemic appears to be upon us, as cases throughout Europe and the US rise. A few vaccine trials have been paused due to health concerns, decreasing the likelihood that a vaccine will be available this year.

Best to your week!

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

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

ANALYSIS

The stock market outlook flipped over early last week, and starts this week in an uptrend.

2020-10-11-SPX Trendline Analysis-Daily

The S&P500 ($SPX) experienced a really good week, finding support at the 50-day moving average and rallying from there. The ADX and price/volume flipped to an uptrend on Monday. And since price rose above 3429, Elliott Wave also shows an uptrend, and more than likely a switch to a bullish count like the one mentioned last week.

COMMENTARY

Stimulus remains the driving force behind the U.S. markets. Only right now, it’s the negotiations, not the actual money. It doesn’t appear to be a “will they / won’t they” decision. Both political parties seem to recognize that government assistance is still required to keep the economy afloat while the pandemic continues to play out. The question is how much will be approved (converging around 2 trillion), and when it will get passed (pre or post-election).

The Fed is also pushing for renewed fiscal support from the legislature, and remains ready to keep policy “accommodating” (i.e. expect interest rates to remain low for a while).

Best to your week!

Stock Market Outlook entering the Week of October 4th = Downtrend

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

ANALYSIS

The stock market outlook continues show a downtrend to start this week, with the ADX and Elliott Wave in downtrends.  Price/volume is mixed.

The S&P500 ($SPX) gapped up to start last week, breaking through the bearish trendline. 

2020-10-04-SPX Trendline Analysis-Daily

The ADX starts this week in a downtrend, while the price/volume moved to mixed. The S&P registered a follow-through day (>1% move on higher volume) on Wednesday, but sold-off into the close.  Price starts the week below the 50-day moving average, so I’m calling this signal mixed for now.

2020-10-04-SPX Elliott Wave Analysis-Daily-PrimaryC

Elliott Wave is still showing a downtrend, and it’s easy to see three waves down…you can make 5 if you squint.  The S&P breached 3310, which was the first sign that the current leg of the downtrend was completed. 

I mentioned seeing a bunch of different counts last week, and someone asked for my “bullish” view (i.e. the Feb to Mar sell-off was the complete downtrend and now we’re back in an uptrend).  Here it is:

2020-10-04-SPX Elliott Wave Analysis-Daily-Primary1

The bullish view appears to show we’re in the 5th wave of a Primary 1 uptrend (verses the 1st wave of a Primary C downtrend in my bearish count).  The problem with this count is the overlap of (1) and (4).  It’s not a lot, but it’s there.

Either way, getting above 3429 would confirm an uptrend, while falling below 3200 reconfirms a larger downtrend.

2020-10-04-SPX Trendline Analysis-Weekly

In the weekly view, the negative RSI divergence shows up, which is why it’s possible we ended a 5th wave.  And I’m still showing the bearish count here.

COMMENTARY

Well, I guess we didn’t have to wait long for an October surprise; the U.S. president tested positive for COVID-19. Then again, there are a lot of people that don’t think that is surprising. The Presidents health will dominate the news cycle this week, at a minimum, so expect volatility.

The U.S. unemployment rate is running around 8%, but job creation slowed. Fiscal stimulus, which many believe to have been the catalyst for the market recovery, is still being negotiated.

A while back, there was a debate about the “shape” of the recovery: U-shaped, V-shaped, L-shaped. As far as stocks are concerned, everyone was wrong…it was K-shaped! Technology and stay-at-home stocks (e.g. Amazon) experienced the V-shape, while more traditional/value stocks (e.g. Chevron or Glaxo-Smith) experienced something like the L-shape.

Best to your week!