The Safe Investing Blog

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

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

ANALYSIS
Basically a carbon copy of last week’s stock market outlook; no change in the signals and price action remained bullish.

2020-08-09-SPX Trendline Analysis-Daily

The S&P500 ($SPX) support trendline, remains in place, and isn’t overly extended from the 50 & 200 day moving averages.

The Elliott Wave count, if correct, shows a correction should start any day now.  The negative divergence in the RSI remains in place verses the highs in June and July (not by much though)…common for the end of a 5th wave.

That said, in order for the current count to be correct, the Minor 5 wave needs to end before it exceeds the February high (3393). Heading into the week, the S&P is just 42 points shy of that level. Not exactly a risk-on scenario.

2020-08-09-SPX Elliott Wave Analysis-Daily-IntermediateA

Of course, the count could be wrong, which is why I don’t use just one signal. Downside risk is roughly 6%; that’s how far the S&P500 would need to fall before breaking the 50-day moving average and generating a sell signal in the other indicators.

COMMENTARY
U.S. employment figures were released last week, beating estimates for hiring in July.

Despite the positive headlines, underlying data isn’t great. There are still a lot of people that aren’t getting paid what they did a few months ago.  The longer that situation persists, the larger the impact on consumption, and therefore the economy.

70+% of our economy is based on consumption, so while the stimulus checks help people stay afloat, they won’t necessary improve the economic recovery. Does the stimulus check get saved, get invested, or go towards paying down debt? If yes, then it’s impact is limited.

That’s not to say the stock market can’t continue to climb. All that liquidity from the various central banks has to go somewhere! Talking heads justify current prices by saying that “the market” is now looking past near term earnings (since they will be bad) and focusing on expected earnings in 2021 or 2022 (even though firms aren’t providing guidance out that far). Since the situation will eventually get better (people get back to work, find similar paying jobs, etc.), there’s no need to reprice.

It’s like a wink and a nod that we’ll all pretend everything is okay…which is great as along as everyone keeps pretending! It’s the prisoner’s dilemma at work.

Best to your week!

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

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

ANALYSIS
No change in the ADX, price/volume, or Elliott Wave signals, so the stock market outlook maintains an uptrend.

2020-08-02-SPX Trendline Analysis-Daily

The S&P500 ($SPX) remains above the support trendline, as well as the moving averages. The ADX remains bullish, while prices remain above the 50-day moving average with a low number of distribution days.

2020-08-02-SPX Elliott Wave Analysis-Daily-IntermediateA

For Elliott Wave, the Minor 5 wave is nearing completion.  The [v] subwave should complete the pattern, as well as the Intermediate [A] wave. Afterwards, the Intermediate [B] correction should take hold.

COMMENTARY
A lot of data last week!  On the “Wall Street” side, earnings reports came in fast and furious.  Really, it was the Amazon, Apple, and Facebook show, as their performance was much better than expected…and their CEOs were dragged in front of Congress to discuss anti-trust.

Quarterly US GDP growth saw its sharpest downturn on record, but even that wasn’t “as bad” as everyone feared.  But Democrats and Republicans are still struggling to come up with agreeable terms for the next round of stimulus, which won’t help “Main Street” at all.

More earnings on tap this week, along with updated unemployment numbers.

Best to your week!

Stock Market Outlook entering the Week of July 26th = Uptrend

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

ANALYSIS
The stock market outlook uptrend continues; no change in the signals last week.

2020-07-26-SPX Trendline Analysis-Daily

The S&P500 ($SPX) remains above key support levels, the ADX remains bullish, and institutional selling remains low.

2020-07-26-SPX Elliott Wave Analysis-Daily-Intermediate A

No change to the Elliott Wave count; the Minor 4 wave completed at the end of June, and the Minor 5 in progress since then. With the market selling off Thursday and Friday, it looks like S&P completed the (3) sub-wave last week. Based on this count, I wouldn’t expect prices to fall much further, since first waves and fourth waves aren’t allowed to overlap; (1) completed at 3184.

All that said, now is not the time to be complacent. It’s earnings season, and your favorite stock may just be one conference call away from a major selloff; just ask Intel shareholders.

COMMENTARY
Not the best week for equities. The E.U. agreed on a stimulus package, but that was about the only positive. The U.S. is still negotiating a second packages, but current benefits set to expire at the end of the week. Initial jobless claims increased for the first time since March.

As if Q2 earnings and a global pandemic weren’t enough to keep markets occupied, geopolitical tensions came back into the headlines last week. The U.S. State Department ordered China to close its Houston consulate, alleging the site was part of a Chinese espionage effort using diplomatic facilities across the US. In response, China ordered the U.S. to close its consulate in Chengdu.

Earnings season kicks into high gear this week, with almost 40% of the S&P500 reporting.

Best to your week!

Stock Market Outlook entering the Week of July 19th = Uptrend

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

ANALYSIS
The stock market outlook uptrend continues, with the ADX, Price/Volume, and Elliott Wave all in the green.

2020-07-19-SPX Trendline Analysis-Daily

The S&P500 ($SPX), closed above the resistance trendline pretty consistently. But it was unable to get past the June 8th high.  The ADX remains bullish. Distribution day count is still low and recent ones have below average trading volume.

2020-07-19-SPX Elliott Wave Analysis-Daily-Intermediate A

No change to the Elliott Wave count; 5th wave still in progress. We do have a pretty good set-up for a new high on lower relative strength (RSI divergence) that was missing back in early June, which can be seen in both the daily and weekly views.

2020-07-19-SPX Trendline Analysis-Weekly

COMMENTARY
Bank earnings were better than expected, thanks in large part to “trading” based revenues.  That said, here are a couple of quotes from the conference calls (hat tip to Steve Blumenthal):

“May and June will prove to be the easy bumps in terms of this recovery. And now we’re really hitting the moment of truth, I think, in the months ahead.”

– Jennifer Piepszak, CFO, JPMorgan

“Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter.”

– Charlie Scharf, CEO, Wells Fargo

“I don’t think anybody should leave any bank earnings call this quarter simply feeling like the worst is absolutely behind us and it’s a rosy path ahead.”

— Mike Corbat, CEO, Citigroup

Earnings season ramps up this week, with ~100 companies reporting results.

Best to your week!

Stock Market Outlook entering the Week of July 12th = Uptrend

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

ANALYSIS
The stock market outlook uptrend remains in place this week, though there wasn’t a lot of activity either way. That’s not to say there wasn’t ANY activity in the markets; Tesla stole the show by jumping ~20%.

Action in the ($SPX) was flat last week. The ADX remains bullish. Distribution days are spread out, so the elevated count (6) isn’t cause for concern.

2020-07-12-SPX Trendline Analysis-Daily

The index closed at the resistance trendline on Friday. Bulls are expecting a gap up on Monday that negates the trendline, bears are expecting a drop back to support levels.

2020-07-12-SPX Elliott Wave Analysis-Daily-Intermediate A

No change to the Elliott Wave count this week (still in a 5th wave, looking to get past the June 8th high), though there was a small divergence in the RSI (slightly higher close/ slightly lower RSI reading on Friday vs Monday).

COMMENTARY
Big name U.S. banks begin Q2 earnings reports this week, so we could be in for some volatile moves. Since they are typically used for income investing strategies, be on the lookout for dividend cuts and or changes in the payout ratio.

Best to your week!

Stock Market Outlook entering the Week of July 7th = Uptrend

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

ANALYSIS
The stock market outlook uptrend remains in place this week.

The S&P ($SPX) rebounded last week, and a new support line is in play. The ADX Directional indicators cross-over again, bullishly this time, marking 4 signal changes in the past 4 weeks. Price / volume remains well behaved.

2020-07-05-SPX Trendline Analysis-Daily

The 200-day moving average provided support last week, so now its sights are set on that March to June trendline.

No change to the Elliott Wave count this week.

2020-07-05-SPX Elliott Wave Analysis-Daily-Intermediate A

COMMENTARY
With Q2 in the books, it’s a great time to take stock of your personal financial situation and goals for the year. The first half of 2020 was a wild ride and everyone’s finances were impacted in some way.

The recovery, while impressive in some aspects, is not evenly distributed.  The Nasdaq was up 10.6% for the first half of the year, while the Dow  Jones Industrial was down 10.6% for the year.  Lowes (LOW)a dividend king, is back at all time highs, while Cincinnati Financial (CINF), another dividend king, is down almost 40% for the year.

Review your current situation and figure out if any changes are necessary.  Do you need to take some profits?  Change your allocations or strategy?  Redeploy some capital?

Best to your week!