The Safe Investing Blog

Stock Market Outlook entering the Week of January 13th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Mixed
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Constructive price action continues, but so does the downtrend.

All of the indexes are above their 20 day and are posed to test their 50 day moving averages.  Continuing the prior week’s trend, prices rose while trading volume declined; not the best situation for a new uptrend.  A few growth stocks did indeed break-out, but not nearly enough to power the markets higher.  I’m still looking for indexes to break above their 50-day moving average before changing these signals.

2019-01-13 – US Stock Market Averages

OEW continues to signal a downtrend.  Tony reiterated his call that the S&P takes another run at the lows before calling a bottom, and provided some research to bolster the claim:

“While all this was going on we were doing some research into historical market activity that is similar to this. We found five events[…]. In every one of the five instances the market rallied between 7.5% to 13% after the significant low. In four of the five instances, when the rally concluded, the market retested the lows. The one exception still had a 61.8% pullback.

We also looked into momentum measures…there are only three instances. In each of the three instances momentum rose 20% to 25% before the market reversed and went back to retest the lows. It is currently up 17%.

Probabilities suggest a decline soon that mostly likely retests the lows.”

The S&P ($SPX) maintained upward momentum last week, but ran into resistance around 2600.  Prices reached a high of 2595,2597,2596 on Wednesday, Thursday, and Friday, respectively.  Combined with falling trading volumes, we may have just found a near-term high.

2019-01-13 – $SPX Technical Analysis – Daily

Switching to a weekly view, the market closed at its 10-week moving average; could this be contributing to the lack of progress we saw on the daily chart during the back half of last week?

2019-01-13 – $SPX Technical Analysis – Weekly

Either way, the weekly view indicates that we should see a confirmation of direction soon, because the downtrend line rests at 2,650 (+2%), and the 40-week moving average is right around 2,700 (+4%).

Are we out of the weeds?  I have no idea.  I know where I’d like them to go, but the markets tend to discount my opinion…as they do everyone else’s.   The Fat-Pitch has some historical perspective this week, similar to OEW, with a positive twist:

“Sharp falls of at least 15% have a strong tendency to have their original low retested in the weeks/months ahead. But what is notable this time is the exceptional breadth that has driven the indices higher: in the past 70 years, this has never taken place within the context of a bear market. The Christmas low may still get retested, but it seems likely to hold and new highs are probably ahead. Nothing in the stock market is ever guaranteed, but this has been the consistent, historical pattern.”

We’ll need a catalyst to turn the rally into a new uptrend; “FANG” earnings maybe?

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has functioned as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of January 6th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Mixed
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Happy New Year! With payrolls coming in WAY above estimates (73%), and a Fed speech promising “to adjust policy quickly and flexibly” if needed, the markets were in a festive mood last week.

The NYSE and Russell 2000 start the first full week of trading in 2019 above their 20 day moving averages, while the S&P, NASDAQ, and DJIA sit just below that mark.  All of them are still below their 50 day (and 200 for that matter), so no change in the signal.

2019-01-06 – us stock market averages

The price/volume combo shifts to mixed to start the week.  Price action has been constructive, and Friday appears to give us a follow-though day.  But trading volume wasn’t great, few growth stocks are ready to break-out, and prices need to recover their 50-day moving average for a sustainable uptrend to take hold.

OEW continues to signal a downtrend.  Tony still thinks we need to take another run at the lows before calling a bottom and declaring an end to our 3 month bear market.  But that doesn’t mean we can’t or won’t have a small rally first.

After finding support around 2,350, the S&P ($SPX) found another floor near 2,450.  Trading volume wasn’t great, but holiday weeks tend to be that way.  The ADX still shows a bearish trend.

2019-01-06 – spx technical analysis – daily

Switching to a weekly view, prices have some work to do before reaching their next resistance level.

2019-01-06 – spx technical analysis – weekly

It seems that all the pundits have jumped ship and are saying 2019 will be challenging for investors…I guess that means we shouldn’t be surprised to see a massive rally!  Either way, now is a great time to review your trading in 2018 and make improvements to ensure that 2019 will be a profitable year (the “Adjust” part of my process).

For example, in 2017’s performance review, I mentioned that the market outlook may need an upgrade.  The moving average and price/volume signals were very similar, and I was also looking for a way to decrease the impact on “whipsaws” (quick price changes that generate false or bad signals) on trading system performance.

And at the start of Q2, you may have noticed that some trendline analysis, along with the ADX indicator, was added to the market outlook.  The goal was to proactively vet new signals, real-time, during 2018.  I’ll publish a comparison as part of the upcoming 2018 performance review.  And, if there’s an improvement, look for some changes in the weekly posts.

How did your process fair during 2018?  Was it robust enough to handle changes?  What improvements will you be making in 2019?

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has functioned as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of December 30th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Downtrend
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Better late than never?  We had to wait until after Christmas, but Santa Claus delivered a rally.  Not as much as we would have liked, I’m sure, but better than another sell-off.  No change in outlook though.  Equities have some work to do before giving the all clear to put your money at risk.

On the bright side, I don’t think we’re in danger of a 2008-2009 style sell off just yet (see last week’s article “Great Recession Revisited”), so your portfolios should recover a bit.

All the indexes are well below their 20, 50, and 200 day moving averages.

2018-12-30 – US Stock Market Averages

The price/volume combo remains in a downtrend as well.  There are only a handful of names on my growth stock list that have anything even close to resembling a solid price chart.

OEW still calls for a downtrend, and thinks we could take another run at the lows.  But, per their analysis, that could be the end of the downtrend…even the bear market(!).

The S&P ($SPX) found support around 2,350, and looks to have broken the falling trendline in play for most of December.  Prices still have to recover ~10% just to get back to the downward trendline and/or 200-day moving average!  The ADX reflects the bearish we experienced last week.

2018-12-30 – SPX Technical Analysis – Daily

Switching to a weekly view, the 2395 support level held and prices are resting on the 2480 support/resistance level.

2018-12-30 – SPX Technical Analysis – Weekly

After the bounce back, bulls will say we’re a week into a V-shaped recovery.  The bears will say we need another test of the lows to truly bottom.  Our job is to make money or not to lose a lot if we decide to initiate positions.

We’ve got another holiday shortened trading week coming up as we celebrate the new year.

Wishing you investing success in 2019!

Happy New Year!

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has performed as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of December 23rd = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Downtrend
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
Investors say that prices take the stairs on the way up, and the escalator on the way down.  I think the market opted for the elevator this month.  But there’s still hope; the Santa Claus rally (sustained increases in the stock market that begin on December 26th and extend through January 2nd) is still on the table.

All the indexes are WAY below their 20, 50, and 200 day moving averages.

2018-12-23 – US Stock Market Averages

The price/volume combo remains in a downtrend as well.  Volume rose during the week, then exploded Friday. The quadruple witching day (market index futures, market index options, stock options and stock futures expired) at the end of the last full trading week in 2018 was the main catalyst.

OEW (downtrend) saw last week expected support level wiped out by falling prices:

There were three Fibonacci retracement levels for support..: (38.2%) 2509, (50.0%) 2376, and (61.8%) 2242. Obviously the first one did not hold. Our worse case support has been around SPX 2400, which is also close to the 50% retracement…

On to some trendlines. Sadly, there was no bounce back to the recent trading range, nor was there a floor of support from early 2018.  The S&P ($SPX) fell to prices we haven’t seen in over a year (August 2017).  Now we need to go back almost 2 years to see where we might bottom…elevator indeed.

2018-12-23 – SPX Technical Analysis – Daily

There was support around 2480, which would have been a 16% correction. Next up is 2395 (similar to the OEW viewpoint), then we go down to 2276, and then on to 2184. Those levels represent 19%, 23%, and 26% declines from the all time of 2940, respectively.

2018-12-23 – SPX Technical Analysis – Weekly

Right now, the SPX is ~18% from the September high, which is the largest correction since 2011 (~20%).  Not quite bear market territory, but close…no wonder the twitterverse is losing its collective mind.

To be fair, we haven’t seen many corrections since 2009.  And when we did see a drop, it was typically V-shaped with prices rebounding quickly.  So it’s rational to think these moves to the downside are abnormal. They’re not.

SPX vs 200-day moving average

Historically, stocks look really oversold right now. Could they go lower and be more oversold? Of course. Either way, last week’s action is a fantastic opportunity to review your buy and sell rules. When the markets are “always” in an uptrend, it’s easy to lose discipline and not get burned. Even when the markets move sideways, investors don’t want to “trade”, so they ignore signals and wait for a rebound.

We’re not in a recession just yet, so a v-shaped recovery wouldn’t surprise me. Maybe the executive and legislative branches will act like adults, reach an agreement, end the government shutdown, and the Santa Claus rally will come to town.  Now that would be a Christmas miracle.

We have a short, low volume trading week ahead, with partial session Monday (Christmas Eve) and no trading on Tuesday (Christmas Day). A great time to log out of StockTwits, turn off CNBC, and relax!

Warmest wishes and a joy filled holiday week to you and your family.

Merry Christmas!

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has performed as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.

Stock Market Outlook entering the Week of December 16th = Downtrend

• 20/50 Day Moving Averages: Downtrend
• Price & Volume Action: Downtrend
• Objective Elliott Wave Analysis: Downtrend

COMMENTARY
So far, Santa hasn’t come to our rescue with his rally yet. Investors are probably rethinking those GI Joe’s with the kung-fu grips (if you don’t know that line, the movie Trading Spaces would make an excellent last minute gift).

All the indexes are still below their 20, 50, and 200 day moving averages to start this week.

2018-12-16 – US Stock Market Averages

The price/volume combo remains in a downtrend as well.  Trading volumes were just about average across the week, but institutions still appear to be in sell mode.

OEW continues with the probable downtrend call, while looking for the SPX to find support at 2577 or even 2550.

The S&P ($SPX) closed at 2599.95 last week, falling below the 2630 support level we’ve been watching. Friday was also the first time the SPX closed below 2630 since April! A bounce-back on Monday would salvage the sideways trading range, but for now it looks done and dusted.

2018-12-16 – SPX Technical Analysis – Daily

The 2580 support level, which was established way back between February and April, is now in play…which coincides with the OEW target mentioned earlier.

2018-12-16 – SPX Technical Analysis – Weekly

Not much we can do right now on the long side for growth strategies.  Fingers crossed and stops tight if you do decide to brave the waters.  For income strategies, some utilities have been doing really well recently, but that’s about it.  The good news is that P/E ratios are beginning to come down.  When the market turns around, there will be some solid names for sale.

Participate. Protect. Prepare.

If you find this research helpful, please tell a friend. If you don’t find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

You can check out how well (or poorly) the outlook has performed as a stand-alone, signal generator using past performance estimates:

• 2015 Performance – Stock Market Outlook
• 2016 Performance – Stock Market Outlook
• 2017 Performance – Stock Market Outlook

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.