The Safe Investing Blog

Market Outlook entering the Week of September 6th = Downtrend

MOVING AVERAGES

• Short-term (20 DMA): Downtrend
  All major stock market averages remained below their 20-day moving averages.

• Intermediate (50 DMA): Downtrend
  All the major stock market averages remained below their 50-day moving averages.

• Long-term (200 DMA): Downtrend
  All of the major stock market averages remained below their 200-day moving averages.

COMMENTARY
Another volatile week for US equities.  Great if you’re trading, not so much for investing.  So we need to take a step back and survey the investing landscape for clues.

Here is some global perspective from Tony C. at OEW:

Last Monday’s flash crash at the open and retest on Tuesday was an international event. Many of the emerging markets, and commodity driven foreign indices, which had been rising in corrective patterns for the past number of years, appear to have completed those patterns and are now back in bear markets. Our list includes: Australia, Canada, Hong Kong, Indonesia, Singapore and S. Korea. These indices join Brazil, Greece and Russia, which had already been in bear markets. These nine indices represent half of the foreign indices we track. Obviously the rest of the indices, plus the US, are now facing some headwinds.

Does this mean that the US is also in a bear market?  No.  It does mean that large gains will be harder to capture over the next few months and/or quarters.  You’ll probably see a lot of price movement, but whether or not that translates into profits is entirely dictated by the trading techniques you’re using.

Speaking of trading, the information here just gives you an idea of the general market conditions.  Obviously, you can’t use these posts to day trade, or even “week” trade.  Moving averages smooth out price movements.  Since the US markets declined so rapidly, the prices that make up a moving average are still dominated by price levels before the decline.  So I expect the next rally to occur without an immediate change in the market outlook.

2015-09-06 – US Stock Market Averages

Sources:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  For price/volume data, head to stockcharts.com.

Moving Average Signals:

• Uptrend=Market indexes remained above their moving average during the trading week
• Downtrend=Market indexes remained below their moving average during the trading week
• Buy signal=Market indexes fell below their moving averages during the trading week
• Sell signal=Market indexes rose above their moving averages during the trading week

Market Outlook entering the Week of August 30th = Downtrend

MOVING AVERAGES

• Short-term (20 DMA): Downtrend
  All major stock market averages remained below their 20-day moving averages.

• Intermediate (50 DMA): Downtrend
  All the major stock market averages remained below their 50-day moving averages.

• Long-term (200 DMA): Downtrend
  All of the major stock market averages remained below their 200-day moving averages.

COMMENTARY
Quite the volatile week for global stocks.  In the US, we haven’t seen that type of volatility in a really long time.  The front half of the week was terrible.  Buyers stepped in on the back-half of the week giving the market some relief.  But daily trading volumes made the outlook dim; high volume price declines with low volume price increases.

The question on everyone’s mind is what’s next?  Was the price action Monday and Tuesday the first step in a longer correction, or did we compact several weeks of selling into a few hours?

Experts have made the case for both.  For example, the S&P500 didn’t test the 1,820 support level, so further downside is expected.  And if we hit that level, the bull market in US equities is likely over.

On the other side of the fence, US stocks have already recovered a majority of last week’s losses.  The S&P500 is well above Tuesday’s low, indicating the worst of the selling is over.  We can then expect a rally to reach new highs, potentially in the 2210’s, 2300’s or even  2500’s for the S&p500.

Patience is required, so plan your trades and trade your plan.  I’ve got a watchful eye on any positions that didn’t participate in the recovery.

Unless your plan is to trade based on volatility and short-term indicators, now is the time to be defensive (i.e. do not buy large positions, expect large “paper” gains and losses and market prices swing back and forth).

Sources:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  For price/volume data, head to stockcharts.com.

Moving Average Signals:

• Uptrend=Market indexes remained above their moving average during the trading week
• Downtrend=Market indexes remained below their moving average during the trading week
• Buy signal=Market indexes fell below their moving averages during the trading week
• Sell signal=Market indexes rose above their moving averages during the trading week