Stock Market Outlook For The Week of
December 23rd = Downtrend
20/50 Day Moving Averages: Downtrend
Price & Volume Action: Downtrend
Objective Elliott Wave Analysis: Downtrend
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:
On to some trendlines. Sadly, there was no bounce back to the recent trading range, nor was there a floor at 2580 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.
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.
You can check out how well (or poorly) the outlook has performed as a stand-alone, signal generator using past performance estimates: