Weekend Stock Market Outlook

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Stock Market Outlook For The Week of
April 12th = Uptrend

INDICATORS

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

COMMENTARY

The stock market outlook switched to an uptrend last week! The ADX directional indicators crossed over based on Tuesday's price movement, meaning two of the three signals tracked for the weekend outlook are now showing an uptrend.

Technical analysis of daily SPX prices

2020-04-12-SPX Trendline Analysis - Daily

The S&P500 ($SPX) broke through the downward trendline on Monday, and you can lay in a new upward trendline off the lows. We start this week ~7% above that trendline, so keep that in mind if you're using that for a trigger. It seems like a lot, but in our current trading environment, 7% is a day or two of price action.

Technical analysis of daily SPX prices

2020-04-12-SPX Elliott Wave Analysis - Daily

For Elliott wave, the S&P500 has retraced 50% of the correction, and is in the final leg (c-wave) of the current rally (B wave). Based on a zig-zag pattern, price targets for the end of the current wave are 2897, 2919, and 3175. The first support level from the initial downtrend (2855) could provide resistance, as well as the 50-day moving average (2909) and the 61.8% retracement level (2934).

Technical analysis of weekly SPX prices

2020-04-12-SPX Trendline Analysis - Weekly

We saw some positive signs, with regard to infection curves, showing that social distancing and shutdowns are slowing the spread. That said, slowing the spread isn't the same as a therapeutic treatment or vaccine, and both will be needed to really create a "normal" environment. And even then, restarting the economy isn't as easy as flipping a switch.

~17 million Americans have filed for unemployment benefits in the last three weeks...that's about 10% of the workforce! Many people are STILL trying to access there state's websites or call centers. That total doesn't include employees who are experiencing reduced income via pay cuts and furloughs. Budgets are being stretched and savings are being drained. It'll take some time before those holes are filled and consumer spending habits change.

The EU reached an agreement on a 500b Euro package to kickstart economic growth. Details on who will pay are TBD.

The Fed announced even more stimulus, including $600 billion in new loans for small and medium sized businesses, $850 billion in corporate lending programs, and $500 billion to states and municipalities.

They will also, via the US Treasury, will fund the purchases of some types of high-yield bonds, collateralized loan obligations and commercial mortgage-backed securities, as well as ETFs that track investment grade and speculative debt. Yes, the Fed is buying bond ETFs. And who knows...another leg down and they could even announce purchases of equity ETFs!

If you've made money trading the recent bounce/rally, don't get greedy and forget to take profits. Some sectors have rebounded better than others, so take a look at your asset allocation overall and make sure you're happy with your risk levels. And as always, make sure you've updated your sell signals, so that if we do see stock prices fall you're not stuck with even bigger losses.

Banks kick off Q1 earnings season this week. Keep an eye on forecasts for the year, or lack thereof.

Best to your week!



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Charts provided courtesy of stockcharts.com.

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.

Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.

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