The stock market outlook remains in an uptrend again this week, but is really just one down day away from a downtrend.
2020-06-28-SPX Trendline Analysis - Daily
A down week for the S&P ($SPX). Tuesday's sell-off made short work of the April/May support line; new resistance lines are shown.
We’ll see if the 200-day moving average provides support this week, and the 50-day moving average isn’t far behind. If we see vertical violation of the 50-day (i.e. big price move below the average on high trading volume), this signal will also turn bearish.
The ADX Directional indicators cross-over again, back into bearish territory. Price/volume is still in an uptrend, but selling is elevated…at least the distribution days aren’t bunched together.
2020-06-28-SPX Elliott Wave Analysis - Daily - Intermediate A
For Elliott Wave, the rally I expected to see last week didn’t materialize, but the count hasn’t been invalidated…yet. It looks like we have an ABC 4-wave, with the 4th wave almost complete. Since Wave 4 can’t overlap Wave 1, a move below 2955 invalidates this count. Just like last week, the uptrend signal remains in place to start the week, but let price be your guide.
My original assumption was that the SPX would rally from the March low into April and May on all of the stimulus programs, as well as other general “improvements” relative to everything being shut down.
Then, as economies reopened and we experienced 2nd waves of COVID, prices would retreat. I assumed this would happen in May, but uncoordinated shutdowns and reopenings look to have drawn out the market impact (flattened the curve, so to speak).
The severity and duration of the second leg down will likely hinge on how much support the government provides. I can imagine scenarios where the U.S. FED starts purchasing index ETFs to stem a selloff!
Second quarter earnings are just around the corner. Since many companies stopped providing forward guidance, expect more volatility when announcements are released. Also, I've seen some discussions about the impact of end of the quarter rebalancing, so stay sharp.
Best to your week!
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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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