The stock market outlook continues show a downtrend to start this week, with the ADX, price/volume, and Elliott Wave in downtrends.
2020-09-27-SPX Trendline Analysis - Daily
The S&P500 ($SPX) continues correcting towards the 200-day moving average. The ADX and price/volume remain bearish; price remains below the 50-day moving average with a high level of institutional selling.
If the bearish trendline holds, prices should retreat early this week. On the bullish side, look for a large advanced on high trading volume as a signal that a new rally is taking shape.
2020-09-27-SPX Elliott Wave Analysis - Daily - Intermediate 1
For the Elliott Wave signal, price fell below 3279 during the week, invalidating the 3rd wave count shown previously and confirming the near term downtrend.
I’ve researched a few different viewpoints, and settled on Intermediate 1 of the Primary C wave. It's a very bearish count and suggests the S&P will retest the March low. I only think that's possible if we have a very gradual, slow moving decline. Any kind of volatility, and expect the Fed to step in to support the market. If/when that occurs, the count likely shifts to a bull count (e.g. Primary [A] shifts to a Primary 2, Primary [B] shifts to a Intermediate 1, etc.)
Either way, the Elliott Wave signal is in a downtrend to start the week. If the S&P can get above 3310, then the current leg of the downtrend is probably over, since the current wave shouldn’t overlap with the prior wave peak from Sept 11.
As expected, September wasn't a great month for U.S. stocks. But that doesn't mean we're out of the woods yet. It's an election year, so next month we've got the "October surprise". And if that last election is any indication, stocks could be in for a wild ride in November.
Best to your week!
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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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