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  5. Stock Market Outlook - 2020-10-25

Stock Market Outlook
For The Week Of October 25th = Uptrend


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


The stock market outlook remains in an uptrend, despite last week's weak price action. The S&P500 ($SPX) continued to decline last week, but found support near the 50-day moving average.

Technical analysis of daily SPX prices

2020-10-25-SPX Trendline Analysis - Daily

The ADX flipped to a bearish trend ever so slightly (+DI = 24.11 / -DI = 24.73). That’s not enough to change the signal to a downtrend, but mixed is fair game. And it's definitely something to watch early next week.

Price/volume is still green, and the recent declines haven't been accompanied by distribution days. And a day or two of price increases on higher than average trading volume couldn't hurt. Many technology stocks have good looking technical set-ups (think cups w/ handles), so it is a possibility.

Bearish and bullish Elliott Wave charts below. We'll stick with the prevailing trend until one or there other is invalidated.

Technical analysis of daily SPX prices

2020-10-25-SPX Trendline Analysis - Primary C

Technical analysis of daily SPX prices

2020-10-25-SPX Trendline Analysis - Primary 1


With just over a week until elections in the U.S., the stage is set for a lot of volatility. On tap this week are earnings for almost 40% of the S&P 500, ongoing stimulus talks, and ever present coronavirus issues.

Global coronavirus cases continue to rise, with many countries hitting daily records. While that's partly a result of more testing, the percentage of positive results also increased as have hospitalizations. Failure to pass a stimulus package (or a passing something that’s poorly received) and COVID shutdowns would be catalysts to the downside.

From a market perspective, there are fewer unknowns in terms of business and earnings impact versus February. We have better procedures and treatments in place, with several vaccine candidates in final stage trials. Passing a good package, a manageable case count, or positive vaccine trials should push the markets back to new highs.

Even though the signals are relatively bullish, it wouldn't take much price movement for the outlook to get really bearish. So be prepared for volatility, and adjust your expectations accordingly. It's unlikely we'll know the results of the election on election night, but prices will tell you want to do.

Best to your week!

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If you're interested in learning more about the relationship between price and volume, or how to find and trade the best stocks for your growth strategy, check out this book on Amazon via the following affiliate link:

How to Make Money in Stocks: A Winning System in Good Times and Bad.

It's one of my favorites.

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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