2021-02-28-SPX Trendline Analysis - Daily
The S&P500 ($SPX) sold off again last week, but not without the return of some volatility. Even with the sell-off, price sits ~9.5% above the 200 day moving average.
The ADX flipped Monday, and heads into this week with the Directional Indicators firmly bearish and a strengthening trend. Three distribution days were added to the count, adding to the case for a downtrend. But price closed right on top of the 50-day moving average, so the price/volume signal is mixed.
If the S&P closes below the 50-day, this signal will flip to a downtrend, joining the ADX.
2021-02-28-SPX Elliott Wave Analysis - Daily - Primary 1
For Elliott Wave, the S&P wasn't able to find support at the 13 or 34 day moving averages. It's possible a 5th wave just ended, which would mean it's time for a correction. The size of that correction depends on whether you think we’re in a bull or bear market and how long we’ve been in it (i.e. which 5th wave just ended - Cycle, Primary, Intermediate, Minor...or was is a B-wave).
Ultimate confirmation (i.e. signal change) occurs if price crosses the Wave 4 low (~3700). Otherwise, the current wave pattern may have further upside. In either case, proceed with caution, and let price tell you what to do.
Most of the S&P 500 has reported 4th quarter earnings, and surprised to the upside. The next round of earnings will compare with Q1 2020; the first reports to be significantly impacted by the pandemic.
The interest rates on 10-year treasuries continued to climb last week, crossing the proverbial line in the sand of 1.5%. Even though rates retreated a bit by the end of the week, 1.5% is considered the first one that could cause some re-balancing and or sector rotation in longer-term portfolios.
If rates continue to rise, financials and energy plays are likely to see the most benefit. Technology stocks and other high-valuation names will see selling pressure, as higher rates lower the future value of their earnings.
Best to Your Week!
P.S. The 2020 Annual Performance Report is out; check it out here:
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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