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:
I regularly share articles and other news of interest via on Twitter (@investsafely), Facebook, Linkedin, and Instagram (@investsafely)
How to Make Money in Stocks: A Winning System in Good Times and Bad.
It's one of my favorites.
For historical Elliott Wave Analysis, go to ELLIOTT WAVE lives on by Tony Caldaro. Other interpretations can be found at: Pretzel Logic, Daneric's Elliott Waves, and 12345ABCDEWXYZ
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.
IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.
Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).