1. Invest-Safely.com
  2. >>
  3. Tracking the Stock Market
  4. >>
  5. Stock Market Outlook - 2021-04-25

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

INDICATORS

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

ANALYSIS

The stock market outlook continues to indicate an uptrend in place to start this week's trading action.

Technical analysis of daily SPX prices

2021-04-25-SPX Trendline Analysis - Daily

A choppy week for the S&P500 ($SPX). We actually saw a small increase in volatility! Since the corrections over the past year have been ~5%, even a small amount of volatility can seem dramatic. But when all was said and done, not much change from last week's starting point.

We start this week in basically the same position as last week: the index trading ~5% above the 50-day, roughly same distance to the lower trendline.

The ADX shows a strong bullish trend. A few more distribution days fell off the count, but a pair of distribution days popped up and took their place. The overall count is low, so nothing to be concerned about yet.

Technical analysis of daily SPX prices

2021-04-25-SPX Elliott Wave Analysis - Daily - Primary 1

For Elliott Wave, it’s possible that the 3rd wave ended on the 16th, and the 4th wave completed last week, which would put the S&P into the 5th wave. The 4th wave could also drag on for a bit more.

Unlike the ADX and price/volume, EW is indicating there’s weakness underneath the price action last week, with the MACD joining the RSI in showing a negative divergence. This type of price action usually occurs during 5th waves (i.e. the end of an uptrend).

If the count is correct, that would mean the end of the Primary 1 wave…or the rally that started at the February low in 2020.

In either case, it’s time to start taking profits and/or right-sizing your allocations. The S&P gained a little more than 10% since the March low, and will likely give back half of that before the signals change.

COMMENTARY

The Biden administration got traders and investors hyperventilating last week, after proposing increased tax rates. The proposal included:

  • Increasing the capital gains tax to 39.6% (currently it's 20%) for those earning >$1 million per year
  • Increasing the corporate tax rate to 28% (currently it's 21%)

The news shouldn't have surprised anyone, but markets gonna market. Biden campaigned on increasing taxes on the wealthy, and is making good on that promise. Regardless of party affiliation, tax increases are inevitable. All the stimulus flooding the economy will be paid for by someone. And by someone, I mean tax payers. The only difference is how the debt collection will be spread around...which tax rates increase and by how much.

There are still plenty of fundamental reasons to be bullish in the near-term; an infrastructure bill in the works (more stimulus), low interest rates (lower debt repayment), and global vaccine rollouts (consumer spending). Earnings season rolls on, and most companies have reported better than expected results. Again, not surprising given the comparison's are based on the disaster that was Q2 2020.

Best to Your Week!



If you find this research helpful, please tell a friend. If you don't find it helpful, tell an enemy.

I regularly share articles and other news of interest via on Twitter (@investsafely), Facebook, Linkedin, and Instagram (@investsafely)



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 historical Elliott Wave Analysis, go to ELLIOTT WAVE lives on by Tony Caldaro. Other interpretations can be found at: Pretzel Logic, 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.
Hypothetical Presentations:
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).