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  3. Stock Market Outlook - 2021-05-16

Stock Market Outlook
For The Week Of May 16th = Uptrend

INDICATORS

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

ANALYSIS

Last week's price action made a mess of the stock market outlook signals, but an uptrend remains in place until there's a confirmation.

A mixed bag last week, with the S&P500 ($SPX) selling-off on inflation concerns, and then attempting a recovery rally to close out the week.

The index is a few points away from closing the price gap created by Tuesday’s opening. We'll have to see if that event leads to another leg down in price (one possible outcome based on Elliott Wave).

Technical analysis of daily SPX prices

2021-05-16-SPX Trendline Analysis - Daily

The ADX flipped to a bearish trend early last week, but could recover shortly if Thursday/Friday trading continues.

The S&P500 picked up another distribution day, putting the count at 7 and shifting the price/volume signal to mixed (since price is still above the 50-day moving average).

The lack of trading volume on upside days continues to indicate a buy-the-dip mentality. It’s a good sign that people are still willing to buy, even at these elevated valuations. But that also means they need dips to buy, and may leave investors out in the cold when that strategy no longer works.

Technical analysis of daily SPX prices

2021-05-16-SPX Elliott Wave Analysis - Daily - Primary 1

For Elliott Wave, calls for the completion of a 4th wave may have been a bit pre-mature. That, or we completed a 5th wave and it's all downhill from here (!). The daily chart looks like it's in the b-wave of a corrective zigzag. Until we reach a new high or close below 3981, the 4th wave remains in play .

COMMENTARY

The SPAC space has been decimated over the past few weeks, and most technology-related companies aren't far behind. It's so bad that the talking heads are starting to hedge their messaging, telling investors to lower their return expectations, look for "value" , and consider cyclical industries and international exposure.

On the heel's of the disappointing jobs report, CPI data came in hot. And that's even after sandbagging by removing food and energy, which everyone knows are getting more expensive and are a pretty big deal when it comes to the personal finances of individual investors.

As expected, the Fed continues to say that the increase was expected based on all things related to the pandemic, and is likely to be transitory in nature. Human beings are transitory too, if you make the time frame long enough...

Best to Your Week!


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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, 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.

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