The S&P500 ($SPX) sold off to start last week, found support near the 50-day moving average and the support trendline, then rebounded to end the week where it started. Currently, it’s trading ~2% above the 50-day and ~10% above the 200 day.
2021-05-23-SPX Trendline Analysis - Daily
The ADX remains bearish, but the trend continues to weaken. The absolute level is below 20, which indicates the lack of a trend and corresponds to the price action in the S&P for the past 2 weeks.
The index picked 3 distribution days last week, but a few fell off the count because the losses for that day were less than 0.2%. Since the S&P bounced found support at the 50-day, this signal remains mixed.
2021-05-23-SPX Elliott Wave Analysis - Daily - Primary 1
For Elliott Wave, the 4th wave appears to be a running flat pattern. If so, that would mean the 5th minute wave has finally started.
The U.S. economy continues to reopen as spring rolls on and more of the population is fully vaccinated. The markets have largely overlooked issues in other parts of the world (the conflict in Gaza, India's COVID-19 troubles, etc.).
Cryptocurrency was the headliner last week, with the big news coming out of China. The financial committee decided to more closely monitor Bitcoin mining activities in the country, and three financial associations reiterated the 2017 ban on using Bitcoin and other cryptocurrency.
The old saw "don't try to catch a falling knife" applies to new asset classes like crypto just as much as stocks! No corner of that market was safe, as all the different coins have sold off tremendously.
While crypto trading doesn't directly impact the stock market, high volatility in an entire asset class does alter capital flows, and capital flows DO impact the stock market directly. This type of sell off, where the entire asset class moves, is the rationale behind asset allocation and diversification.
On the income investing front, AT&T (T) decided to "resize" it's payout ratio, which basically means it will cut its dividend at some point in the near future. The cut is disappointing to some income investors who enjoyed the above average yield the stock provided.
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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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