The S&P500 ($SPX) had an off week…if you can call something like a 2% decline an off week. And the ADX and price/volume signals remain bullish.
2021-07-18-SPX Trendline Analysis - Daily
So we’re all good, right? Not so fast. Over the past two weeks, the S&P collected a cluster of distribution days (4 of the past 9 sessions). One of those days (last Wednesday) was something typical of market tops.
2021-07-18-SPX Elliott Wave Analysis - Daily - Primary 1
Even though the index closed higher than the prior day, it was actually a rare type of distribution day, “stalling”. Stalling days indicate selling into strength, verses buying it. Stalling occurs when:
Combined with the fact that many stocks with really good fundamentals are experiencing technical / chart breakdowns, we have reasons to be cautious.
Elliott Wave is at an inflection point. We may have just seen the end of the 5th wave or the end of the first part of the 5th wave. If the 5th wave is still alive, then the S&P should remain above the wave iv low (just under 4300), assuming the Minute wave count is correct. As mentioned last week, the S&P has had waves extend several times previously, and there’s a lot of liquidity available to keep things moving.
The Fed repeated its stance that the current inflation readings are transitory, and while the recent recovery is progressing well, the central bank is still not to the point of withdrawing support. China seems to support that notion, announcing its own version of QE last week.
Best to Your Week!
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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