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  5. Stock Market Outlook - 2021-07-25

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


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


The stock market outlook uptrend remains in place to start the last week of July.

The S&P500 ($SPX) sold-off, then recovered last week, appearing to end the selling shortly after it began. In total, the “sell-off” dropped prices just a bit over 3.5% in 3 days. I hesitate to call it a “correction”. It's more like normal volatility creeping back into the market action, since we recovered all of the loss and then some over the following 4 days.

Technical analysis of daily SPX prices

2021-07-25-SPX Trendline Analysis - Daily

Technically, the long-term price channel ended thanks to Monday’s sell-off. A new, short-term channel took its place.

The ADX made a quick, round-trip from bullish to bearish to bullish, highlighting the market volatility we just witnessed. The SPX found support at the 50-day, but there’s a cluster of distribution days over the past few weeks (currently 6) which does indicate institutional selling at work and shifts the signal to mixed.

Technical analysis of daily SPX prices

2021-07-25-SPX Elliott Wave Analysis - Daily - Primary 1

Based on last week’s price movement, Elliott Wave seems to be showing that the 5th wave is still alive...just not the way I thought. The S&P dropped below 4300 in dramatic fashion, and then rebounded just as quickly. Basically that means the count wasn’t correct, because wave 4 low points can’t overlap first wave high points. After relabeling the 5th minute wave, the current count still shows an “old” uptrend in progress.


Earnings season is upon us, but COVID's Delta variant, inflation, and Fed support are driving the narrative.

Speaking of the Fed and their "support" of the economy, Natixis recently surveyed investors on a large number of topics. One interesting data point was their long-term expectations for returns. Globally, investors expect their returns to exceed inflation by 14.5%! U.S. investors expect to beat inflation by 17.5%!

I couldn't find the definition of "long-term", but that's a pretty impressive average no matter what time frame you use. You can dig into the report here (https://www.im.natixis.com/us/research/2021-natixis-global-survey-of-individual-investors).

And while it's less of an immediate concern here in the U.S., China's renewed focus on regulating publicly listed companies (e.g. BABA, DIDI, for-profit education firms) could eventually reach multi-national corporations. Something to watch.

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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