The S&P500 ($SPX) starts the week in the middle of a price channel. Before last week, the index tried to break through the upper limit of the bullish price channel 5 days in a row, came up short on each attempt, and is now searching for support
2021-09-12-SPX Trendline Analysis - Daily
The ADX flipped to bearish after Friday’s drop, putting this signal into a downtrend to start the week.
From a price and volume perspective, this signal remains in an uptrend for now. Price remains above the 50-day, and the index added 1 distribution day and lost a distribution day, so the count stays at 4. Trading volume was definitely to the down size last week, but the price moves (open to close) weren’t significant until Friday.
2021-09-12-SPX Elliott Wave Analysis - Daily - Primary 1
For the Elliott Wave signal, the signal is mixed. The S&P fell below the i-wave high, creating an overlapping wave within the count shown over the past few weeks. Those are a no-no for EW, and it's been a recurring challenge when trying to label the corrective waves since May. Either the count was incorrect and the 5th-wave is still extending, or the count was correct, and the September 2 was the end of Primary 1. The good news is that the S&P should confirm it's direction pretty quickly:
Since May, RSI(5) dipped below a reading of 30 on 4 occasions. Each time that day marked the end of a correction. Friday marked the 5th time the RSI is below 30, and price hasn't spent more than a day below the 34-day moving average (where it closed on Friday).
So far, September hasn't disappointed if you were expecting volatility.
It's truly a mixed message, so use this time as an opportunity to prune your portfolio. Watch your stops sell stocks showing weakness (fundamentally and/or technically), take profits from your winners, and look for investments that are hold up well over the next few weeks.
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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