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  3. Stock Market Outlook - 2021-11-28

Stock Market Outlook
For The Week Of November 28th = Uptrend

INDICATORS

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

ANALYSIS

The stock market outlook still shows an uptrend in progress, despite a rough week for U.S. stocks. After reaching an all time high to start last week, COVID concerns derailed the rally and the S&P500 ($SPX) ended the week down 2.2%. The index now sits ~1.5% and 7% above the 50 and 200 day moving averages, respectively.

Technical analysis of daily SPX prices

2021-11-28-SPX Trendline Analysis - Daily

The ADX directional indicators flipped to a downtrend on Friday, but price/volume signal remains in an uptrend. Price remains above the 50-day moving average, and 2 more distribution days brings the total to 5.

Technical analysis of daily SPX prices

2021-11-28-SPX Elliott Wave Analysis - Daily - Primary 1

Elliott Wave also maintains an uptrend overall, with the S&P in a 2nd wave correction. Not too surprising given the weakness / 5th wave characteristics mentioned last week. With a completed Minor 1, we’re now looking for the bottom of minor 2, which could be anywhere between the current price and the October low near 4275.

The typical expectation for a second wave is a 61.8% retrace of the first wave. Minor Wave 1 was 465 points, so the retrace would be 287 points from the top (4743): 4455 or so (another ~3% drop from Friday’s close).

COMMENTARY

The news of a new COVID strain hit the wires at the worst possible time; ahead of a traditionally low-volume trading day with most market participants away from their desks. Automated trading programs and algorithms probably keyed on all the news reports related to COVID and sold holdings to be on the safe side. In that light, Friday's volatility isn't too surprising and is most likely a knee-jerk reaction.

That said, corrections are a healthy part of market action, and this one may not be over yet. Keep an eye on government and corporate responses to the Omicron variant. Travel bans and lockdowns, even if they're short-lived, won't do stock markets any favors. But they may offer you an early gift, in the form of another buying opportunity heading into year end.

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, 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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