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.
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).
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!
Charts provided courtesy of stockcharts.com.
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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