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  3. Stock Market Outlook - 2022-02-20

Stock Market Outlook
For The Week Of February 20th = Downtrend

INDICATORS

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

ANALYSIS

The stock market outlook remains in a downtrend after another down week for U.S. equities. The S&P500 ($SPX) briefly reclaimed the 200-day moving average mid-week, before plunging back below that level ahead of the long weekend. The index currently sits ~5% below the 50-day moving average and 2.5% below the 200-day.

Technical analysis of daily SPX prices

2022-02-20-SPX Trendline Analysis - Daily

The ADX signal continues to show a bearish trend in place. A few more distribution days fell off the count, but the price/volume signal still shows a downtrend too.

Elliott Wave also shows a downtrend, with two possible counts depending on your level of bearishness. I discovered a bullish count as well...possible, but not probable as of today.

Technical analysis of daily SPX prices

2022-02-20-SPX Elliott Wave Analysis - Daily - Primary 2 - Intermediate A

The first bearish count has the market in the 3rd wave ( Minor 3 ) of the first down wave of Primary [2] (Intermediate (A) ). This count implies the downtrend is just getting started. This count would be invalidated if the SPX rises above 4450.

Technical analysis of daily SPX prices

2022-02-20-SPX Elliott Wave Analysis - Daily - Primary 2 - Intermediate C

The second bearish count has the market in the 3rd wave (Minor 3) of the third down wave of Primary [2] (Intermediate (C) ). This count implies the downtrend is more than halfway complete. This count would be invalidated if the SPX rallies above 4450.

Technical analysis of daily SPX prices

2022-02-20-SPX Elliott Wave Analysis - Daily - Primary 3

And the bullish count shows the SPX completed the entire Primary [2] back on Jan. 24th, and is currently working through the first correction of the new uptrend (The Minor C wave of Intermediate (2) ). This count would be invalidated if the SPX falls below 4222.

COMMENTARY

The Russia-Ukraine situation continues to drive uncertainty into the markets, with each day seeming to to unearth a new set of will they/won't they narratives.

Russia's a global player in the energy market, so it's no surprise that a potential conflict is driving up energy prices. Terrible for consumers and inflation; great for investments allocated to the energy sector.

No surprise rate hike from the Fed's emergency meeting last week, which is a good thing. And the hysteria around a potential half point rate hike died down as well.

But the Fed's job doesn't get any easier, as each of the next 4 weeks has potentially market moving data releases. First, we'll have to see what happens on Thursday (24th) when GDP is released. Keep in mind that the change verses last year is the most important number, as it will tell us if growth is starting to slow.

Shortly thereafter is the next jobs report (Friday, March 4), and then the next inflation reading (Thursday, March 10). All of which will need to be digested by the Fed, prior to releasing the actual size of the next interest rate hike on March 15-16th.

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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