The S&P500 ($SPX) rose 1.5% last week. The index is ~6% above the 50-day and ~1% below the 200 day moving average, and is closing on the long-term trendline dating back to mid-January.
2022-11-27-SPX Trendline Analysis - Daily
The ADX and price & volume remain bullish. The ADX is below 25, indicating a weak trend in place. Even though the August rally ultimately failed at the 200-day moving average, at least it had a strong bullish trend as measured by the ADX. The November rally is much weaker from that perspective.
2022-11-27-SPX Trendline Analysis - Daily
And speaking of volume, not sure what's going on during the past two weeks. Trading volume ran well below average and looks like a typical Christmas holiday. It definitely doesn't look like last Thanksgiving, even accounting for the fact that the market was in the final stages of a bull market at that time. Low trading volume is not a good sign for a market trying to rally and/or break through technical resistance levels.
2022-11-27- SPX Elliott Wave Analysis - Daily - Primary Y
Elliott Wave analysis has the SPX in the final stage of the Intermediate (X), counter-trend rally: 5th wave (Minutte) of the 5th wave (Minute) of the C wave (Minor). The next wave down (Intermediate (Y) ) should be the last leg (Primary [Y] wave) of the "Double 3" pattern we've been tracking most of this year. And that would complete the Cycle II bear market.
2022-11-27- SPX Elliott Wave Analysis - Weekly - Primary Y
A lot of data hits the wires this week, so another round of volatile trading sessions is likely. We get retails sales released tomorrow, which also happens to be Cyber Monday. Retailers started circulating big discounts and "Black Friday" deals a few weeks early this year, as they attempted to clear pre-holiday inventory. So Monday's online sales may not move the needle.
Labor data starts flowing on Wednesday, with Job Openings and Labor Turnover Survey (JOLTS) coming out pre-market. Thursday brings Personal Consumption Expenditures (PCE) for October, which is the Fed's preferred measure of inflation. And on Friday, the November nonfarm payrolls report is released.
Perhaps most importantly, Fed Chair Powell will speak at the Brookings Institute on Wednesday at 1:30 EST, delivering remarks on the economic outlook, inflation, and the labor market.
Eagle-eyed readers looking at the second chart probably spotted a big spike in trading volume near the end of November 2021. Can you guess what happened? Powell gave a speech to the U.S. Senate on November 30th, and said that inflation was no longer transitory. He also stated that the Fed would consider speeding up its withdrawal of bond purchases as inflation risks increase (i.e. the end of QE).
Earnings season may be winding down, but don't forget there are a few big names reporting this week. Watch your holdings accordingly.
Best To Your Week and Have a Happy Thanksgiving!
Best To Your Week!
P.S. If you find this research helpful, please tell a friend.
If you don't, tell an enemy.
Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, U.S. Bureau of Economic Analysis, U.S. Bureau of Economic Analysis
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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