The S&P500 ($SPX) fell ~2% last week, dropping back to the 50-day moving average, after moving above the 200-day moving average and challenging the long-term trendline earlier in the week.
2022-12-18-SPX Trendline Analysis - Daily
The ADX reading is back to bearish, after rebounding slightly.
Price and volume shifts to mixed, with the SPX looking for support at the 50-day moving average. Friday’s trading volume comes with an asterisk, thanks to another “quadruple witching” day.
4 TRILLION dollars options expiration tends to have that effect.
2022-12-18- SPX Elliott Wave Analysis - Daily - Primary Y
The bear market rally fell apart last week, confirming the end of the Intermediate (X), counter-trend rally. Elliott Wave analysis shows the SPX in a 3rd wave, tentatively labeled as Minute, with resistance at 3918 (Minute [i] low).
CPI data for November came in below expectations, continuing to show inflation peaked earlier this year and heading in the right direction. Headline inflation increased 7.1% year-over-year, versus an expectation of 7.3%. Core inflation increased 6.0% , slightly below the forecast of 6.1%. Definitely good news, but the year over year figures are still too high, opinions on Fed policy notwithstanding.
Speaking of the Fed, they raised rates by 0.50% (as did the Bank of England and the European Central Bank, in case you were wondering). The FOMC press conference was more of the same; journalists STILL trying to tease out a timeline for the Fed to pivot (i.e. pause rate hikes or cut interest rates).
November retail sales fell more than expected, month-over-month (-0.6% vs -0.15%). Black Friday and Cyber Monday weren't as impactful this year, as many retailers started their sales early in an attempt to clear out inventory. Regardless, that's not indicative of a strong consumer, and won't be kind to Q4 earnings.
A full week of trading this week, but expect lower trading volume as the weekend approaches. Christmas falls on Sunday this year, so no market update next week. The markets are closed the next day (Monday, December 26) in observance of the holiday. And New Year's Day is the following Sunday (2 weeks from today), and the markets will be closed the following Monday (January 2) as well.
Merry Christmas, Happy Holidays, and 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 Labor Statistics
How to Make Money in Stocks: A Winning System in Good Times and Bad.
It's one of my favorites.
Charts provided courtesy of stockcharts.com.
For historical Elliott Wave commentary and analysis, go to ELLIOTT WAVE lives on by Tony Caldaro. Current counts 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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