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Stock Market Outlook
For The Week Of December 18th = Downtrend


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


The stock market outlook slides back into downtrend with two weeks left in 2022. Two of the three signals are now bearish, and price/volume isn't far behind. Considering how marginal the signal was the prior week, you probably took action already. Right?

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.

Technical analysis of daily SPX prices

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.

Technical analysis of daily prices

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

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