2023-06-11-SPX Trendline Analysis - Daily
No change in signal from the ADX or price/volume; both show uptrends as of Friday's close.
Bullish and bearish Elliott Wave counts continue to play out, leaving the overall signal mixed. Both views show a completed uptrend from the March low, increasing the probability of a correction over the next month or so.
2023-06-11- SPX Elliott Wave Analysis - Daily - Primary 1 (Bullish)
The bullish count has the necessary requirements for a completed Minor 1 wave. A Wave 2 correction typically retraces 61.8% to 78.6% of the first wave.
2023-06-11- SPX Elliott Wave Analysis - Daily - Primary Y (Bearish)
Reviewing the checklist from last week’s bearish count also shows the SPX met the criteria for completing the current wave (Minute [v] / Minor C):
Watch for a bearish MACD cross-over in the daily charts to confirm the end of the rally.
Heading into this week, the SPX is flirting with a new high for the year. Meanwhile, the SPX's volatility index ($VIX), or so-called "fear gauge", is at a new low. This means that expectations for a large downside move within the next 30-days are at their lowest point this year.
In fact, fear is so low that financial media is falling all over themselves to call the start of a new bull market. Historically, cover stories are great contrarian indicators. Just saying...
Against all odds and recession fears, the market can't stop climbing. Better yet–it just might keep going. In this issue: pic.twitter.com/UXiWxtX7PN— Barron's (@barronsonline) June 10, 2023
With that backdrop, there's a big potential for volatile market action because each day has potential market moving events!
On Monday and Tuesday, the U.S. Treasury conducts the first bond issuance to refill the TGA, to the tune of $296B. That's about 1/3 of the total $750B needed within the next 3-4 months.
TSY issuance Mon/Tues next week starting off spicy at $296B .... pic.twitter.com/eoVgHb8S40— Christian B. Drake (@HedgeyeUSA) June 9, 2023
Recall from last week's note that the 2 key unknowns were the size of the offerings and which institutions were buyers. Restoring the balance sheet in large chunks creates larger capital flows (i.e. bigger reductions /sales of other assets). Now we need to watch who's buying.
Also on Tuesday, the BLS releases May inflation data (CPI), following by PPI on Wednesday.
The latest will they/won't they rate debate ends on Wednesday afternoon, when the U.S. FOMC announces its latest interest rate decision.
On Thursday, data is released for retail sales, initial jobless claims, and import/export pricing.
And we close out the week with a quadruple witching day on Friday, with option expiration across all durations.
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
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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