The S&P500 ($SPX) ramped 5.9% last week, with the index logging one of its best weekly of gains this year. The index starts this week just above the 50-day moving average.
2023-11-05-SPX Trendline Analysis - Daily
The ADX directional indicators flipped bullish on Thursday, after the SPX gapped above the 200-day moving average.
Price/volume flipped to mixed on Thursday, based on a rally start Monday and a follow-through on Day 4 (Thursday). With price breaching the 50-day moving average on Friday, the signal is in an uptrend to start the week.
Elliott Wave analysis shows a counter-trend rally in progress, but the higher-level wave count isn't clear just yet.
2023-11-05 - SPX Elliott Wave Analysis - Weekly - Primary C (Bearish)
Since it's the first post of the month, so lets revisit the long-term view. Dropping the bullish count coincided with a revisit of Elliott Wave guidelines and rules, particularly those related to Wave 4 overlaps with Wave 1. As a result, the new count puts the SPX in the final wave sequence (Primary [C]) of the bear market that started in late 2021.
Last week's rally coincided with a bullish crossover in the MACD, suggesting the current downward wave completed and a relief rally takes the SPX back towards 4500. The lack of a positive convergence for the RSI(5), prior the current overbought condition, suggestions the index remains within the downtrend, and another test of the October lows is coming. The volatility of the price movement last week suggests a corrective wave, so we'll go with the former, for now.
2023-11-05 - SPX Elliott Wave Analysis - Daily - Primary C (Bearish)
In both cases, the SPX should test support between 4200-4250 within the next week or so.
Market participants were in a buying mood last week, as evidenced by the high trading volumes and overnight gap ups. In the U.S., the FOMC held rates constant. Many analysts now expect that the hiking cycle is over; which means that rate cuts are closer. Even a bearish speech wasn't enough to keep rates from selling off on the expectation of future cuts. U.S. jobs data was a bit worse than expected, in that there weren't as many job openings as expected.
The "earnings recession" continues in Q3. Yes, some companies are inline or beating expectations. But those expectations have been lowered throughout the year. If you compare year over year earnings, the picture is abysmal. Forward guidance has been the catalyst for many overnight moves in individual names.
Be on the lookout for more sales events this holiday season, as companies look to ramp up their 4th quarter numbers. Amazon has already had 2 massive sales events (Prime days in July, and Prime "Big deal" days in Oct.), ahead of the "normal" Black Friday event later this month.
We could see an exciting week in the U.S. Treasury market, with several speeches from FOMC officials this week, including 2 from Powell. Not to mention over 1,000 corporate earnings reports.
Best to Your Week!
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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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