Weekend Stock Market Outlook

Stock Market Outlook For The Week of
January 28th = Uptrend

INDICATORS

20/50 Day Moving Averages: Uptrend
Price & Volume Action: Uptrend
Objective Elliott Wave Analysis: Uptrend

COMMENTARY

U.S. markets rumbled higher last week, extending our uptrend. The government shutdown ended quickly, though we may see another one in a few week because the solution is temporary.

All the market indexes remain above their 20 and 50 day moving averages.

$INDU,$NYA,$SPX,$USD,$COMPQ,$CRB,$RUT,$GOLD

2018-01-28-US Stock Market Averages

Price and volume action is positive for the markets. For individual stocks, lower volume breakouts remain an issue. In fact, several growth stocks on my watch list have sold off heavily since they broke out (on low volume). Remember to keep those losses in check, even if the market is in an uptrend.

OEW is still in place. Whenever we get our next correction, OEW expects it to be small.

ANALYSIS

While back-testing for my yearly performance review, I noticed the S&P500 sits ~14% above it's 200-day moving average as of last week's close. That seemed high, and I wondered how often this happened (and more importantly, what happens next!).

In the past 20 years, S&P prices exceeded the 200 day moving average by 15% or more a total of 4 times:

  1. April 1998
  2. April 1999
  3. August 2009
  4. Feb 2011
The biggest difference was ~+21%, set back on 10/15/2009. On the downside, within 5-9 months of first exceeding the 15% threshold, prices fell back below the 200 day moving average.

That's not the say we won't go higher, just that downside risk is larger than upside potential at this point (~7% from the largest difference in the past 20 years, vs 14% from a key support level).

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You can check out how well (or poorly) the outlook has tracked the market using past performance estimates:

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.  Charts provided courtesy of stockcharts.com.