Weekend Stock Market Outlook

Stock Market Outlook For The Week of
July 21st = Uptrend

INDICATORS

ADX Directional Indicators: Uptrend
Price & Volume Action: Uptrend
Objective Elliott Wave Analysis: Uptrend

COMMENTARY

No change in the signals this week; the same story as last week: bullish ADX, subdued price/volume, and an uptrend call from OEW.

Earnings season is upon us and a slew of big names report Q2 results this week, including the rest of the FANG stocks: Facebook (FB), Amazon (AMZN) and Alphabet (GOOGL). Analysts expect lower growth, so a surprise could result in oversized moves...in either direction.

Technical analysis of daily SPX prices

2019-07-21 - SPX Trendline Analysis - Daily

The daily chart shows the S&P 500 ($SPX) hasn't made much progress since mid-June.

Technical analysis of weekly SPX prices

2019-07-21 - SPX Trendline Analysis - Weekly

The weekly chart shows the first decline on higher trading volume since December...and below average volume at that. Look at how much prices have risen since that December low!

Weak volume continues to plague the stock market as a whole. It's hard to put much conviction behind any type of move until volume returns. Leading stocks are no exception. Several growth stocks on my watch list broke out over the past few weeks, but the action left a lot to be desired; <1.5% price moves with anemic trading volume.

Friday was options expiration, which usually produces really high volume. Even that activity couldn't drive trading volumes up. Is it uncertainty about the U.S. / China trade war? Brexit? The Strait of Hormuz? Will they or won't they cut interest rates in U.S.?

OEW is still looking for 3,300 on the S&P. If we do see prices fall before that level, look for support between 2,900 and 2,830.

I've been part of several "debates" about inverted yield curves and recessions; particularly trying to time when we'll see the next one. Bear markets occur without recessions, but recessions make bear markets a lot worse. Since we haven't had a recession in a long time, it's definitely a worthwhile discussion and something to keep on your radar.

There was agreement on the fact that before every recession in the past 40 years, the yield curve has inverted. Also, that there are times (2 to be exact) when the yield curve inverts, and there isn't a recession.

There wasn't agreement on whether the yield curve has or hasn't inverted this year. I figured this might be something you're encountering in your research as well, so I wanted to show you the source of the disagreement. There were 2 different criteria for an inverted yield curve:

  • 10-year yield < 2-year yield
  • 10-year yield < 3-month yield
And as of July 19, 2019:

  • 10-year yield = 2.05%
  • 2-year yield = 1.80%
  • 3-month yield = 2.06%

The 3-month and 10-year inverted back in March; the 2 & 10 year haven't inverted yet.

Which of these datasets you choose to follow is up to you. In either case, it's safe to say that the yield curve is saying the U.S. economy has issues to work through over the next 12 months, so watch manage your holdings accordingly (position sizing, allocations, etc.).



If you find this research helpful, please tell a friend. If you don't find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

Charts provided courtesy of stockcharts.com.

If you're interested in learning more about the relationship between price and volume, or how to find and trade the best stocks for your growth strategy, check out this book on Amazon via the following affiliate link: How to Make Money in Stocks: A Winning System in Good Times and Bad. It's one of my favorites.

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.

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.

IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Hypothetical Presentations:
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.

Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).