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Stock Market Outlook
For The Week Of February 19th = Uptrend

INDICATORS

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

ANALYSIS

The stock market outlook remains in an uptrend and appeared to find technical support at the 4080 level during Friday's session.

For the week, the S&P500 ($SPX) fell 0.3%, but remains above the 50 and 200 day moving averages.

Technical analysis of daily SPX prices

2023-02-19-SPX Trendline Analysis - Daily

As mentioned last week, the 4080 level provided a battleground for closing prices, going all the way back to August of 2022.  After breaking above that level early this month, it now serves as a support level in technical analysis terms.

The ADX and price/volume action remains bullish, with only a couple of distribution days in the past 5 weeks.

Elliott Wave remains mixed. The bullish count aligns with the market outlook signals (ADX/Price Volume), and the bearish count aligns with macroeconomic data. No change in key levels from last week (3765 and 4196/4325).

Technical analysis of daily prices

2023-02-19- SPX Elliott Wave Analysis - Daily - Primary 1

The bullish count puts the index in a corrective Minute [ii] wave. Typical retracement would be between 38.2% and 61.8% of Minute [i] (~4030 & ~3930 respectively), but could drop all the way to 3764 (100% retracement).

Technical analysis of daily prices

2023-02-19- SPX Elliott Wave Analysis - Daily - Primary Y

The bearish count shows an expanding leading diagonal pattern for Minute [i], which suggests a test of the 4000 level next week (roughly the 50-day moving average).  A Minute [ii] wave would then bring the index back towards recent highs (~4196), before entering Minute [iii] and heading lower.

COMMENTARY

January CPI data was higher than expected. I assumed stocks would sell off, but prices barely budged. Instead, it was Thursday's higher than expected PPI data for January that that soured the mood of investors.  That, combined with 0DTE trading and hawkish commentary from Fed governors sent the stock market lower.

Speaking of other "surprises":  almost 85% of the S&P 500 has reported earnings for Q4.  Many financial media sources point out that earnings have surprised to the upside verses expectations and aren't as bad as feared, causing stocks to rally year to date.

Do yourself a favor:  look beyond the headline numbers, which are "adjusted" earnings.  I mean, what would your financial situation look like if you could "adjust" away all your major expenses each year?  GAAP earnings are the version used for Q/Q and Y/Y comparisons, as well as any fundamental analysis.  And GAAP earnings are down 29% year-over-year, and it's the 3rd straight quarter of negative YoY growth!

Looking ahead, a short week of trading; U.S. markets are closed on Monday for President's Day. The BEA updates Q4 GDP on Thursday, following by PCE data on Friday.Q4 earnings reports continue to roll in:


Source: https://twitter.com/eWhispers/status/1626939580313387009

P.S.  Here's a potential contrarian and totally unofficial indicator for you: blog traffic. Typically, site traffic peaks when people are extremely bearish.  Right now, traffic is barely a trickle, with some days registering zero activity, which is indicative of extreme bullishness.

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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For historical Elliott Wave commentary and analysis, go to ELLIOTT WAVE lives on by Tony Caldaro. Current counts can be found at: Pretzel Logic, and 12345ABCDEWXYZ

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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