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Stock Market Outlook
For The Week Of April 16th = Downtrend

INDICATORS

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

ANALYSIS

The stock market outlook still shows a downtrend in place, despite the upward price movement since mid-March.  Below average trading volume continues to haunt the latest rally attempt.

The S&P500 ($SPX) rose 0.8% last week, and remains above the 50 and 200-day moving averages.  The index ended the week above a trendline of lower highs, but has a track record of retreating shortly thereafter in 2023.

Technical analysis of daily SPX prices

2023-04-16-SPX Trendline Analysis - Daily

The ADX signal remains bullish and shows the initial signs of a strengthening trend, although the overall reading remains below 20 (i.e. weak trend).

Price and volume is still mixed, because the index still lacks a true follow-through day.  Thursday's rally looking promising, but trading volume was too low.  Some readers pointed to March 31 as the follow-through, even though trading volume was below average.  But even that action would come with an asterisk, since the move occurred 11 days after the rally attempt (just outside the 4-10 day window).

Technical analysis of daily prices

2023-04-16- SPX Elliott Wave Analysis - Daily - Primary Y (Bearish)

No change in Elliott Wave entering the week. There's a negative divergence in the RSI(5), raising the probability that the Minuttewave pattern has ended.  Attention now turns to the MACD; look for a cross-over to confirm the bearish count.  Key levels carry over from last week:  resistance between 4150 – 4196, and support at 4050.

Technical analysis of daily prices

2023-04-16- SPX Elliott Wave Analysis - Daily - Primary 1 (Bullish)

COMMENTARY

March inflation metrics were inline with estimates; CPI came in at 5% y-o-y, versus 8.5% at this time last year, while Core CPI rose 5.6% y/y.  For consumers, inflation is headed in the right direction; prices are still rising, but not as much as last March.  PPI came in at 2.7% y-o-y, versus 11.7% a year ago (!), while core PPI was up 3.6% versus 7.1% last March.  This was the first reading below 3% since January 2021.

Big banks showed up and showed out last week, particularly JP Morgan.  When was a last time you saw a bank stock rally 8% in a day?  In the past few weeks, it's been in the other direction!  But before you break out the party hats, consider what Hedgeye's Financial Analyst, Josh Steiner, had to say a few week's ago:  "Banks are supposed to be boring.  When they're not, it's usually not a good thing".

Earnings season kicks into high gear this week, with several widely held companies reporting ($TSLA, $NLFX, $JNJ, $TSMC, etc.).


https://twitter.com/eWhispers/status/1646953100417064962

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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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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