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Stock Market Outlook
For The Week Of September 17th = Downtrend

INDICATORS

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

ANALYSIS

The stock market outlook remains in a downtrend, heading into the week with a mix of signals.

The S&P500 ($SPX) fell 0.2% last week.  As of Friday's close, the index was ~1%below the 50-day moving average, and ~6% above the 200 day moving average.

Technical analysis of daily SPX prices

2023-09-17-SPX Trendline Analysis - Daily

The ADX directional indicators created a bullish cross-over last Monday, shifting the signal back to an Uptrend.  But, just like last week, they're on the verge of crossing back as of Friday's close; this time to a downtrend or bearish signal.

Price/volume remains in a downtrend with the index below the 50-day moving average and a high number of distribution days (8). The SPX hasn't been able to confirm the latest rally attempt with high volume buying, and we're well past the 4-10 day timeframe.  Friday's quarterly option expiration skewed trading volume, but the index sliced through the 50-day nonetheless.

Technical analysis of daily prices

2023-09-17- SPX Elliott Wave Analysis - Daily - Primary 1 (Bullish)

Elliott Wave analysis remains mixed, but both potential counts show higher risk to the downside.

The current bullish view shows a Minor C in its 3rd wave, with the possibility of either a 3 or 5 Minute wave downtrend.

Technical analysis of daily prices

2023-09-17- SPX Elliott Wave Analysis - Daily - Primary Y (Bearish)

The bearish count has several possible wave combinations for the current 3-wave or 5-wave down pattern (Minor 3 or Minor C).  For the Minor C wave, a 3 or 5 wave Minute pattern is also possible, aligning with the bullish count above.

Short-term resistance in both cases remains at 4541; first level of support is 4430.

COMMENTARY

Per last months CPI data, consumers are still experiencing the impact of high inflation, thanks to higher energy prices.  Producer prices (PPI) are feeling similar effects.

  • August CPI (y/y)
    • Headline: +3.7% vs. +3.2% in July
    • Core: +4.3% vs. +4.7% in July
  • August PPI (y/y)
    • Headline: +1.6% vs. +0.8% in July
    • Core: +2.2% vs +2.4% in July

Retail sales made headlines last week, showing an increase month over month. But the real story came in the form of year over year data, at +2.5% Y/Y, which is slightly lower than the +2.6% reading in July. If you were to adjust for inflation retail sales actually fell ~2% Y/Y.

These data points will feed into the Fed decision on whether or not to raise interest rates, ahead of the FOMC meeting on Wednesday. The price behavior of the bond market (as well as "Fed Futures" data) says the Fed won't hike rates. The price behavior of the U.S. dollar shows a bit more skepticism.

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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