As a swing trader, each week I do a stock market outlook to determine if I’ll be placing new trades during the week or not. The stock market outlook gives me a sense of market health, and thus how much or little of my capital I want to deploy.
Here is my stock market outlook for the week of May 15, 2023.
The stock market outlook is based on:
- how the major indices are performing
- “Market Health Indicators”
- recent watchlist and trade performance
- sector performance
My swing trading is based on: Overall market conditions (discussed below) –> strong/weak individual stocks for longs or shorts –> patterns –> trade triggers.
Stock Market Outlook for This Week
Heading into the week of May 15, market conditions are recovering and continue to be right on the cusp of moving into “good” territory. I am deploying capital selectively on trade setups I like in strong stocks. Less than half my capital is currently deployed. I will keep deploying more if conditions continue to improve.
Here are the current stock watchlists:
Here is a summary video of the market outlook:
How the Market Indexes Are Doing
I look at 4 different US indices because they each tell a different story about overall stock market health. The stock market is healthiest—and swing trading stocks on the long side is most profitable—when all these indexes are in uptrends. Here’s what each of the 4 indices represents:
- Nasdaq 100 – Tech stocks
- S&P 500 – Large US companies
- NYSE Composite – A wide array of stocks, varying in size and industry
- Russell 2000 – Smaller companies
The Canadian index tracks large-cap Canadian stocks.
Charts provided by TradingView, the charts I personally use.
Market Summary (Indexes) on TradingView
From a price action perspective, the Nasdaq 100 continues its uptrend. The S&P 500 is back close to its prior swing high. NYSE Composite is recovering after making a major lower swing low. IWM is very weak, near prior swing lows. That shows small-cap stocks aren’t really participating in this rally. So each index is saying something different. Not ideal conditions, yet we do have quite a few stocks working.
Gold and Bitcoin (and Ethereum in orange) were strong, but the cryptos are at an inflection point. The French index, the CAC 40 is one of the top performers of the year. The France chart shown is the EWQ ETF.
State of the Market Health Indicators
The following chart shows the market health indicators I track. They tell me the condition of the stock market overall, and whether it’s a good time to swing trade individual stocks.
S&P 500 Index Chart on TradingView
Market health indicators are signaling caution.
- 46% of S&P 500 stocks are above their 50-day moving average. 41% of all US stocks are above their 50-day moving average. It’s generally much easier to swing trade profitably (on the long side) when more stocks are above their 50-day average. When this indicator is below 50% it tends to be sideways or a downtrend for most stocks/indexes. On the cusp.
- Volume is not currently relevant.
- The dark blue bars are the daily percentage movement of the S&P 500. Big moves are associated with downtrends and turning points. Small values are associated with an uptrend. No big drops since a series of them in March. Good.
- The blue line is the cumulative NYSE Advance-Decline Line. It moved above its Feb. high a couple weeks back, while the S&P 500 is still slightly below its Feb. High. That is a bullish divergence and usually indicates the S&P 500 will follow through and take out its Feb high. But recently it has been falling, making lower swing lows. Mixed.
- The blue columns are NYSE up volume divided by NYSE total volume. It tracks buying and selling enthusiasm. 90%+ downside day on March 9. Nothing recent.
- The ultimate indicator is how many quality setups there are and how trades are working. I do see quite a few trades setting up, but not a lot that are taking off just yet.
The Complete Method Stock Swing Trading Course covers my entire method of swing trading stocks. Now is a great time to review the material and prepare for the opportunities that are unfolding.
Sectors on the Move
I don’t typically swing trade utility or consumer defensive stock because in good market conditions they don’t move as much as the other sectors. In poor market conditions, these sectors hold up a bit better but are often still dropping.
Pretty much everything doing well in the last month. Technology, Communication Services, and Healthcare in focus.
Sector performance provided by Finviz.
The article, How to Scan for the Strongest Stocks in the Strongest Sectors covers how to find high-momentum stocks by looking at sector performance in either Finviz, StockRover, StockFetcher, or StockCharts. It also shows you how to determine when money is flowing into or out of a sector.
What I’m Doing Right Now
If I see setups I like, and they trigger, I keep deploying some capital on swing trades. I get fully loaded after conditions are good, not before.
I also day trade stocks and the EURUSD. What I like about day trading is that I can trade every day. Whereas swing trading is periods of action followed by periods of inaction.
You can check out my stock day trading methods in the Price Action Stock Day Trading Course.
See how I day trade forex in the EURUSD Day Trading Course.
By Cory Mitchell, CMT
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.
Historic Conditions:
| Week Of: | Indices: | Conditions | Watchlist/Trade Performance |
What I’m Doing: | Top Sectors (Ex: Utlt, Con Def) |
| May 8 | Nasdaq uptrend, rest are mixed | On Cusp | Flat | Deploying some capital (if I see very high-quality setups) | Technology and Healthcare in focus |
| May 1 | Nasdaq uptrend, rest are mixed | Improving/On the Cusp | Flat | Deploying some capital (if I see very high-quality setups) | Healthcare, communication services, and technology |
| April 24 | Nasdaq uptrend, rest are mixed | Improving/On the Cusp | Flat | Deploying some capital (if I see very high-quality setups) | Pretty much everything doing well in the last month. Healthcare doing well on all time frames. |
| April 17 | Nasdaq upternd, rest are mixed | Improving/On the Cusp | Good | Deploying some capital if I see quality setups. Very selective. | Basic materials, Energy strong recently. Healthcare decent on all time frames. Technology and Communication Services still worth watching. |
| April 10. | Nasdaq uptrend. Other indices are neutral to weak. | Poor | No trades. Not much on watchlist. | Nothing | Technology, consumer cyclical, and communications services |
| April 3. | Pullbacks or downtrends, except Nasdaq in uptrend | Poor | No trades | Nothing | Technology, consumer cyclical, and communications services |
| March 27 | In pullback, several near prior lows, SP 500 mid-range, Nasdaq100 at swing high | Poor | No trade | Nothing | Technology and communications services |
| March 20 | Pullback, possible reversal | Poor | No trade | Nothing | Technology and communications services |
| March 13 | Pullback | Poor | No trade | Nothing | Technology, industrials, and energy holding up the best |
| March 6 | Pullback | Cusp | Good (but few triggering) | Buying (very cautious | Basic Materials, Consumer Cyclicals, Communication Services, Technology, Industrials, and Financials |
| Feb. 27 | Pullback | Cusp | Good (but few triggering) | Buying (cautious) | Consumer Cyclicals, Communication Services, Technology, Real Estate, Industrials, and Financials |
| Feb 20 | Flat the last week | Good | Good (but few if any setups) | Buying | Consumer Cyclicals, Communication Services, Technology, Real Estate, Industrials, and Financials |
| Feb. 13 | Moving Up | Good | Good | Buying | Consumer Cyclicals, Communication Services, Technology, Real Estate, and Financials |
| Feb 6 | Moving up | Good | Good | Buying | Consumer Cyclicals, Communication Services, Technology, Real Estate, and Financials |
| Jan 30 | Moving up | Good | Good | Buying | Basic materials, Consumer Cyclicals, Communication Services, Technology, Real Estate, and Financials |
| Jan 23 | Moving up | Good | Good | Buying | Basic material, everything else doing pretty well |
| Jan 16 | Moving up | Good | Good | Buying | Basic materials, Industrials, Financials, and healthcare |
| January 9 | Moving up after a sideways period | OK | OK | Buying | Basic materials, Industrials, Financials, and Healthcare |
| January 1, 2023 | Short-term downtrends | Poor | OK | No new purchases | Energy, basic materials, Industrials, and Healthcare |
| Dec. 19 | Short-term downtrends | Poor | OK | No new purchases | Basic materials, Industrials, and Healthcare |
| Dec. 12 | Right on the cusp of a downtrend. Could go either way. | Still ok, but right on the cusp. | Ok, not great. | Conservatively buying. Limited capital. If indices drop, not buying. | basic materials, Industrials, healthcare, and financials |
| Dec. 5 | short-term uptrends | Good | Good | Buying if setups occur | basic materials, Industrials, healthcare, and financials |
| Nov. 28 | short-term uptrends | Good | Good | Buying if setups occur | basic materials, Industrials, and Financials |
| Nov. 21 | short-term uptrends | Good | Good | Buying if setups occur | basic materials, Industrials, and Financials |
| Nov. 14 | short-term uptrends | Good | Ok | Buying if setups occur | basic materials, Industrials, Financials, and Energy |
| Nov. 7 | short-term uptrend, except Nasdaq 100 | Mediocre. Everything good except recent >2% daily drop in S&P 500 | Doing Ok, nothing great. | Holding current positions. Not taking new positions this week. |
energy, industrials, financials, and basic materials |
| Oct. 31 | Short-term uptrend | Ok | Doing ok, nothing amazing | starting to take some positions | energy, industrials, financials, and healthcare |
| Oct 24 | Downtrend, but pushing up at prior swing highs | FTD + Lowry upside day | Not published publically, But I did scan – LLY, plus a few others. All did very well in the past week | Started taking some positions. | energy, basic materials, healthcare, financials, and industries |
| Oct 17 | Downtrend: ST, LT | Poor, All | N/A – no trades, stocks performing poorly |
No long swing trades | energy, healthcare, financials, and industries |
| Oct 10 | Downtrend: ST, LT | Poor, All | N/A – no trades, stocks performing poorly |
No long swing trades | Energy, ind, basic mat, finc, holding up best over all all the time frames |
| Oct 3 | Downtrend: ST, LT | Poor, All | N/A – no trades, stocks performing poorly |
No long swing trades | Industrials, Con Cyc, and Fin holding up better than most, but still down.
Energy Up on the week. |
| Sept. 26 | Downtrend: ST, LT | Poor, All | N/A – no trades, stocks performing poorly |
No long swing trades | 3&1 month – all negative. Fin, Ind, Con Cyc holding up the best. |
