Swing Trading Stock Market Outlook for This Week – TradeThatSwing

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.

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 October 3, market conditions are poor. I’m not buying into new swing trades until conditions improve. I discuss below what that would look like. I have no long positions and am in cash. I’m not scanning for stocks this week as even considering trades is probably at least a week away (or more).

Here’s a quick summary video of the current state of the stock market and what has to happen for me to start buying into some swing trading stocks again.

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

2 Canadian stock indices are also included. The Composite tracks larger companies, while the Venture tracks very small companies.

Charts are provided by TradingView – the charts I personally use.

US and Canadian stock market indices as of Oct 1

From a price action perspective, all the indices are in short-term downtrends amid a longer-term downtrend.

Downtrends are composed of lower swing highs and lower swing lows, and that’s what we have right now in the US and Canadian indices.

Uptrend behavior is higher swing highs and higher swing lows. Until that happens, these indices are weak and represent what is happening in most stocks.

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 with health indicators showing overall stock market health as of Oct. 1

The market health indicators are poor.

  • 3% of S&P 500 stocks are above their 50-day moving average. 12% 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. Poor.
  • 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. Values of -2 are a warning sign anytime they occur. A 2.11% drop on Sept. 29. Poor.
  • The blue line is the cumulative NYSE Advance-Decline Line. It is trending lower. It has held above its June lows while the S&P 500 has fallen below its. That is a positive divergence, but until the NYSE ADL starts trending higher the indicator is still bearish overall. Poor.
  • The blue columns are NYSE up volume divided by NYSE total volume. It tracks buying and selling enthusiasm. A 93% downside day on Sept. 13. Poor.
  • The ultimate indicator is how many quality setups there are and how trades are working. Once the indicators turned negative in mid-September, nearly all the stocks that I was watching or trading started to break down. A few managed to hold up, but that doesn’t matter. If we are watching 10 stocks, we want 7 of them acting well. Right now, maybe 1 out of 10 is acting OK. And they aren’t even really moving up they are just holding their ground. Those are not favorable conditions to be trading in. Wait for pretty much everything you’re watching to be popping higher. Much better chances of catching winners. So right now, staying out.

My entire method of swing trading stocks is covered in the Complete Method Stock Swing Trading Course. 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 trade utility or defensive stock because in good market conditions they don’t move as much as the other sectors, and in poor market conditions, these sectors hold up a bit better but are often still dropping.

Financials, Industrials, and Consumer Cyclical stocks occur in upper half on all time frames.

I am more interested to see what sectors start emerging when the market health indicators improve. Those could be sectors that lead the next bull market.

Sector performance provided by Finviz.

how sectors have performed over the last week, month, and 3 months

What I’m Doing Right Now

I’m not adding new long swing trading positions right now. I’ll wait for conditions to improve.

I’m always day trading…it has saved me and provided income while the swing trading has been slow in 2022.

I day trade the EURUSD (here’s how) and a stock day trading course will be coming out shortly.

JOIN ME FOR WEEKLY TRADING DISCUSSIONS. Mondays, Wednesdays, and Fridays. Ask trading questions, get guidance, and discuss current market conditions.

Historic Conditions:

Week Of: Indices: Conditions Watchlist/Trade
Performance
What I’m Doing: Top Sectors
(Ex: Utlt, Con Def)
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.

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.

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