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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 the market health's, 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, strong/weak individual stocks for longs or shorts, patterns, and trade triggers.

Stock Market Outlook for This Week

Heading into the week of Oct. 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, and even considering trades is probably at least a week away (or more).

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 – these are charts I personally use.

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 defined by 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.

The market health indicators are poor.

• 3% of S&P 500 stocks are above their respective 50-day moving average. 12% of all US stocks are above their respective 50-day moving average. It’s generally much easier to swing trade profitably (on the long side) when more stocks are above their respective 50-day average. When this indicator is below 50%, it tends to be sideways or a downtrend for most stocks/indexes. This is a poor indicator.
• 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 occurred on Sept. 29. This is 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 lows. That is a positive divergence, but until the NYSE ADL starts trending higher, the indicator is still bearish overall. This is another poor indicator.
• The blue columns are NYSE up volume divided by NYSE total volume. It tracks buying and selling enthusiasm. A 93% downside day was seen on Sept. 13. This is a poor indicator.
• 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 has been acting decently. And it isn't even really moving up, it is just holding its ground. These are not favorable conditions to be trading in. I would say to wait for pretty much everything you’re watching to be popping higher, that would provide much better chances of catching winners. So right now, I'm staying out.

Sectors on the Move

I don’t typically trade utility or defensive stocks because they don’t move as much as the other sectors in good market conditions, and in poor market conditions, these sectors hold up a bit better but often still drop. 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.

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 day trading as always, it has saved me and provided income while the swing trading has been slow in 2022. I often day trade the EUR/USD currency pair, and a stock day trading course will be coming out shortly.

Historic Conditions

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