Weekly Market Recap (Apr 15-19): The Pullback Is Finally Here. Where Will We Bottom?
Everything you need to know about last week's markets performance and what to expect next.
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Welcome to My Weekly Stock, where we blend in-depth market analysis with proven momentum-based trading strategies. My mission? Help you navigate the financial markets with unbiased, data-driven insights you can act on!
Every week, I spend hours curating this market recap, producing insightful analyses with clear visuals and a structured layout so you can easily find what you need, week after week. And because it's easy to get swayed by personal bias, I like to let the data do most of the talking.
Let’s get started!
SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were down for the week, with the S&P 500 down -3.1%, the Nasdaq -5.5%, and the Dow Jones flat. Utilities (+1.9%) and Consumer Defensive (+1.4%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive. 5,050 is the next resistance, while 4,940 is support.
3. The earnings season has started, and 70 companies from the S&P 500 index have released their Q1 results, with 79% beating estimates. Earnings are expected to be up 3% in Q1 2024 and 10% in 2024.
4. Market sentiment is at a "Fear" level (32) as measured by the Fear & Greed indicator, while VIX is at a medium value of 19.
5. Earnings reports from Microsoft and Alphabet, as well as the PCE Price Index, are scheduled for next week.
My take:
We've just wrapped our third consecutive weekly loss, and sixth consecutive daily loss. The long-anticipated pullback is now upon us. We got a first attempt at a rebound early Monday, but it was short-lived, and all subsequent bounces have been consistently sold.
Now that the trend has shifted to the negative, we will see a reversal only when we recover critical resistance levels. The first marker for the S&P 500 is at 5,050 but I'd feel more confident once we are back above 5,150. Until then, I expect more pain, and we might revisit the 4,800s before we are done. As always, let's take it one level at a time.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, 3 of the 11 S&P 500 sectors have achieved gains. Utilities led the way, rising by 1.9%. By contrast, Technology was the weakest, falling by -6.3%.
Year-to-date, 9 of the sectors have seen positive results. Energy has been the most successful sector, with a 13% gain. On the other hand, Real Estate has been trailing behind.
2. S&P 500 Top & Worst Performers
Last week, 36% of the stocks in the S&P 500 index rose in value.
The best-performing stocks were:
United Airlines Holdings Inc (UAL, 23%)
Unitedhealth Group Inc (UNH, 14%)
Paramount Global (PARA, 14%)
Meanwhile, the worst-performing stocks were:
NVIDIA Corp (NVDA, -14%)
Tesla Inc (TSLA, -14%)
Super Micro Computer Inc (SMCI, -21%)
In addition, 6 stocks within the S&P 500 reached a new 52-week high, while 16 set new lows, indicating that momentum has flipped to the downside. Most of the highs this week came from the Financial sector, while Healthcare has seen the most lows.
MARKET TRENDS & MOMENTUM
1. S&P 500 Long-Term Trend
The long-term trend for the S&P 500 is positive. I base this evaluation on the weekly chart's 9 and 30 exponential moving averages (EMAs). To determine if the trend is strongly positive, I look for the following conditions (the 1st is the most important):
EMA9 is above the EMA30: 🟢
Price is trading above the EMA9: 🔴
Price is trading above the EMA30: 🟢
EMA9 is rising: 🟢
EMA30 is rising: 🟡
I also use the MACD as an additional tool to detect trend changes. The MACD has crossed below its signal line, a negative signal for the index.
2. S&P 500 Technical Analysis
Healthy bull markets typically see the index set several new highs, broad market participation, and ascending trend lines. That's why I've created a four-part scorecard – a straightforward tool to give us a comprehensive view of these essential health indicators.
Momentum: The index is down 5% over the past month, up 3% in the last three months, and is trading 6% away from its 52-week high.
Breadth: Market participation remains healthy in the long term, as 68% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 20% of stocks are trading above their 20-day SMA, increasing by 5 points compared to the previous week. A reading below 20% usually suggests the sell-off might be running out of steam.
Trends: The 1-day and 4-hour charts are have both turned negative.
Key levels: The next resistance level is 5,050, followed by 5,150. On the other hand, the next support area is 4,920-40, followed by 4,800.
3. Momentum Analysis of the Week
This week's momentum analysis focuses on the market segments’ trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank different asset-class ETFs and identify potential outperformers. Based on this approach, I've identified Gold and Oil as having the best relative momentum.
EARNINGS RECAP
1. Q1 and Full Year 2024 Expected EPS & Revenue Growth
Q1 2024 earnings for the S&P 500 are expected to be up 3%. Excluding the energy sector, the figure is +6%.
Earnings are projected to grow by 10% in 2024, slightly higher than the 9% growth seen on average over the last decade. In the past four weeks, 51% of earnings revisions made by analysts were to increase their outlook.
The forward 4-quarter P/E ratio is 19.9, higher than the average over the past five and ten years.
2. Q1 Earnings Season Summary
70 companies from the S&P 500 index have released their Q1 2024 earnings, with 79% posting higher EPS than expectations. This is in line with the previous four-quarter average of 78% and higher than the historical average of 67%.
MARKET SENTIMENT
Measures of investor sentiment can be helpful as they provide insight into the views and opinions of professional or individual investors. However, it's important to note that these measures are not perfect predictors of market movements. They should be combined with other indicators and analysis tools for a complete market picture.
1. AAII Sentiment Survey (Individual Investors)
The American Association of Individual Investors (AAII) conducts a weekly survey among its members to gauge their expectations for the stock market over the next six months. The results are published every Wednesday.
According to the most recent AAII survey, 38% of the respondents had a bullish outlook on the stock market, down 5 points from the previous week.
2. BofA Bull & Bear Indicator (Institutional Investors)
The Bank of America Bull-Bear Indicator is a proprietary measure of investor sentiment developed by Bank of America. It is based on a survey of fund managers and institutional investors, and it tracks the percentage of respondents who are bullish, bearish, or neutral on the stock market. Results are published in the form of a score ranging from 0 (extremely bearish) to 10 (extremely bullish)
The indicator fell from 5.2 to 5.0, a neutral sentiment reading.
3. CNN Fear & Greed Index (Technical)
The CNN Fear & Greed Index is a daily measure that analyzes seven market indicators to assess how emotions influence investors' decisions. The index is scored out of 100 and categorizes results into five stages: Extreme Fear, Fear, Neutral, Greed, and Extreme Greed.
The index closed at 30, or a “Fear” level, down from 46 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Next week, attention will center on the release of the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, due on Friday. Additionally, we'll receive an update on the first quarter GDP, which will provide further insights into the economic health.
2. Earnings Calendar
The earnings season starts next week, and 159 companies from the S&P 500, including Microsoft and Alphabet, are expected to release their quarterly results.
3. Next Week’s Earnings Watchlist
Below is my watchlist of stocks reporting week next week, along with several key indicators I like to review:
Stock Indicators:
Stock performance in the last 3 months.
RSI, where a reading of 70 indicates overbought status and a reading of 30 oversold.
PE ratio, where a reading below 25 indicates a "cheap" valuation and/or low growth expectations.
Stock Price Reactions to Earnings:
1-day Stock Return on Earnings is the stock performance on the earnings release date.
Implied volatility is the expected 1-day stock change after earnings are released, as assessed by the options markets.
Every week, I share a deep dive into 1 stock reporting earnings in the coming days. This week, I prepared an in-depth overview of Merck (MRK). In this post, I break down key data points around Merck’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions.
That’s a wrap for this week’s recap! I hope it helped you understand the market better.
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My Weekly Stock
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The information provided in this newsletter is for informational purposes only and should not be taken as financial advice. Any investments or decisions made based on the information provided in this newsletter are the reader's sole responsibility. We recommend that readers conduct their own research and consult a qualified financial professional before making investment decisions. The author does not assume any responsibility for any losses or damages arising from using the information provided in this newsletter.