Weekly Market Recap (Apr. 17 - 21)
Everything you need to know about last week's markets performance and what to expect next
Dear subscribers,
Welcome to our weekly market recap!
Navigating the markets can be overwhelming, but I'm here to provide you with the latest updates and actionable insights to help you succeed. Whether you're an experienced investor or just starting out, my recap has something for everyone.
I hope you enjoy this week's edition and find it helpful. If you like what you see, please share it with your network on social media and, if you haven't already, subscribe to our email updates.
Thank you for joining us, and let's get started!
SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were slightly negative for the week, with the S&P 500 down 0.1%, the Dow Jones 0.2%, and the Nasdaq 0.4%. Consumer Defensive (+1.9%) and Real Estate (+1.6%) were the best-performing sectors.
2. The market finished the week without a clear direction, as better-than-anticipated corporate earnings balanced out fears of a recession.
3. The long-term trend for the S&P500 is turning positive, but the index needs to clear resistance ahead, starting with 2023 high at 4,180.
4. The earnings season has started in earnest, and 88 companies from the S&P 500 index have already released their Q4 results, with 76% beating estimates. Earnings are expected to fall 5% in Q1 2023 and rise 1% in 2023.
5. Earnings reports from Microsoft, Alphabet, and Amazon are scheduled for next week, along with Q1 GDP and PCE price index updates.
My take:
Although the past week was choppy and volatile, most market dips have been met with buying interest, which is a positive sign for the markets. My short-term outlook is unchanged, and the S&P 500 is likely to test the 4,300 level. I will let the market play its hand and would like to see a break above the 4,180 resistance level.
However, caution is warranted, as the index has been consolidating for 3 weeks in a row, and long periods of consolidation typically result in sharp price fluctuations. And the coming week will provide multiple market catalysts, with Q1 GDP growth updates and 30% of the S&P 500 index reporting earnings, including many of the largest technology companies. These updates will be crucial, particularly as investors weigh in on the possibility of a recession.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 6 of the 11 S&P 500 sectors have achieved gains. Consumer Defensive led the way and rose by 1.9%. By contrast, Energy was the weakest, falling by 2.6%.
Year-to-date, 7 sectors have seen positive results. Communication Services has been the most successful sector, with a 23% gain. On the other hand, Financials has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 56% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Intuitive Surgical, Inc. (ISRG, 12%)
Snap-on Incorporated (SNA, 10%)
First Republic Bank (FRC, 9%)
Meanwhile, the worst-performing stocks were:
Albemarle Corporation (ALB, -15%)
CDW Corporation (CDW, -13%)
Seagate Technology Holdings plc (STX, -12%)
In addition, 43 stocks within the S&P 500 reached a new 52-week high, while 6 set new lows, indicating the momentum is to the upside.
The following are the top stocks, ranked by market size, that reached a new high or low in the last 5 days:
MARKET TRENDS & MOMENTUM
1. S&P 500 Long-Term Trend
The long-term trend for the S&P500 is improving. 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 three conditions:
Price is trading above the EMA9 and EMA30: 🟢
EMA9 is above the EMA30: 🟢
Both moving averages are rising: 🟡
I also use MACD as an additional tool to detect trend changes. The MACD has crossed above its signal line, a positive indication for the index.
2. Short-term outlook and key levels
The S&P 500 has now completed its third consecutive week of consolidation. It is worth noting that prolonged periods of consolidation frequently result in sharp price movements. Nonetheless, my primary view is that we will test 4,300. This level would mark the official start of a new bull market and correspond to the August 2022 high.
However, staying cautious and letting the market demonstrate its intentions is critical, beginning with a break of the resistance level of 4,180. Conversely, breaking below 4,000 and then 3,900 would be a significant blow to the bull case.
3. Momentum Analysis of the Week
In this week's momentum analysis, I analyzed the performance of each S&P 500 sector in 2023 and highlighted the top and worst-performing stocks in each sector.
The difference in performance between the best and worst-performing stocks in each sector is enormous, emphasizing the importance of stock selection. Choosing wisely when it comes to stock selection can significantly impact your portfolio!
For daily updates and content on momentum trading, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
88 companies from the S&P 500 index have released their Q1 2023 earnings, with 76% posting higher EPS than expectations. This is higher than the previous four-quarter average of 74%.
2. Expected EPS & Revenue Growth
Q1 2023 earnings for the S&P 500 are expected to decline by 5%. Excluding the energy sector, the figure falls to -6%.
The earnings growth rate for 2023 is projected at +1%, lower than the 9% average seen over the last decade. Earnings are expected to increase year-over-year in 6 of the 11 sectors, with the Consumer Cyclical and Communication Services sectors leading the way. On the other hand, the Energy and Materials sectors are projected to see the worst decline.
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. Individual Investors (AAII)
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 of the survey are published every Wednesday.
According to the most recent AAII survey, 27% of the respondents had a bullish outlook on the stock market, a 1-point increase from the previous week. The investors' bullish sentiment remains on the low side vs. historical levels.
2. Institutional Investors (BofA Bull & Bear Indicator)
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 rose from 2.3 to 2.8 and remains tipped to the bearish side.
THE WEEK AHEAD
1. Economic Calendar
The upcoming week will bring us a reading of Q1 GDP, for which economists expect a 2% growth. It is also worth keeping an eye on the PCE price index, which is the Federal Reserve's preferred measure of inflation.
2. Earnings Calendar
The Q1 2023 earnings season picking up steam, and 178 companies from the S&P 500, including Microsoft, Amazon and Visa are set to report their quarterly earnings next week.
3. Next Week’s Earnings Watchlist
The top five stocks that will report earnings next week are listed here, along with 3 key indicators:
Performance in the previous quarter.
RSI, where a reading of 70 indicates overbought status and a reading of 30 oversold.
PE ratio, where a reading of 25 indicates a "cheap" value and/or low growth expectations.
It is helpful to analyze these 3 indicators to understand how the stock positions itself before the earnings.
If you want to learn more, check out my in-depth overview of Meta Platform (META) ahead of earnings. In this post, I break down key data points around $META's fundamentals, technicals, analyst ratings, and past earnings performance to help you make informed investment decisions.
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Have a great week!
My Weekly Stock
DISCLAIMER
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.
Great analysis 👏
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