Weekly Market Recap (Apr. 24 - 28)
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.
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SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were positive for the week, with the S&P 500 up 0.9%, the Dow Jones 0.9%, and the Nasdaq 1.3%. Communication Services (+3.8%) and Technology (+2.1%) were the best-performing sectors.
2. Despite ongoing recession concerns, markets were lifted by better-than-expected earnings, notably from major tech companies.
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 is well underway, and 267 companies from the S&P 500 index have already released their Q4 results, with 78% beating estimates. Earnings are expected to fall 2% in Q1 2023 and rise 1% in 2023.
5. Earnings reports from Apple, Pfizer, and AMD are scheduled for next week, as well as the Fed's interest rate decision and the latest non-farm payroll update.
My take:
After several weeks of consolidation, the markets finally experienced sharper movements this week. While it first seemed we were about to lose support and sell off, we recovered and finished the week in positive territory thanks to solid earnings reports.
So, on the one hand, we successfully navigated a week full of potential catalysts and saw a failed breakdown, a typically bullish pattern. On the other hand, we still need to clear the next resistance at 4,180.
Net net, my view remains unchanged, and I think the S&P 500 is likely to test the 4,300 level, which would signal the start of a new bull market. But before that, we need to get through another busy week of data, including more earnings reports, updates on the job market, and the Fed's interest rate decision. These updates will provide us with crucial insights into the economy's health and the likelihood of a recession.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 6 of the 11 S&P 500 sectors have achieved gains. Communication Services led the way and rose by 3.8%. By contrast, Utilities was the weakest, falling by 0.9%.
Year-to-date, 7 sectors have seen positive results. Communication Services has been the most successful sector, with a 25% gain. On the other hand, Financials has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 53% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Chipotle Mexican Grill, Inc. (CMG, 15%)
Hasbro, Inc. (HAS, 15%)
Meta Platforms, Inc. (META, 13%)
Meanwhile, the worst-performing stocks were:
First Solar, Inc. (FSLR, -16%)
Enphase Energy, Inc. (ENPH, -27%)
First Republic Bank (FRC, -75%)
In addition, 42 stocks within the S&P 500 reached a new 52-week high, while 14 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
After three weeks of consolidation, the S&P 500 has finally made a move. My primary view is that we will test the 4,300 level, which would indicate the official start of a new bull market and align with the August 2022 high.
However, it is crucial to remain cautious and let the market demonstrate its intentions, starting with a break of the resistance level at 4,180. Conversely, if the index were to drop below 4,000 and then 3,900, it would be a significant setback for the bull case.
3. Momentum Analysis of the Week
This week's momentum analysis is about Asset Class ETFs' trends. I employ various performance metrics and technical indicators, which are then processed by my proprietary algorithm. I use this model here to rank the different markets’ ETFs and identify those likely to outperform.
From a relative standpoint, it's Gold and Equity indices show strong momentum but we have seen a lot of consolidation in the past month.
For daily updates and content on momentum trading, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
267 companies from the S&P 500 index have released their Q1 2023 earnings, with 78% posting higher EPS than expectations. This is higher than the previous four-quarter average of 74%, and the historical average of 66%.
2. Expected EPS & Revenue Growth
Q1 2023 earnings for the S&P 500 are expected to decline by 2%. Excluding the energy sector, the figure falls to -4%.
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, 24% of the respondents had a bullish outlook on the stock market, a 3-point decrease from the previous week. The investors' bullish sentiment remains on the low side vs. the 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 2.8 to 2.9 and remains tipped to the bearish side.
THE WEEK AHEAD
1. Economic Calendar
Next week, the focus will be on the Federal Reserve's two-day meeting and the interest rate decision scheduled for Wednesday. The market will also closely monitor the Central Bank's statements and insights on the future trajectory of interest rates. It is also worthwhile to keep an eye on the non-farm payroll report, as it will provide insights into the state of the job market.
2. Earnings Calendar
The Q1 2023 earnings season is now well under way, and 162 companies from the S&P 500, including Apple, Pfizer, and AMD 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 Apple Inc. (AAPL) ahead of earnings. In this post, I break down key data points around AAPL 0.00%↑ '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.