Weekly Market Recap (Apr. 3 - 7)
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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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 mixed for the week, with the S&P 500 down 0.1%, the Dow Jones up 0.6%, and the Nasdaq down 1.1%. Healthcare (+3.1%) and Utilities (+3.1%) were the best-performing sectors.
2. The markets went sideways as the stock indexes digested the recent week's uptrend.
3. The long-term trend for the S&P500 is turning bullish, and the index has broken out of the critical levels it has been consolidating for weeks.
4. The earnings season is starting in earnest, and 20 companies from the S&P 500 index have already released their Q4 results, with 100% beating estimates. Earnings are expected to fall 5% in Q1 2023 and rise 1% in 2023.
5. Earnings reports from UnitedHealth Group, JP Morgan, and Wells Fargo are scheduled for next week, along with the release of the CPI and Retail Sales report for March.
My take:
Following a breakout from critical levels the previous week, I anticipated the index might need to consolidate in preparation for its next move. Next week presents several catalysts, including the start of the earnings season, inflation and retail sale updates, and further insights into the Fed's future policy.
While I hold a cautiously bullish view, I will examine how the index reacts to these catalysts. The key will be maintaining the breakout level and overcoming upcoming resistance levels, beginning with the 4,180, 2023 high. It's worth noting that the ultimate test for this rally will be the 4,300 level, which was the August 2022 high and would mark the official start of a bull market.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 5 of the 11 S&P 500 sectors have achieved gains. Healthcare led the way and rose by 3.1%. By contrast, Industrials was the weakest, falling by 3.4%.
Year-to-date, 5 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, 59% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
UnitedHealth Group Incorporated (UNH, 9%)
Eli Lilly and Company (LLY, 8%)
Johnson & Johnson (JNJ, 8%)
Meanwhile, the worst-performing stocks were:
Albemarle Corporation (ALB, -12%)
MarketAxess Holdings Inc. (MKTX, -11%)
Generac Holdings Inc. (GNRC, -11%)
In addition, 32 stocks within the S&P 500 reached a new 52-week high, while 2 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 the S&P 500 broke out of critical levels the previous week, the index has been consolidating in preparation for the next move. My short-term view has not changed, and the key will be to maintain the breakout level during any retest and overcome upcoming resistance.
Regarding specific levels to watch, 4,180 (2023 high) is the next significant resistance. The ultimate resistance is 4,300, which would mark the official start of a new bull market. Ideally, we should not break below 4,000, while 3,900 (1-year trend line) is a crucial support range to defend.
3. Momentum Analysis of the Week
This week's momentum analysis is about the S&P 500 sectors' 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 S&P 500 sectors and identify those likely to outperform. Based on this approach, I've identified the Technology sector as having the best relative momentum. I encourage fellow momentum traders to investigate this sector and its best-performing stocks.
For daily updates and content on momentum trading, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
20 companies from the S&P 500 index have released their Q1 2023 earnings, with 100% 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 -7%.
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, 33% of the respondents had a bullish outlook on the stock market, a 10-point increase from the previous week. The investors' bullish sentiment is getting closer to 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 was stable at 2.3 and remains tipped to the bearish side.
THE WEEK AHEAD
1. Economic Calendar
Next week will provide us with several important economic data updates. Inflation will take center stage with the release of the Consumer Price Index (CPI) for March. The expectation is for consumer prices to increase by 5.3% year-over-year, down from 6% in the previous month. In addition, the markets will also be keeping an eye on the Federal Open Market Committee (FOMC) meeting minutes and the latest update on Retail Sales.
2. Earnings Calendar
The Q1 2023 earnings season is starting in earnest, and 10 companies from the S&P 500, including UnitedHealthGroup, JPMorgan, and Wells Fargo, are set to report their quarterly earnings next week.
3. Next Week’s Earnings Watchlist
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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.
Another wild week, with earnings season next week 🤯🔥