Weekly Market Recap (Apr 8-12): The Bears Didn't Drop The Ball This Time. Now What?
Everything you need to know about last week's markets performance and what to expect next.
Dear subscribers,
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 -1.6%, the Nasdaq -0.5%, and the Dow Jones -2.4%. Technology (-0.5%) and Consumer Cyclical (-0.9%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive. 5,150 is the next resistance, while 5,050 and 4,940 are support.
3. The earnings season has started, and 29 companies from the S&P 500 index have released their Q1 results, with 86% beating estimates. Earnings are expected to be up 3% in Q1 2024 and 9% in 2024.
4. Market sentiment is at a "Neutral" level (46) as measured by the Fear & Greed indicator, while VIX is at a medium value of 17.
5. Earnings reports from P&G and Netflix, as well as the Retail Sales report, are scheduled for next week.
My take:
We just wrapped another complex and volatile week, marked by sharp reversals. Going in, I was expecting the inflation report to provide some resolution after the S&P 500 was stuck in a 100-point range for a month. Unfortunately, the resolution came on the downside, and the bears secured a 2nd consecutive red week. And the short-term trend lines look quite ugly.
Looking ahead to next week, some breadth indicators I track suggest we see some consolidation or even a slight bounce. However, until we reclaim key resistance levels, we need to look further down. Specifically, this pullback might bring us back down to the low 5000s, possibly even below. But, as usual, we'll need to take it one level at a time, especially as this market has consistently delivered against our expectations.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, none of the 11 S&P 500 sectors have achieved gains. Technology led the way, falling by -0.5%. By contrast, Financials was the weakest, falling by -3.6%.
Year-to-date, 9 of the sectors have seen positive results. Energy has been the most successful sector, with a 15% gain. On the other hand, Real Estate has been trailing behind.
2. S&P 500 Top & Worst Performers
Last week, 10% of the stocks in the S&P 500 index rose in value.
The best-performing stocks were:
GE Vernova Inc. (GEV, 9%)
Insulet Corporation (PODD, 6%)
First Solar Inc (FSLR, 5%)
Meanwhile, the worst-performing stocks were:
Solventum Corp (SOLV, -10%)
Carmax Inc (KMX, -12%)
Globe Life Inc (GL, -46%)
In addition, 36 stocks within the S&P 500 reached a new 52-week high, while 10 set new lows, indicating that momentum remains on the upside but clearly slowing down. Most of the highs this week came from the Industrial 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 is about to cross below its signal line, the first sign of a potential trend reversal 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 1% over the past month, up 7% in the last three months, and is trading 3% away from its 52-week high.
Breadth: Market participation remains healthy in the long term, as 69% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 15% of stocks are trading above their 20-day SMA, decreasing by 35 points compared to the previous week. A reading below 20% usually suggests we might see some consolidation or a bounce next.
Trends: The 1-day trend remains primarily positive, but the 4-hour chart shows signs of weakness.
Key levels: The next resistance level is 5,150, followed by 5,300. On the other hand, the next support area is 5,050, followed by 4,920-40, where we found our footing in February.
3. Momentum Analysis of the Week
This week's momentum analysis focuses on the main commodities' trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these commodities and identify potential outperformers. Based on this approach, I've identified Metals 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 +5%.
Earnings are projected to grow by 9% in 2024, in line with the 9% growth seen on average over the last decade. In the past four weeks, 49% of earnings revisions made by analysts were to increase their outlook.
The forward 4-quarter P/E ratio is 20.6, higher than the average over the past five and ten years.
2. Q1 Earnings Season Summary
29 companies from the S&P 500 index have released their Q1 2024 earnings, with 86% posting higher EPS than expectations. This is higher than the previous four-quarter average of 78% and 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, 43% of the respondents had a bullish outlook on the stock market, down 4 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 5.3 to 5.2, 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 46, or a “Neutral” level, down from 60 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Next week is relatively light on economic reports, with the highlight being the Retail Sales report due on Monday. This release will provide valuable insights into consumer spending trends.
2. Earnings Calendar
The earnings season starts next week, and 41 companies from the S&P 500, including P&G and Netflix, 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 American Express (AXP). In this post, I break down key data points around American Express’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.
Did you enjoy my analysis? The premium section offers much more: I provide my short-term trading and analysis of over 20 US large caps and share my long-term investing portfolios. Upgrade your subscription to unlock all the exclusive features and insights! The first month is free!
If you have any questions or feedback, please don't hesitate to email me or comment on this post. Your support helps me create high-quality content and is greatly appreciated!
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.
Love the recap - very detailed and was worth the read!
We got it right from the last recap! 💪🏻