Weekly Market Recap (Aug. 14-18)
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 mixed for the week, with the S&P 500 down 2.1%, the Dow Jones 2.2%, and the Nasdaq 2.6%. Energy (-1.2%) and Technology (-1.1%) were the best-performing sectors.
2. The stock indices posted another negative week behind disappointing economic data in China, rising interest rates in the US, and hawkish comments from Fed officials.
3. The long-term trend for the S&P 500 remains positive, and the next significant resistance is at 4,450, while support is at 4,280.
4. The Q2 earnings season is well underway, and 472 companies from the S&P 500 index have already released their 2nd quarter results, with 79% beating estimates so far. Earnings are expected to be down 3% in Q2 2023 and up 2% in 2023.
5. Earnings reports from Nvidia and Lowe’s are scheduled for next week, and an update from the Fed Chair following the annual Jackson Hole Economic Symposium.
My take:
While I felt frustrated by the lack of direction last week, this one provided a clear trajectory – unfortunately, it was sharply downward. The S&P500 posted its 3rd consecutive weekly loss, breaching key support at 4,450 and plummeting throughout the week. Until we reclaim this level, we are in a downtrend. However, a bounce could be in store next week, given that several indicators I follow suggest we are due for a pause in the sell-off.
Zooming out, it's worth remembering that 5%+ pullbacks are common during bull markets, and as always, we should focus on key levels and tune out the noise. The next critical support lies at 4,280, the breakout level from June – a level I'm keen to see holding. And reclaiming 4,450 will be needed before shifting to a more positive outlook short-term. Additionally, I'm watching for a breakthrough above 4,600, the level we failed at this summer, before feeling confident we are resuming our march toward new highs for the S&P 500.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, none of the S&P 500 sectors have achieved gains. Technology led the way but declined by 1.1%. By contrast, Consumer Cyclical was the weakest, and fell by 4.2%.
Year-to-date, 8 sectors have seen positive results. Communication Services has been the most successful sector, with a 36% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 9% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
NVIDIA Corporation (NVDA, 6%)
MarketAxess Holdings Inc. (MKTX, 6%)
Generac Holdings Inc. (GNRC, 5%)
Meanwhile, the worst-performing stocks were:
Keysight Technologies, Inc. (KEYS, -17%)
First Solar, Inc. (FSLR, -11%)
Tesla, Inc. (TSLA, -11%)
In addition, 12 stocks within the S&P 500 reached a new 52-week high, while 30 set new lows, indicating the momentum is to the downside.
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&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 MACD as an additional tool to detect trend changes. The MACD is about to cross below its signal line, indicating potentially more pain ahead for the index.
2. Short-term outlook and key levels
This week went free fall after losing the 4,450 support, and 4,280-4,300 will be the next strong support, as it is June’s breakout level. While we might test that level next week, I anticipate a bounce, as many indicators are flashing that we are due for a pause in the sell-off.
Beyond next week, until we recapture 4,450, we remain on the downtrend. Once we cleared that level, a breakthrough above 4,600 would signal a resumption of the upward trajectory, setting the stage for potentially new all-time highs.
3. Momentum Analysis of the Week
This week's momentum analysis is about the top and worst-performing stocks in each sector. The difference in performance between the best and worst-performing stocks in each sector is huge, 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 the stock market, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
472 companies from the S&P 500 index have released their Q2 2023 earnings, with 79% posting higher EPS than expectations. This is higher than the previous four-quarter average of 73%, and the historical average of 66%.
2. Expected EPS & Revenue Growth
Q2 2023 earnings for the S&P 500 are expected to be down 3%. Excluding the energy sector, the figure is +3%.
The earnings are projected to be up 2% in 2023, lower than the 9% growth seen on average over the last decade. Earnings are expected to increase year-over-year in 8 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, 36% of the respondents had a bullish outlook on the stock market, a 8-point decrease from the previous week. The investors' bullish sentiment is back below historical average after passing more than 2 months above.
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 increased from 4.1 to 4.2, a neutral reading and highest level since March.
THE WEEK AHEAD
1. Economic Calendar
The week ahead will be light in terms of economic data. Keep an eye on the speech from Fed Chair Powell on Friday, which might provide more insights on the central bank’s actions in the coming months. Central bank officials are meeting this week for the annual Jackson Hole Economic Symposium.
2. Earnings Calendar
The earnings season continues in the week ahead, and 12 companies from the S&P 500, including Nvidia Corp. and Lowe’s Companies 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 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" value and/or low growth expectations.
Implied volatility is the expected 1-day stock change after earnings are released, as assessed by the options markets.
It is helpful to analyze these indicators to understand better the stocks before their earnings.
Every week, I share a deep dive into one stock reporting earnings in the coming days. This week, I prepared an in-depth overview of NVIDIA Corp. ($NVDA). In this post, I break down key data points around NVIDIA Corp.’s fundamentals, stock returns, 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.