Weekly Market Recap (Dec 11 - 15)
Everything you need to know about last week's markets performance and what to expect next
Dear subscribers,
Welcome to my 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 up for the week, with the S&P 500 up 2.5%, the Nasdaq +2.9%, and the Dow Jones +2.9%.Real Estate (+5.5%) and Materials (+4%) were the best-performing sectors.
2. The S&P 500 set a new high for 2023 after the Fed signaled 3 rate cut for 2024, and the latest CPI report came in lower than expected.
3. The long-term trend for the S&P 500 is positive. The next resistance is 4,800, while 4,600 is now support.
4. The earnings season is almost over, and 499 companies from the S&P 500 index have released their Q3 results, with 82% beating estimates. Earnings are expected to be up 7% in Q3 2023 and 11% in 2024.
5. Earnings reports from Nike and Micron, the PCE price index, and a GDP update are scheduled for next week.
My take:
This week was a high-stakes period in the markets, and it played out favorably and marked a 7th consecutive weekly gain. In last week's newsletter, I mentioned I was watching the 4,540-4,610 range that the S&P 500 has held since Thanksgiving, anticipating some resolution. Fortunately for the bulls, this breakout was to the upside.
Now's the time to take a step back and look at the bigger picture. Since the late October low, the trend has been consistently up. This is a reminder that there is no point in fighting the trend or attempting to outguess the market. Riding a clear trend is more profitable than trying to nail the perfect highs and lows.
However, remember that a red week and some pullback are inevitable. But as long as we don't lose any significant support – currently, that's 4,600 – the outlook remains bullish. Holding above this level, I anticipate the index will attempt to break its previous all-time high of over 4,800.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, all the 11 S&P 500 sectors have achieved gains. Real Estate led the way and rose by 5.5%. By contrast, Communication Serv. was the weakest but still rose by 0.7%.
Year-to-date, 7 of the 11 sectors have seen positive results. Technology has been the most successful sector, with a 54% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Last week, 82% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Solaredge Technologies Inc (SEDG, 24%)
Enphase Energy Inc (ENPH, 20%)
Broadcom Inc (AVGO, 20%)
Meanwhile, the worst-performing stocks were:
Ameren Corp. (AEE, -8%)
Oracle Corp. (ORCL, -9%)
Exelon Corp. (EXC, -9%)
In addition, 125 stock within the S&P 500 reached a new 52-week high, while 5 set new lows, indicating the momentum is clearly 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&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 above its signal line, signaling potentially more gains ahead.
2. S&P 500 Short-Term Outlook and Key Levels
I was looking for the S&P 500 index to finally break out from the 4,540-4,610 range it has been trading since Thanksgiving, and thankfully, the resolution came to the upside. Regarding levels, the 4,800 zone, the all-time high, is the next significant resistance, while 4,600 is now support.
In the longer term, my target would be to, at minimum, test 4,800 and potentially the 5,000 psychological level. On the other hand, a break below 4,400, then 4,110, would be a setback to the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis is about Mega Caps' trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these mega-cap stocks and identify potential outperformers. Based on this approach, I've identified Amazon and Apple as currently having the best relative momentum.
EARNINGS RECAP
1. Q3 Earnings Season Summary
499 companies from the S&P 500 index have released their Q3 2023 earnings, with 82% posting higher EPS than expectations. This is higher than the previous four-quarter average of 74%, and the historical average of 67%.
2. Q3 and 2024 Expected EPS & Revenue Growth
Q3 2023 earnings for the S&P 500 are expected to be up 7%. Excluding the energy sector, the figure is +13%.
The earnings are projected to be up 11% in 2024, higher than the 9% growth seen on average over the last decade. Earnings are expected to increase year-over-year in all the 11 sectors, with the Healthcare and Communication Services sectors leading the way. On the other hand, the Materials and Energy sectors are projected to see a softer performance.
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, 51% of the respondents had a bullish outlook on the stock market, a 4-point increase from the previous week. The bullish sentiment is at its highest level since July.
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 3.8 to 4.7, the highest level since February 2023.
THE WEEK AHEAD
1. Economic Calendar
The Personal Consumption Expenditures (PCE) data is on our radar for the upcoming week, which is expected on Friday. As the Fed's favored measure of inflation, it plays a pivotal role in shaping interest rate decisions. I will watch for the Gross Domestic Product (GDP) update on Thursday.
2. Earnings Calendar
The Q3 earnings season is almost over, and 9 companies from the S&P 500, including Micron and Nike, 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 Nike, Inc. ($NKE). In this post, I break down key data points around Nike’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.
Great read. One question regarding the market sentiment. Do they also share the reason behind the sentiment changes?