Weekly Market Recap (Dec 18 - 22)
Everything you need to know about last week's markets performance and what to expect next
Dear subscribers,
This is going to be my last post of the year as I will be taking a break next week. Exceptionally, my stock pick is included directly in this post.
I would like to take this opportunity to wish everyone a happy holiday season and express my gratitude for your continuous support. I have some exciting new features coming in January, including a premium version! Until then, please take care of yourself and your loved ones!
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 0.8%, the Nasdaq +1.2%, and the Dow Jones +0.2%. Communication Services (+2.2%) and Energy (+0.8%) were the best-performing sectors.
2. The S&P 500 posted its 8th consecutive weekly gain as another inflation report showed prices increased less than feared.
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 over, and all the 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. My stock pick for week#52 is Salesforce (CRM), a leading stock in the technology sector and trading less than 1% from its 1-year high.
My take:
This week marked the 8th consecutive weekly gain for the S&P 500 index. Bears made a brief appearance on Wednesday, but without any follow through.
The past few weeks were a good reminder for me that relying solely on indicators can be challenging. In fact, many have suggested a pullback for weeks now. However, price action is the ultimate guide, and as long as no major support is lost, the momentum remains on the upside. Remember, predicting the exact high or front run the market is tough, if not impossible. When the trend does shift, there will be ample time and opportunities to adjust, capitalize, or protect our gains.
Looking ahead, we're entering the final week of the year. While I don't expect massive movements, keeping an eye on critical levels is essential. As long as the index stays above 4,600, it will likely attempt to break its previous all-time high of over 4,800.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 7 of the 11 S&P 500 sectors have achieved gains. Communication Services led the way and rose by 2.2%. By contrast, Utilities was the weakest and fell by 2.1%.
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, 66% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Ansys Inc. (ANSS, 21%)
Moderna Inc (MRNA, 10%)
Illumina Inc (ILMN, 10%)
Meanwhile, the worst-performing stocks were:
Warner Bros. Discovery Inc (WBD, -8%)
Nike, Inc. (NKE, -11%)
Fedex Corp (FDX, -12%)
In addition, 90 stock within the S&P 500 reached a new 52-week high, while 2 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
The index remains on a positive trend despite many indicators signaling the need for a pullback. Until significant support is lost, we need to look up next. Regarding levels, the 4,800 zone, the all-time high, is the next significant resistance, while 4,600 is 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 the top and worst-performing stocks in each sector. The difference in performance between the best and worst-performing stocks in each sector is enormous, emphasizing the importance of stock selection. Choosing wisely when it comes to stock selection can significantly impact your portfolio.
EARNINGS RECAP
1. Q3 Earnings Season Summary
All the 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
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, 53% of the respondents had a bullish outlook on the stock market, a 2-point increase from the previous week. The bullish sentiment is at its highest level since April 2021.
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 4.7 to 5.0, the highest level since December 2021.
THE WEEK AHEAD
Due to the Christmas holiday, next week will be a short trading week, and no significant economic or earnings report is expected.
For next week, my algorithm has identified Salesforce (CRM) as a top pick, a leading company within the Technology sector, trading less than 1% from its 52-week high.
That's a wrap for 2023 with My Weekly Stock! I'll be back in early January 2024, ready to kick off the new year with some exciting updates. Until then, I wish you all happy holidays!
Cheers,
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.