Weekly Market Recap (Dec 4 - 8)
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 mostly flat for the week, with the S&P 500 up 0.2%, the Nasdaq +0.7%, and the Dow Jones flat. Consumer Cyclical (+1.2%) and Communication Services (+0.8%) were the best-performing sectors.
2. The S&P 500 just set a new high for 2023 as strong economic data fueled optimism in the market.
3. The long-term trend for the S&P 500 is positive. I am watching for a breakout from the 4,540-4,610 range to clarify the market direction for the rest of the year.
4. The earnings season is almost over, and 497 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 Costco and Oracle, the CPI report, and the Fed meeting are scheduled for next week.
My take:
The bears briefly gained some traction earlier this week, but this was again short-lived. The index bounced back, securing a sixth consecutive weekly gain andmaking a new high for the year.
Since Thanksgiving, we've been trading within a tight 70-point range (4540-4610), but now it's decision time. The upcoming week is lined with significant catalysts: the CPI and PPI report, the Fed meeting, and Retail Sales data. These could be the perfect triggers for a breakout. I would watch for a sustained break from the range to gauge the market's direction for the rest of the year.
In the longer term, I remain "cautiously" optimistic and believe the index will post a new all-time high in the coming months.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 5 of the 11 S&P 500 sectors have achieved gains. Consumer Cyclical led the way and rose by 1.2%. By contrast, Energy was the weakest and fell by 3.3%.
Year-to-date, 7 sectors have seen positive results. Technology has been the most successful sector, with a 50% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Last week, 47% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Carnival Corp. (CCL, 15%)
Norwegian Cruise Line Holdings Ltd (NCLH, 14%)
Walgreens Boots Alliance Inc (WBA, 11%)
Meanwhile, the worst-performing stocks were:
Old Dominion Freight Line, Inc. (ODFL, -9%)
First Solar Inc (FSLR, -9%)
Alaska Air Group Inc. (ALK, -10%)
In addition, 64 stock within the S&P 500 reached a new 52-week high, while none 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 S&P 500 has been stuck between 4,540 and 4,610 since Thanksgiving. I expect to see some resolution next week and to finally get out of the range. Regarding levels, the 4,600 zone is the next significant resistance, while 4,400 is the support to hold on a more substantial pullback.
In the longer term, my target would be to, at minimum, test 4,800, the all-time high of the index. On the other hand, a break below 4,110 would be a setback to the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis is about Market Segments' trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these various segments of the market and identify potential outperformers. Based on this approach, I've identified the Bitcoin and Nasdaq as having the best relative momentum currently.
EARNINGS RECAP
1. Q3 Earnings Season Summary
497 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, 47% of the respondents had a bullish outlook on the stock market, a 2-point increase from the previous week. The bullish sentiment is above 40% for the 5th consecutive week.
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 2.7 to 3.8, the largest weekly increase since 2012.
THE WEEK AHEAD
1. Economic Calendar
Next week is packed with economic updates. The Federal Reserve meeting will take the spotlight, and markets expect the central bank to hold its rates unchanged. The Consumer Price Index (CPI), Producer Price Index, and Retail Sales data are also scheduled. Fasten your seatbelt!
2. Earnings Calendar
The Q3 earnings season is almost over, and 7 companies from the S&P 500, including Oracle and Costco, 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 Adobe Inc. ($ADBE). In this post, I break down key data points around Adobe’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.
This is my first read and week of subscribing. I am really impressed with your organization and surprised by how well they have challenged my negative bias on the current market environment. Well done!!