Weekly Market Recap (Feb 3-7): Déjà Vu With Another Monday Dip Bought - But When Will the (Real) Breakout Come?
Everything you need to know about last week's markets performance and what to expect next.
Dear readers,
Welcome back to My Weekly Stock, where in-depth market analysis meets proven momentum-based trading strategies. My mission? To help you win in the markets with unbiased, data-driven insights you can act on.
Friday means it's time to review the week in the markets. Each week, I dedicate hours to curating this market recap, preparing insightful analysis with clear visuals and a structured layout—making it easy for you to find exactly 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.
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SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were negative this week, with the S&P 500 down -0.2%, the Nasdaq -0.5%, and the Dow Jones -0.5%. Real Estate (+1.3%) and Energy (+1.1%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive, and so is the short-term momentum. 6,130 is the next resistance, while 6,000 is support.
3. The Q4 earnings season is well under way and 308 companies from the S&P 500 index have released their quarterly results, with 76% beating estimates. Earnings are expected to be up 15% in Q4 2024 and 12% in 2025.
4. Market sentiment is at the "Fear" level (40) as measured by CNN’s Fear & Greed indicator, while VIX is at a low value of 16.
5. Earnings reports from Coca-Cola and McDonald’s, and the latest CPI, PPI and Retail sales reports are scheduled for next week.
My take:
This week was almost a perfect copy of the last one—a weekend bearish headline (this time tariffs), a massive gap down on Monday, and yet another dip that was quickly bought. We mostly saw good price action throughout the rest of the week before finishing on a sour note Friday, pulling back after touching the 6,100 level.
While this kind of price action can be frustrating, it ultimately reinforces what I've been saying for weeks: we're still stuck in a broad trading range between 5,840 and 6,130. Choppy conditions may persist until we get a decisive breakout in either direction. My primary expectation remains that this range will eventually resolve to the upside. Still, with bearish headlines constantly around, it's crucial to stay alert and trade cautiously.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
This week, 7 out of the 11 S&P 500 sectors posted gains. Real Estate led the market with a 1.3% increase, while Consumer Cyclical was the laggard, dropping 2.8%.
Year-to-date, 11 sectors have achieved positive performance. Financials is the top-performing sector with a 7.2 % gain, while Technology lags behind, with a 0.1 % loss.
2. S&P 500 Top & Worst Performers
Over the last five trading days, 45% of the stocks in the S&P 500 index rose in value.
Top Performers:
$PLTR (Palantir Technologies Inc): 34.4%
$SMCI (Super Micro Computer Inc): 27.2%
$EXPE (Expedia Group Inc): 18.4%
$MPWR (Monolithic Power System Inc): 13%
$TTWO (Take-Two Interactive Software, Inc): 12.5%
Worst Performers:
$PYPL (PayPal Holdings Inc): -12.7%
$HII (Huntington Ingalls Industries Inc): -14.6%
$MRNA (Moderna Inc): -17.3%
$EL (Estee Lauder Cos., Inc): -22.1%
$SWKS (Skyworks Solutions, Inc): -26%
In addition, 58 within the S&P 500 reached a new 52-week high, while 33 stocks set new lows. The majority of this week’s highs came from the Technology sector.
Notable Highs:
$GOOG (Alphabet Inc)
$AMZN (Amazon.com Inc)
$META (Meta Platforms Inc)
$WMT (Walmart Inc)
$JPM (JPMorgan Chase & Co)
Notable Lows:
$MRK (Merck & Co Inc)
$AMD (Advanced Micro Devices Inc)
$DHR (Danaher Corp)
$UPS (United Parcel Service, Inc)
$MDLZ (Mondelez International Inc)
MARKET MOMENTUM
1. Momentum Review
To evaluate the market's current health, I examine 4 key elements: performance, breadth, trends, and key levels. Healthy bull markets typically feature indices setting new highs, broad market participation, and ascending trend lines.
Performance (POSITIVE 🟢): evaluating recent market performance to gauge the momentum’s strength. Ideally i want to see returns accelerating short-term and index trading less than 5% from its 1-year high
1-month performance: +2.1% 🟢
3-month performance: +4.2% 🟢
vs. 1-year high: -1.6% 🟢
Breadth (MIXED 🟡): assessing market participation to understand the health of the trend. Extreme levels (above 80% or below 20%) may indicate overextended trends.
% of stocks above 200-day moving average: 57% (down from 59% last week) 🟡
% of stocks above 20-day moving average: 54% (down from 69% last week) 🟡
Trends: analyzing trend strength across multiple timeframes using exponential moving averages, scored on a scale of 1 to 5. A score of 3 or above suggests solid trends and supports holding a position.
Weekly chart: STRONG ⭐️⭐️⭐️⭐️
Daily chart: MODERATE ⭐️⭐️⭐️
4-hour chart: MIXED ⭐️⭐️
Key levels: identifying critical price zones to confirm the current trend or signal a potential reversal.
Support:
$6,000 (-0.4%)
$5,960 (-1.1%)
$5,840 (-3.1%)
Resistance:
$6,130 (+1.7%)
$6,250 (+3.7%)
$6,370 (+5.7%)
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2. Post of the Week
This week's momentum analysis is about the Commodity sector. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank 9 commodities. Based on this approach, I've identified Gold and Silver as having the best relative momentum currently.
EARNINGS & ECONOMIC REPORTS RECAP
1. Earnings Outlook
Q4 Earnings: S&P 500 earnings are expected to grow by 15%, rising to 18% when excluding the energy sector.
2025 Full-Year Outlook: Earnings are expected to increase by 12%, above the 10-year average growth of 9%.
Analyst Revisions: Over the past month, 43% of all earnings revisions by analysts have been upward adjustments to their outlook.
Valuation: The forward 4-quarter P/E ratio stands at 22.4, above the 5-year and 10-year historical averages.
2. Earnings Season Recap
Out of 308 S&P 500 companies that have reported fourth-quarter earnings, 76% exceeded EPS expectations. It is below with the four-quarter average of 78% but above the historical average of 67%.
Below are some notable companies that reported earnings last week. I’ve highlighted their EPS and revenue performance vs estimate, as well as their stock return this week.
Notably, Palantir was a standout performer, beating both earnings and Revenue expectations, while the stock returned 34% last week.
3. Economic Reports
The main report of the week was the Nonfarm Payrolls for January. Job growth significantly missed expectations, coming in at 143K, well below the forecast of 169K and last month’s 307K. This shortfall raises concerns about potential softening in the labor market.
MARKET SENTIMENT
Measures of investor sentiment can be helpful as they provide insight into the views and opinions of professional or individual investors. While not definitive predictors of market direction, these measures can serve as a valuable complement to other indicators and analysis tools, helping to paint a more comprehensive picture of the market's current state.
1. AAII Sentiment Survey (Individual Investors)
The American Association of Individual Investors (AAII) conducts a weekly survey to gauge members' expectations for the stock market over the next six months. Results are published every Wednesday.
In the latest survey, 33% of respondents had a bullish outlook, down from 41% the previous week.
2. BofA Bull & Bear Indicator (Institutional Investors)
The Bank of America Bull-Bear Indicator measures investor sentiment based on fund managers' and institutional investors' views. Scores range from 0 (extremely bearish) to 10 (extremely bullish).
The most recent reading was 4.3, a neutral sentiment.
3. CNN Fear & Greed Index (Technical)
This daily measure analyzes seven indicators to assess how emotions drive market decisions. Scores range from Extreme Fear to Extreme Greed.
The index closed at 40 (Fear), down from 47 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Here are the key events of the upcoming week:
Fed Chair Powell Testifies (Tuesday & Wednesday): Powell's testimony will provide critical insights into the Federal Reserve's stance on inflation, interest rates, and the broader economic outlook. Markets will be watching closely for any hints about future policy adjustments.
CPI Report (Wednesday): The January Consumer Price Index (CPI) will be a focal point for understanding inflation trends. The data are expected to influence market sentiment and Federal Reserve decision-making.
Retail Sales Report (Friday): January's retail sales data will reveal how consumer spending is holding up amid economic challenges.
2. Earnings Calendar
Earnings season continues next week, and 78 companies from the S&P 500, including Coca-Cola and McDonald’s, are expected to release their quarterly results.
Below are notable stocks reporting earnings next week, along with several key indicators I like to monitor:
Stock Indicators:
3-Month Performance: Assessing recent stock trends.
RSI (Relative Strength Index): A reading above 70 suggests overbought conditions, while below 30 indicates oversold.
P/E Ratio: A value below 25 often points to a "cheap" valuation or low growth expectations.
Stock Price Reactions to Earnings:
1-Day Stock Return on Earnings: How the stock performs on its earnings release day.
Implied Volatility: The options market's forecast for the expected 1-day stock move after earnings.
In particular, Palo Alto Networks ($PANW) is set to report earnings next week. With a high P/E ratio of 51, expectations are elevated, and the options market is pricing in a significant +/-8.9% move.
3. Stock Analysis of the Week
Every week, I share my analysis of 1 stock that has reported earnings in recent weeks, focusing on implications for long-term investors. This week, I prepared an analysis of DISNEY ($DIS).
👨💻 My View: PASS
Disney has been stuck in a massive downtrend since its 2021 peak, losing 45% from its all-time high. However, since Q4 2024, we've seen an attempt to break out of this long-term bearish pattern.
I like the upside potential here, but patience and discipline are key. We have sizeable overhead resistance, particularly in the $115–$125 range, which has rejected four breakout attempts over the past two years.
We again failed to clear the resistance area this week after the earnings report. That further highlights that the recovery path towards the previous highs starts by a decisive break above this level.
Check out the post for more details about $DIS performance, trend and key levels.
4. Subscribers Poll: Another Weak Monday Open?
CONCLUSION
Thank you for reading my Weekly Market Recap, which, I hope, got you ready for the week ahead.
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Thanks again, and I look forward to sharing my market recap with you next week.
Happy investing!
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.
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