Weekly Market Recap (Jan. 30 - Feb. 3)
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 positive, with the S&P 500 up 1.6%, the Dow Jones flat, and the Nasdaq +3.3%. Communication Services (+5.2%) and Technology (+3.7%) were the best-performing sectors.
2. The stock market has risen behind positive economic data and supportive comments from the Fed.
3. The long-term trend for the S&P500 is turning bullish and could soon signal that the bear market is truly behind us. Regarding specific levels to watch, 4,300 is a significant resistance.
4. The earnings season is now well underway, and 250 companies from the S&P 500 index have released their Q4 results, with 70% beating estimates. Earnings are expected to fall 3% in Q4 2022 and rise 2% in 2023.
5. Earnings reports from Disney, Pepsico, and Paypal are scheduled for next week, along with the FED Chair speaking on Tuesday, and for which we can expect more insights on the central bank policy in the coming months.
My take:
The S&P 500 recorded its fourth positive week in five in 2023, and growth stocks continue to lead the way this year. Technical signs are increasingly bullish, and the recent breakthrough from the downtrend channel was confirmed this week. However, some consolidation may be required before the market continues its upward trend. In these times, keeping our market perspective relatively simple and focused on key support and resistance levels is vital. We need to sustain the 4,000 breakout level on any retest and gradually clear the next resistances, starting with 4,300. I view any fluctuations between these levels as pure noise.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 9 of the 11 S&P 500 sectors had achieved gains. Communication Services led the way, rising by 5.2%. By contrast, Energy was the weakest, falling by 5.8%.
Year-to-date, 7 sectors have seen positive results. Communication Services has been the most successful sector, with a 21% gain. On the other hand, Utilities have been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 65% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Align Technology, Inc. (ALGN, 27%)
Meta Platforms, Inc. (META, 23%)
W.W. Grainger, Inc. (GWW, 18%)
Meanwhile, the worst-performing stocks were:
ConocoPhillips (COP, -13%)
Hess Corporation (HES, -12%)
Electronic Arts Inc. (EA, -12%)
In addition, 1 stock within the S&P 500 reached a new 52-week low, while 42 set new highs, signaling momentum is clearly to the upside.
MARKET TRENDS & MOMENTUM
1. S&P 500 Long-Term Trend
The long-term trend for the S&P500 is turning bullish. 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 three conditions:
Price is trading above the EMA9 and EMA30: 🟢
EMA9 is above the EMA30: 🟢
Both moving averages are rising: 🟡
I also use MACD as an additional tool to detect trend changes. The MACD is currently higher than its signal line, a positive indication for the index.
2. Short-term outlook and key levels
The previous week marked a significant development in the S&P500's trend, as it broke out from the 2022 downtrend channel. This week, the market saw a successful retest and confirmation of this breakthrough, which is a positive sign for investors. The focus now shifts to defending the breakout level and steadily advancing toward the next resistance levels, one at a time.
Regarding specific levels to watch, 4,300 is a significant resistance and would mark the official start of a new bull market. On the other hand, 4,000-50 (previous breakout level) is a key support range.
3. Momentum Analysis of the Week
This week's momentum analysis is about seasonality, as we started the month of February. Over the past 20 years, the S&P500 has had a flat average performance in February, with a win rate of 60%. For daily updates and content on momentum trading, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
Half of the S&P 500 have released their Q4 2022 earnings, with 70% posting higher EPS than expectations. However, this is lower than the previous four-quarter average of 76%.
2. Expected EPS & Revenue Growth
Analysts predict that earnings for the S&P 500 will decline by 3% in Q4 2022. Excluding the energy sector, the figure falls to -7%.
The earnings growth rate for 2023 is projected at 2%, lower than the 9% average seen over the last decade. Earnings are expected to increase year-over-year in 7 of the 11 sectors, with the Consumer Cyclical and Financials 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 to get 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, 35% of the respondents had a bearish outlook on the stock market, a 3-point decrease from the previous week. The market sentiment is close to historical levels but still tipping towards bearishness.
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 3.7 to 4.2 and continues to show an improvement in sentiment among professional investors.
THE WEEK AHEAD
1. Economic Calendar
Next week will be light on the economic data front. The spotlight will be again on the FED, with the chairman scheduled to speak on Tuesday and where we can expect more insights on the central bank policy for the coming months.
2. Earnings Calendar
93 companies from the S&P 500, including Disney, Pepsico, and Paypal, are set to report their quarterly earnings next week.
3. Next Week’s Earnings Watchlist
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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.
week momentum analyses is nice addition.