Weekly Market Recap (Jan 8-12): Can the S&P 500 Break Above 4,800 Already?
Everything you need to know about last week's markets performance and what to expect next
Dear subscribers,
Welcome to my Weekly Market Recap.
Markets can be noisy and overwhelming, but I'm here to help you succeed!
Every week, I spend hours curating and producing powerful analyses with clear visuals and a structured layout so you can easily find what you need, week after week. Most of my research is done through a momentum lens and focuses heavily on price action. And because it's easy to get swayed by personal bias, I like to let the data do the talking.
If you appreciate this straightforward approach and want more in-depth insights or are curious about my short and long-term investing strategies, check out the paid section of this newsletter.
Until the end of January, you can enjoy a 50% discount for your 1st year of subscription! Don't miss out on this opportunity!
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 1.8%, the Nasdaq 3.1%, and the Dow Jones 0.3%. Technology (+4.4%) and Communication Services (+2.4%) were the best-performing sectors.
2. The long-term trend for the S&P 500 is positive. The next resistance is at 4,800, while support is at 4,600.
3. The earnings season has started, and 20 companies from the S&P 500 index have released their 4th quarter results, with 93% beating estimates. Earnings are expected to be up 4% in Q4 2023 and 11% in 2024.
4. Market sentiment is positive, as measured by the Fear & Greed indicator, while VIX is at 13, decreasing 5% this week.
5. Earnings reports from Morgan Stanley and Goldman Sachs and the latest Retail Sales report are scheduled for next week.
My take:
Technology (+4.4%) and Communication Serv. (+2.4%) were the best-performing sectors. Technology led the way and rose by 4.4%. By contrast, Energy was the weakest and fell by -2.4%.
This week, we saw a return to green despite inflation numbers being hotter than expected. Risk-on assets, particularly tech and growth stocks, regained momentum. Despite the positive overall performance, it was a volatile week, as highlighted by Thursday's CPI-induced market yo-yo, which tested our nerves (at least mine!).
The short-term trend shows improvement, yet the market has been stuck within a 100-point range since mid-December. Such prolonged consolidation often sets the stage for a significant trend movement. The challenge, of course, lies in discerning the direction.
Focusing on critical levels is often the most effective strategy in such scenarios. My primary expectation leans towards an upward movement, finally breaking above the 4,800 mark. However, despite several attempts, we've been unable to break above so far, increasing the risk of a more significant pullback. Should this scenario unfold, the 4,600 level would become the next crucial support to monitor closely.
Sponsor
This week’s edition is brought to you by TradingView
Discover TradingView, the charting and social networking tool for investors. TradingView has been instrumental in crafting the detailed analysis and picks featured in my newsletter. It is my go-to platform for:
Stock Charting
Indicator-based trading signal & alerts.
Fundamental and technical data.
Join TradingView today to elevate your trading game by using the link below:
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, 7 of the 11 S&P 500 sectors have achieved gains. Technology led the way and rose by 4.4%. By contrast, Energy was the weakest and fell by -2.4%.
Year-to-date, 3 sectors have seen positive results. Health Care has been the most successful sector, with a 3% gain. On the other hand, Consumer Cyclical has been trailing behind.
2. S&P 500 Top & Worst Performers
Last week, 53% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Juniper Networks Inc (JNPR, 25%)
Palo Alto Networks Inc (PANW, 15%)
Intuitive Surgical Inc (ISRG, 13%)
Meanwhile, the worst-performing stocks were:
Eversource Energy (ES, -8%)
Paramount Global (PARA, -9%)
Boeing Co. (BA, -13%)
In addition, 50 stocks within the S&P 500 reached a new 52-week high, while 1 set new lows, indicating the momentum, while slowing down, remains to the upside.
The Health Care sector has seen the most new highs this week, the low was set in Consumer Defensive.
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 Technical Analysis
Robust and healthy bull markets typically see the index set several new highs, broad market participation, and ascending trend lines. That's why I've created a four-part scorecard – a straightforward tool to give us a comprehensive view of these essential health indicators.
Momentum: the index is up 3% over the past month and 10% in the last three months, now trading just 0.3% shy of its 52-week high.
Breadth: market participation remains healthy in the long term as 73% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 47% of stocks are trading above their 20-day SMA, dropping from 54% the previous week and a concerning signal for the index.
Trends: the 65-minute and 4-hour charts have improved dramatically compared to last week. However, we remain stuck in the 100-point range we have traded since mid-December.
Key levels: the 4,800 zone is the next significant resistance, while 4,600 is the support to hold if we see a more substantial pullback. In the longer term, my target would be to break the 5,000 mark. On the other hand, a break below 4,110, October's low, would be a setback to the bullish case.
Have you enjoyed my analysis so far? There is much more in the paid version: I provide my short-term trading and analysis of over 20+ US large caps and share my long-term investing portfolios. Upgrade your subscription and unlock all the exclusive features and insights!
3. Momentum Analysis of the Week
This week's momentum analysis focuses on the S&P 500 sectors' trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these sectors and identify potential outperformers. Based on this approach, I've identified the Financials and Communication Services sectors as having the best relative momentum.
EARNINGS RECAP
1. Q4 and 2024 Expected EPS & Revenue Growth
Q4 2023 earnings for the S&P 500 are expected to be up 4%. Excluding the energy sector, the figure is +8%.
The earnings are projected to be up 11% in 2024, higher than the 9% growth seen on average over the last decade. In the past 4 weeks, 51% of earnings revisions done by analyst were to increase their outlook.
The forward P/E ratio sit at 19.6, higher than the average in the past 5 and 10 years.
2. Q4 Earnings Season Summary
29 companies from the S&P 500 index have released their Q4 2023 earnings, with 93% posting higher EPS than expectations. This is higher than the previous four-quarter average of 76%, and the historical average of 67%.
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. AAII Sentiment Survey (Individual Investors)
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, 49% of the respondents had a bullish outlook on the stock market, flat from the previous week. The bullish sentiment was above historical average for the 10th consecutive week.
2. BofA Bull & Bear Indicator (Institutional Investors)
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 5.3 to 5.4, the highest level since Nov’21.
3. CNN Fear & Greed Index (Technical)
The CNN Fear & Greed Index is a daily measure that analyzes seven different market indicators to assess the extent to which emotions are influencing investors' decisions. The index is scored out of 100 and categorize results into five stages: Extreme Fear, Fear, Neutral, Greed, and Extreme Greed.
The index closed at 71 or “Greed” level, down from 74 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Next week, we'll have a shortened trading week as U.S. markets will be closed on Monday. A key focus will be the retail sales data, which is expected to provide valuable insights into the performance of holiday season sales.
Below are the actual month-over-month retail sales growth figures for the past 12 months, alongside the performance of the S&P 500 on the day each report was announced.
2. Earnings Calendar
The Q4 earnings season is picking up steam next week, and 20 companies from the S&P 500, including Morgan Stanley and Goldman Sachs, 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 Indicators:
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.
Stock Price Reactions to Earnings:
1-day Stock Return on Earnings is the stock performance on the day earnings were released.
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 1 stock reporting earnings in the coming days. This week, I prepared an in-depth overview of Morgan Stanley ($MS). In this post, I break down key data points around Morgan Stanley’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions.
Thank you for reading my weekly market recap! I hope you found it helpful in understanding the stock markets better. If you did, please share this post with your friends and followers.
If you need further help, the premium section will give you access to all my trading and investing portfolios as well as more in-depth analysis. And remember you can enjoy a 50% discount if you subscribe before the end of January.
If you have any questions or feedback, please don't hesitate to reach out by email or in the comment section. Your support helps me to continue creating high-quality content and is greatly appreciated!
Have a great week!
My Weekly Stock
DISCLAIMERS
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.
Affiliate Links
Please note that some of the links in this newsletter are affiliate links. This means that at no additional cost to you, I may earn a commission if you decide to make a purchase or sign up for a service after clicking through these links. Your support in purchasing through these links enables me to keep providing free high-quality content and research.
TRV is still going strong. However, earning is out in another week. A bit risky to hold an extended stock through earning.