Weekly Market Recap (Jul. 10-14)
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 for the week, with the S&P 500 up 2.5%, the Dow Jones 2.3%, and the Nasdaq 3.3%. Consumer Cyclical (+3.3%) and Communication Services (+3.2%) were the best-performing sectors.
2. The stock indices surged as the latest inflation reports revealed that consumer and producer prices have risen less than anticipated.
3. The long-term trend for the S&P 500 is positive, and the next significant resistance is at 4,550, while support is at 4,300.
4. The Q2 earnings season is starting, and 30 companies from the S&P 500 index have already released their 2nd quarter results, with 80% beating estimates so far. Earnings are expected to be down 8% in Q2 2023 and flat in 2023.
5. Earnings reports from Tesla and Netflix are scheduled for next week, as is the release of June’s Retail Sales data on Tuesday.
My take:
In last week's recap, I emphasized the importance of closely monitoring the index's reaction to releasing crucial CPI data. Specifically, I was looking for indications that the rally could resume if we surpassed the 4,460 level while hoping for support to hold at 4,390.
To our relief, the support held on Monday and Tuesday, leading to a breakout from the resistance after positive news from the CPI report. As a result, the index has climbed back above the 4,500 mark. However, we should brace ourselves for potential volatility as the earnings season gains momentum. In such times, zooming out and considering the bigger picture is crucial.
Speaking of the long-term perspective, my view remains unchanged: I firmly believe that the S&P 500 will eventually test its all-time high at 4,800 in the coming months. However, it's important to note that a break below the range of 4,280-4,300 would represent a significant setback for the bullish case.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, all the S&P 500 sectors have achieved gains. Consumer Cyclical led the way and rose by 3.3%. By contrast, Energy was the weakest, but still increased by 0.8%.
Year-to-date, 6 sectors have seen positive results. Technology has been the most successful sector, with a 41% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 82% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Match Group, Inc. (MTCH, 14%)
D.R. Horton, Inc. (DHI, 13%)
Domino's Pizza, Inc. (DPZ, 13%)
Meanwhile, the worst-performing stocks were:
The Progressive Corporation (PGR, -11%)
Carnival Corporation & plc (CCL, -9%)
FMC Corporation (FMC, -9%)
In addition, 97 stocks within the S&P 500 reached a new 52-week high, while 8 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 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 above its signal line, a positive indication for the index.
2. Short-term outlook and key levels
In last week's recap, I mentioned I was closely monitoring if the index was to break the previous week's high at 4,460 or drop below 4,380. On Monday and Tuesday, the support held, and we ultimately broke out from the resistance following positive news from the CPI report.
We are approaching my initial target, which is the March 2022 high of 4,550. However, we may encounter some sideways consolidation early next week.
Regarding key resistance and support levels, the natural target for this rally would be the S&P 500's all-time high of 4,800. On the other hand, if the index falls below the breakout level of 4,280-4,300 from June, it would be a significant setback for the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis is about the top overbought and oversold stocks in the S&P 500 based on the Relative Strength Index. RSI is a momentum oscillator used to measure the speed and change of price movements. RSI is considered overbought when above 70 and oversold when below 30. While I would never use RSI alone to make an investment decision, it can be a helpful tool to identify a potential change in trend.
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EARNINGS RECAP
1. Earnings Season Summary
30 companies from the S&P 500 index have released their Q2 2023 earnings, with 80% posting higher EPS than expectations. This is higher than the previous four-quarter average of 73%, and the historical average of 66%.
2. Expected EPS & Revenue Growth
Q2 2023 earnings for the S&P 500 are expected to be down 8%. Excluding the energy sector, the figure is -3%.
The earnings are projected to be flat in 2023, lower than the 9% growth seen on average over the last decade. Earnings are expected to increase year-over-year in 8 of the 11 sectors, with the Consumer Cyclical and Communication Services 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 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, 41% of the respondents had a bullish outlook on the stock market, a 5-point decrease from the previous week. The investors' bullish sentiment is higher than the historical average.
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 increased from 3.2 to 3.5, a moderately bearish reading.
THE WEEK AHEAD
1. Economic Calendar
This week, we will receive a significant update on consumer activity with the release of June’s Retail Sales data on Tuesday.
2. Earnings Calendar
The Q2 earnings season is picking up steam, and 68 companies from the S&P 500, including Tesla and Netflix, 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 Netflix (NFLX). In this post, I break down key data points around Netflix’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.
I love the reading the week ahead bit, well put together 🤓🙌
G man thanks for sharing your knowledge.
I’m in the short line to make my first million. Quote from your cartoon joke you or someone posted.
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My thoughts are to find US companies that are already producing Zinc that it makes sense that we make our own Germanium. So it makes sense to invest in these companies. Any thoughts?