Weekly Market Recap (Jul. 3-7)
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 negative for the week, with the S&P 500 down 1.1%, the Dow Jones 2.0%, and the Nasdaq 0.9%. Real Estate (+0.2%) and Communication Services (-0.1%) were the best-performing sectors.
2. The stock indices decreased as fears grew that the Federal Reserve would continue to raise interest rates, further supported by the minutes from their latest meeting and robust economic data.
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 18 companies from the S&P 500 index have already released their 2nd quarter results, with 78% beating estimates. Earnings are expected to be down 6% in Q2 2023 and up by 1% in 2023.
5. Earnings reports from UnitedHealth Group and JPMorgan Chase are scheduled for next week, as is the release of the June Consumer Price Index (CPI) on Wednesday, followed by the Producer Price Index (PPI) on Thursday.
My take:
In last week's recap, I anticipated some consolidation due to various indicators signaling a need for a pause, and indeed, that's exactly what occurred this week. However, there is no immediate cause for concern as we are still above key support levels, and consolidation phases are normal and healthy.
Looking ahead to next week, we can expect important updates with the release of the Consumer Price Index (CPI) and the start of the second-quarter earnings season. The reaction of stock indexes to these updates will be crucial as we continue to navigate the same trio of risks: inflation, central bank tightening, and potential economic recession. Specifically, I will closely monitor whether the index breaks last week's high at 4,460, as it would indicate a resumption of the rally.
Despite the short-term fluctuations, my long-term perspective remains unchanged: I believe the S&P 500 will eventually test its all-time high at 4,800 in the coming months, with a notable intermediate milestone to overcome at 4,550 first.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, only 1 of the S&P 500 sectors have achieved gains. Real Estate led the way and rose by 0.2%. By contrast, Health Care was the weakest, and fell by 2.8%.
Year-to-date, 6 sectors have seen positive results. Technology has been the most successful sector, with a 38% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 31% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Schlumberger Limited (SLB, 9%)
Fidelity National Information Services, Inc. (FIS, 8%)
Zions Bancorporation, National Association (ZION, 8%)
Meanwhile, the worst-performing stocks were:
Generac Holdings Inc. (GNRC, -9%)
Align Technology, Inc. (ALGN, -7%)
KLA Corporation (KLAC, -6%)
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 the need for consolidation in the S&P 500 after its upward movement. However, there is no immediate cause for concern as we are still above the support level, and consolidation periods are a normal and healthy part of the process. I will closely monitor if the index breaks last week's high at 4,460, indicating the rally's resumption. Conversely, a drop below 4,380 could result in further weakness.
Regarding key resistance and support levels, breaking the March 2022 high of 4,550 will be a significant milestone. Once this level is surpassed, the next target 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 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 Communication Services sector as having the best relative momentum.
For daily updates and content on the stock market, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
18 companies from the S&P 500 index have released their Q2 2023 earnings, with 78% 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 6%. Excluding the energy sector, the figure is -1%.
The earnings growth rate for 2023 is projected at +1%, lower than the 9% average seen 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, 46% of the respondents had a bullish outlook on the stock market, a 4-point increase from the previous week. The investors' bullish sentiment is back on the high side vs. the historical levels and is currently at 1-year high.
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 was stable at 3.2, a moderately bearish reading due to still high cash levels.
THE WEEK AHEAD
1. Economic Calendar
This week, we will receive a significant update on inflation as the June Consumer Price Index (CPI) is released on Wednesday, followed by the Producer Price Index (PPI) on Thursday.
2. Earnings Calendar
The Q2 earnings season is starting in earnest next week, and 11 companies from the S&P 500, including UnitedHealth Group and JPMorgan Chase, 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 PepsiCo (PEP). In this post, I break down key data points around PepsiCo’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 traffic light system you use!! I have very little time to read and that gives me the opportunity to check at least some of your analysis 🤩
I love getting this on Saturdays and then the weekly pick. Best newsletter out there. Thank you 🙏🙏