Weekly Market Recap (Jun. 12-16)
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 2.6%, the Dow Jones 1.3%, and the Nasdaq 3.3%. Technology (+4.3%) and Materials (+3.5%) were the best-performing sectors.
2. The stock indices rallied after the Fed maintained its interest rate, and the latest inflation report came slightly below expectations.
3. The long-term trend for the S&P 500 is positive, and the index is now officially in a bull market.
4. The earnings season is almost over, and 499 companies from the S&P 500 index have already released their Q1 results, with 77% beating estimates. Earnings are expected to be flat in Q1 2023 and rise by 1% in 2023.
5. Earnings reports from FedEx and CarMax are scheduled for next week. The Fed chair is expected to testify in front of Congress next week and will provide more insights into the central bank's potential course of action.
My take:
The markets perfectly navigated a week full of potential traps and welcomed positive developments on the inflation front, along with the Federal Reserve announcing a pause in rate increases.
The S&P 500 has cleared the 4,300 resistance and is officially in a new bull market. I believe we will likely test the previous all-time high of 4,800 in the coming months.
However, before reaching that milestone, a period of consolidation is likely and potentially beneficial. Several indicators I monitor suggest that this rally is becoming overextended, indicating we may need a pause before continuing its upward trajectory.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 10 of the 11 S&P 500 sectors have achieved gains. Technology led the way and rose by 4.3%. By contrast, Energy was the weakest, falling by 0.6%.
Year-to-date, 6 sectors have seen positive results. Technology has been the most successful sector, with a 39% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 83% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Carnival Corporation & plc (CCL, 21%)
Intel Corporation (INTC, 16%)
The Estee Lauder Companies Inc. (EL, 16%)
Meanwhile, the worst-performing stocks were:
Humana Inc. (HUM, -13%)
Nasdaq, Inc. (NDAQ, -11%)
Bath & Body Works, Inc. (BBWI, -8%)
In addition, 79 stocks within the S&P 500 reached a new 52-week high, while 4 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
The S&P 500 cleared the resistance at 4,280-4,300 and is now officially in a new bull market. I expect 4,550 (March 2022 high) to be the next significant resistance. Once this level is breached, the natural target for this rally will be the S&P 500's all-time high of 4,800.
However, we will likely witness some consolidation before reaching that milestone. In terms of support, ideally, I would look for the index to hold 4,280.
3. Momentum Analysis of the Week
This week's momentum analysis focuses on the S&P 500 stock performance in 2023. While the S&P500 is up 15% this year, only 56% of stocks from the index are up this year. And the top 3 performers more than doubled in value this year: NVDA +181%, META +127%, and TSLA +114%.
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EARNINGS RECAP
1. Earnings Season Summary
499 companies from the S&P 500 index have released their Q1 2023 earnings, with 77% posting higher EPS than expectations. This is higher than the previous four-quarter average of 74%, and the historical average of 66%.
2. Expected EPS & Revenue Growth
Q1 2023 earnings for the S&P 500 are expected to be flat. Excluding the energy sector, the figure falls to -2%.
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, 45% of the respondents had a bullish outlook on the stock market, stable from the previous week. The investors' bullish sentiment is now at the highest level since November 2021.
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 decreased from 3.7 to 3.6, a moderately bearish reading.
THE WEEK AHEAD
1. Economic Calendar
Next week will be a short one as markets are closed on Monday. The focus will be on the Fed again as chairman Powell will testify in front of congress and provide more insights on the potential actions of the central bank in the coming months.
2. Earnings Calendar
The Q1 2023 earnings season is almost over, and 5 companies from the S&P 500, including FedEx and CarMax are set to report their quarterly earnings next week.
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 how the stock positions itself before the earnings.
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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.