Weekly Market Recap (Jun. 19-23)
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 1.4%, the Dow Jones -1.7%, and the Nasdaq -1.4%. Healthcare (-0.1%) and Consumer Cyclicals (-0.6%) were the best-performing sectors.
2. The stock indices declined as several Federal Reserve officials suggested more rate increases might be needed this year to curb inflation.
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 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 down 6% in Q2 2023 and up by 1% in 2023.
5. Earnings reports from Nike and Micron are scheduled for next week, as is the release of the PCE Price Index report, the Fed’s favorite measure of inflation.
My take:
After a remarkable run with 8 consecutive positive weeks for the Nasdaq and 6 for the S&P 500, the stock indices saw their winning streaks end.
As I mentioned in last week's recap, I had been expecting a pause in the rally and was hoping for one, as periods of consolidation are healthy for the market. It's important to remember that markets cannot sustain indefinite upward momentum, and various indicators suggested it was time for a break.
That said, the S&P 500 remained above the breakout level of 4,280-4,300. As long as we stay above that level, my outlook remains positive, with my sights set on targets of 4,550 and eventually 4,800.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, none of the 11 S&P 500 sectors have achieved gains. Healthcare led the way but declined by 0.1%. By contrast, Real Estate was the weakest, falling by 4.9%.
Year-to-date, 5 sectors have seen positive results. Technology has been the most successful sector, with a 36% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 19% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
CarMax, Inc. (KMX, 7%)
Generac Holdings Inc. (GNRC, 6%)
Merck & Co., Inc. (MRK, 5%)
Meanwhile, the worst-performing stocks were:
Advanced Micro Devices, Inc. (AMD, -11%)
Enphase Energy, Inc. (ENPH, -12%)
SolarEdge Technologies, Inc. (SEDG, -12%)
In addition, 61 stocks within the S&P 500 reached a new 52-week high, while 6 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
Despite the loss this week, the S&P 500 remains ahead of the breakout level at 4,280-4,300. As long as this level holds, I am not particularly worried about the selling phase.
Regarding resistance, 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.
3. Momentum Analysis of the Week
This week's momentum analysis is about the top and worst-performing stocks in each sector. The difference in performance between the best and worst-performing stocks in each sector is enormous, emphasizing the importance of stock selection.
Choosing wisely regarding individual stock picking can significantly impact your portfolio.
For daily updates and content on the stock market, follow me on Instagram.
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
Q2 2023 earnings for the S&P 500 are expected to be down 6%. 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, 43% of the respondents had a bullish outlook on the stock market, a 2-point decrease from the previous week. The investors' bullish sentiment is back on the high side vs. the historical levels.
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 3.6 to 3.4, a moderately bearish reading.
THE WEEK AHEAD
1. Economic Calendar
The PCE Price Index, the Fed’s preferred inflation measure, will be released on Friday. We will also receive updates on consumer sentiment and the final readings for Q1 GDP.
2. Earnings Calendar
The Q1 2023 earnings season is almost over, and we have started seeing reports for Q2. Notably, 8 companies from the S&P 500, including Nike and Micron, 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 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 Nike (NKE). In this post, I break down key data points around Nike’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.