Weekly Market Recap (Jun. 26-30)
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 2.4%, the Dow Jones 2.0%, and the Nasdaq 2.2%. Real Estate (+5.1%) and Energy (+4.9%) were the best-performing sectors.
2. The stock indices increased sharply behind upbeat economic data, lower-than-feared inflation data, and the fact that major US banks all passed the Fed's annual stress test.
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 over, and all the 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. No significant earnings report is scheduled in the shorter trading week ahead; however, we expect the release of the Non-Farm Payroll report and the last Fed meeting’s minutes.
My take:
The stock market indices resumed their upward march with another strong gain. The signs of a bull market continue to strengthen, and while the tech sector is leading the way, we see broader market participation.
The Nasdaq achieved its best first-half performance in 40 years, which is remarkable considering the numerous risks we had to navigate. And historical data suggests a positive outlook for the second half.
Next week is a shorter trade week, with probably lower volume, and some of the indicators I follow indicate we may need a consolidation. But my longer-term view remains unchanged, and I believe the SP 500 will test its all-time high at 4,800 in the coming months, with a significant intermediate test at 4,550 on the way.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, all the 11 S&P 500 sectors have achieved gains. Real Estate led the way and rose by 5.1%. By contrast, Consumer Defensive was the weakest, but still rising by 0.5%.
Year-to-date, 6 sectors have seen positive results. Technology has been the most successful sector, with a 40% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 90% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Carnival Corporation & plc (CCL, 19%),
Generac Holdings Inc. (GNRC, 16%),
Old Dominion Freight Line, Inc. (ODFL, 13%)
Meanwhile, the worst-performing stocks were:
Walgreens Boots Alliance, Inc. (WBA, -9%),
Regeneron Pharmaceuticals, Inc. (REGN, -8%),
Illumina, Inc. (ILMN, -7%)
In addition, 83 stocks within the S&P 500 reached a new 52-week high, while 9 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 resumed its march upward and seemed increasingly to be in a new bull market. Having said that, I see again many indicators suggesting we need some consolidation. Nevertheless, I am looking for further gains as long as we hold the June breakout level at 4,280-4,300.
Regarding resistance, I expect 4,550 (March 2022 high) to be the next significant threshold. 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 seasonality, as we are about to start the month of July, one of the best months of the year over the past 20 years. The S&P500 has been up 75% of the time, for a +2.2% return on average.
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EARNINGS RECAP
1. Earnings Season Summary
All the 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 is flat.
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, 42% of the respondents had a bullish outlook on the stock market, a 1-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 3.4 to 3.2, a moderately bearish reading.
THE WEEK AHEAD
1. Economic Calendar
The shorter trading week ahead will focus on the job market with the release of the Non-Farm Payroll report. We will also get more insights into the Federal Reserve's course of action as the minutes from their last meeting will be published on Wednesday.
2. Earnings Calendar
The Q1 2023 earnings season is over; no major earnings report is expected next week. The next earnings season will start in earnest Mid-July.
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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.
Thanks for the recap, let's see how the NFP will shake the charts 🤓