Weekly Market Recap (Jun 3-7): The S&P 500 Hits New Highs - CPI and Fed Meeting Loom Ahead
Everything you need to know about last week's markets performance and what to expect next.
Dear subscribers,
Welcome to My Weekly Stock, where we blend in-depth market analysis with proven momentum-based trading strategies. My mission? Help you navigate the financial markets with unbiased, data-driven insights you can act on!
Every week, I spend hours curating this market recap, producing insightful analyses with clear visuals and a structured layout so you can easily find what you need, week after week. And because it's easy to get swayed by personal bias, I like to let the data do most of the talking.
Let’s get started!
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 1.3%, the Nasdaq 2.4%, and the Dow Jones 0.3%. Technology (+2.6%) and Health Care (+1.9%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive. 5,400 is the next resistance, while 5,265 and 5,150 are support.
3. The earnings season is well underway, and 496 companies from the S&P 500 index have released their Q1 results, with 79% beating estimates. Earnings are expected to be up 8% in Q1 2024 and 11% in 2024.
4. Market sentiment is at the "Neutral" level (45) as measured by CNN’s Fear & Greed indicator, while VIX is at a low value of 12.
5. Earnings reports from Oracle and Broadcom, the CPI and PPI reports, and the Fed meeting are scheduled for next week.
My take:
The S&P 500 resumed its march upward this week, boosted by a double-digit gain from Nvidia, now the second-largest public company in the U.S. Despite the index reaching a new all-time high on Friday, market breadth is still a concern, with less than 40% of stocks finishing the week in the green.
We have one of the most critical weeks of the year ahead of us, featuring two inflation updates and the Federal Reserve meeting. We are likely to see increased volatility and sharp price movements. In such times, I always focus on critical levels and the overall trend. In that case, I lean towards the bullish case as long as the S&P 500 remains above 5,265 and its 21-day exponential moving average. And from a longer-term perspective, the trend remains overwhelmingly positive, suggesting that we may see further highs in the coming months.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, 5 of the 11 S&P 500 sectors have achieved gains. Technology led the way, rising by 2.6%. By contrast, Utilities was the weakest, falling by -3.8%.
Year-to-date, 9 of the sectors have seen positive results. Communication Services has been the most successful sector, with a 16% gain. On the other hand, Real Estate has been trailing behind.
2. S&P 500 Top & Worst Performers
Last week, 38% of the stocks in the S&P 500 index rose in value.
The best-performing stocks were:
Hewlett Packard Enterprise Co (HPE, 13%)
Carnival Corp. (CCL, 11%)
NVIDIA Corp (NVDA, 10%)
Meanwhile, the worst-performing stocks were:
Builders Firstsource Inc (BLDR, -9%)
Bath & Body Works Inc (BBWI, -12%)
Vistra Corp (VST, -14%)
In addition, 45 stocks within the S&P 500 reached a new 52-week high, while 11 set new lows, indicating that the positive momentum is slowing down. Most of the highs this week came from the Healthcare sector, while Technology has seen the most new lows.
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 9 and 30-week exponential moving averages (EMAs). To determine if the trend is strongly positive, I look for the following conditions (the 1st is the most important):
9-week EMA is above the 30-week EMA: 🟢
Price is trading above the 9-week EMA: 🟢
Price is trading above the 30-week EMA: 🟢
The 9-week EMA trend line is rising: 🟢
The 30-week EMA trend line is rising: 🟢
I also use the MACD as an additional tool to detect trend changes. The MACD is currently neutral.
2. S&P 500 Technical Analysis
Healthy bull markets typically see the index set several new highs, broad market participation, and ascending trend lines. That's why I've created a four-part scorecard – a straightforward tool to give us a comprehensive view of these essential health indicators.
Momentum: The index is up 3% over the past month, 4% in the last three months, and is trading less than 1% away from its 52-week high.
Breadth: Market participation remains healthy in the long term, as 67% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 37% of the stocks are trading above their 20-day SMA, down by 10 points compared to the previous week.
Trends: The trend on 4-hour and 1-day charts is positive.
Key levels: The next resistance level is 5,400. On the other hand, the next support area is at 5,265.
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 and Technology sectors as having the best relative momentum this week.
EARNINGS RECAP
1. Q1 and Full Year 2024 Expected EPS & Revenue Growth
Q1 2024 earnings for the S&P 500 are expected to be up 8%. Excluding the energy sector, the figure is +11%.
Earnings are projected to grow by 11% in 2024, slightly higher than the 9% growth seen on average over the last decade. In the past four weeks, 55% of earnings revisions made by analysts were to increase their outlook.
The forward 4-quarter P/E ratio is 21.1, higher than the average over the past five and ten years.
2. Q1 Earnings Season Summary
496 companies from the S&P 500 index have released their Q1 2024 earnings, with 79% posting higher EPS than expectations. This is roughly in line with the previous four-quarter average of 78% and higher than the historical average of 67%.
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. AAII Sentiment Survey (Individual Investors)
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 are published every Wednesday.
According to the most recent AAII survey, 39% of the respondents had a bullish outlook on the stock market, flat from the previous week.
2. BofA Bull & Bear Indicator (Institutional Investors)
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 5.5 to 5.9, a neutral sentiment reading.
3. CNN Fear & Greed Index (Technical)
The CNN Fear & Greed Index is a daily measure that analyzes seven market indicators to assess how emotions influence investors' decisions. The index is scored out of 100 and categorizes results into five stages: Extreme Fear, Fear, Neutral, Greed, and Extreme Greed.
The index closed at 45, or a “Neutral” level, down from 48 last Friday.
THE WEEK AHEAD
1. Economic Calendar
A critical week awaits us with the Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Thursday. The event of the week will be the Federal Reserve meeting. While no rate change is expected, the FOMC statement and commentary from the Fed chair will surely move the markets.
2. Earnings Calendar
Earnings season continues next week, and 3 companies from the S&P 500, including Broadcom and Oracle, 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 Indicators:
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" valuation and/or low growth expectations.
Stock Price Reactions to Earnings:
1-day Stock Return on Earnings is the stock performance on the earnings release date.
Implied volatility is the expected 1-day stock change after earnings are released, as assessed by the options markets.
Every week, I share a deep dive into 1 stock reporting earnings in the coming days. This week, I prepared an in-depth overview of Oracle (ORCL). In this post, I break down key data points around ORCL’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions.
That’s a wrap for this week’s recap! I hope it helped you understand the market better.
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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.
Amazing as always the charts are nice to gauge how the markets are doing!!! I swear I miss a week I read a post like this and I’m all caught up!!!
Great write up and summary of the week, thanks for sharing.
It’s amazing to see the Fear and Greed at fearful-neutral despite the market at All Time Highs.
Seems like a lack of froth, or like the pain trade is higher still.
I thought 2023 was the most hated bull market of all time, but 2024 is starting to take the cake.