Weekly Market Recap (Mar 11-15): a Week of Mixed Signals. Fed Meeting 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.
SUMMARY
Here are this week's highlights and what to look out for next:
1. The markets were down for the week, with the S&P 500 down -0.3%, the Nasdaq -0.7%, and the Dow Jones flat. Energy (+3.8%) and Materials (+1.6%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive. 5,200 is the next resistance, while 5,050 and 4,920 are support.
3. The earnings season is almost over, and 498 companies from the S&P 500 index have released their 4th quarter results, with 76% beating estimates. Earnings are expected to be up 10% in Q4 2023 and 10% in 2024.
4. Market sentiment is at the "Greed" level (70) as measured by the Fear & Greed indicator, while VIX remains low at 14.
5. Earnings reports from Nike and Micron, as well as the Fed meeting, are scheduled for next week.
My take:
We just wrapped up another complex week to trade. On the downside, we ended the week without setting new highs, and the daily chart shows clear signs of weakness. On the brighter side, we're only down by 0.1% this week, even after facing two hotter-than-expected inflation reports.
The upcoming FOMC meeting may bring us yet another challenging trading week. In such cases, it is always better to focus on critical levels. The 5,200 point remains significant resistance, while a drop below 5,050 could open the door to a more sizeable pullback.
Next week is poised to offer more clarity, confirming whether the "always-up" trend since early November is over and whether a (short-term) top has been reached.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, 4 of the 11 S&P 500 sectors have achieved gains. Energy led the way, rising by 3.8%. By contrast, Real Estate was the weakest, falling by -2.8%.
Year-to-date, 10 of the sectors have seen positive results. Communication Services has been the most successful sector, with a 10% gain. On the other hand, Real Estate has been trailing behind.
2. S&P 500 Top & Worst Performers
Last week, 41% of the stocks in the S&P 500 index rose in value.
The best-performing stocks were:
Freeport-McMoRan Inc (FCX, 12%)
3M Co. (MMM, 12%)
Oracle Corp. (ORCL, 12%)
Meanwhile, the worst-performing stocks were:
Southwest Airlines Co (LUV, -17%)
Enphase Energy Inc (ENPH, -17%)
Jabil Inc (JBL, -19%)
In addition, 87 stocks within the S&P 500 reached a new 52-week high, while none set new lows, indicating the momentum remains on the upside.
Most of the highs this week were coming from the Financial sector.
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 the following conditions (the 1st is the most important):
EMA9 is above the EMA30: 🟢
Price is trading above the EMA9: 🟢
Price is trading above the EMA30: 🟢
EMA9 is rising: 🟢
EMA30 is rising: 🟢
I also use the MACD as an additional tool to detect trend changes. The MACD is above its signal line, a positive indication for the index.
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 2% over the past month and 8% in the last three months, and it is now trading less than 1% from its 52-week high.
Breadth: Market participation remains healthy in the long term, as 76% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 57% of stocks are trading above their 20-day SMA, decreasing by 19 points compared to the previous week.
Trends: The 1-day chart is showing some weakness and could signal further pain ahead.
Key levels: the next resistance could be 5,200. I have no concerns as long as we hold 5,050. After that, the next support area is 4,920-40, where we found our footing in February, followed by the 4,800s zone.
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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 huge, emphasizing the importance of stock selection.
EARNINGS RECAP
1. Q4 and 2024 Expected EPS & Revenue Growth
Q4 2023 earnings for the S&P 500 are expected to be up 10%. Excluding the energy sector, the figure is +14%.
Earnings are projected to grow by 10% in 2024, higher than the 9% growth seen on average over the last decade. In the past four weeks, 49% of earnings revisions made by analysts were to increase their outlook.
The forward 4-quarter P/E ratio is 21.2, higher than the average over the past five and ten years.
2. Q4 Earnings Season Summary
498 companies from the S&P 500 index have released their Q4 2023 earnings, with 76% posting higher EPS than expectations. This is in line with the previous four-quarter average of 76% and above 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, 46% of the respondents had a bullish outlook on the stock market, down 6 points from the previous week. The bullish sentiment is above the historical average for the 19th week in a row.
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 rose from 6.4 to 6.5 but still did not show an "extreme" bullish sentiment.
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 70, or the “Greed” level, down from 72 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Next week, attention will turn to the Federal Open Market Committee (FOMC) meeting, where the central bank will announce its decision on interest rates. Although the market consensus is that rates will remain unchanged at this meeting, investors and analysts will look for any comments or hints regarding the timing of potential rate cuts.
2. Earnings Calendar
The earnings season continues next week, and 8 companies from the S&P 500, including Nike and Micron, 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.
It is helpful to analyze these indicators to understand better the stocks before their earnings.
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 Lululemon (LULU). In this post, I break down key data points around Lululemon’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
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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.
Great as always