Weekly Market Recap (Mar. 20 - 24)
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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Thank you for joining us, and 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 1.4%, the Dow Jones +1.2%, and the Nasdaq +1.7%. Technology (+1.7%) and Communication Services (+3.0%) were the best-performing sectors.
2. The markets went up after the Fed increased its benchmark rate by 25 basis points, as widely expected, and signaled that the rate hike cycle may soon be finished.
3. The long-term trend for the S&P500 remains mixed, as the index has been volatile and consolidating for weeks around several critical levels (200-day SMA, 1-year trend line, 4,000 psychological level).
4. The earnings season is over, and all the companies from the S&P 500 index have released their Q4 results, with 68% beating estimates. Earnings are expected to fall 5% in Q1 2023 and rise 2% in 2023.
5. Earnings reports from Micon Technology and Walgreens are scheduled for next week, along with the release of the PCE price index, the FED’s favorite measure of inflation.
My take:
The markets ended the week positively, but it was another volatile week due to financial sector concerns and interest rate uncertainty. The S&P 500 index has been volatile and consolidating for weeks around several critical levels (200-day moving average, 1-year trend line, 4,000 psychological level), which typically set up for a sizeable breakout move. Cautiousness is critical in the coming weeks as volatility remains high and the market direction is uncertain.
In the short term, my view remains unchanged. We must sustainably break out from the 4,000 level, or we may witness a retest of the October 2022 lows. In the long term, we are stuck in a choppy trading zone unless we go above the August 2022 high (4,290) or below the bear market low (~3,500).
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 8 of the 11 S&P 500 sectors have achieved gains. Communication Services led the way and rose by 3.0%. By contrast, Real Estate was the weakest, falling by 2%.
Year-to-date, 3 sectors have seen positive results. Communication Services has been the most successful sector, with an 18% gain. On the other hand, Energy has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 65% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Regeneron Pharmaceuticals, Inc. (REGN, 10%)
Match Group, Inc. (MTCH, 9%)
Accenture plc (ACN, 9%)
Meanwhile, the worst-performing stocks were:
First Republic Bank (FRC, -46%)
Comerica Incorporated (CMA, -7%)
Advance Auto Parts, Inc. (AAP, -7%)
In addition, 47 stocks within the S&P 500 reached a new 52-week low, while 10 set new highs, indicating the momentum is to the downside.
MARKET TRENDS & MOMENTUM
1. S&P 500 Long-Term Trend
The long-term trend for the S&P500 is mixed. 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 might soon cross below its signal line, a negative indication for the index.
2. Short-term outlook and key levels
The S&P 500 index has been volatile and consolidating for weeks around several critical levels (200-day SMA, 1-year trend line, 4,000 psychological level), which typically set up for a sizeable breakout move.
Regarding specific levels to watch, 4’000 and 4’180 (2023 high) are the next significant resistances. The ultimate resistance is 4’300, which would mark the official start of a new bull market. Ideally, we should not break below 3’900 (1-year trend line), while 3’770 and ~3’500 (bear market low) are crucial support ranges to defend.
3. Momentum Analysis of the Week
This week's momentum analysis is about Asset Class ETFs' trends. I employ various performance metrics and technical indicators, which are then processed by my proprietary algorithm. I use this model here to rank the different markets’ ETFs and identify those likely to outperform.
From a relative standpoint, Gold has the strongest momentum. Nasdaq and Bitcoin are clearly making a comeback, but they have still a lot of overhead resistance to overcome.
For daily updates and content on momentum trading, follow me on Instagram.
EARNINGS RECAP
1. Earnings Season Summary
All the S&P 500 companies have released their Q4 2022 earnings, with 68% posting higher EPS than expectations. However, this is lower than the previous four-quarter average of 73%.
2. Expected EPS & Revenue Growth
Q1 2023 earnings for the S&P 500 are expected to decline by 5%. Excluding the energy sector, the figure falls to -6%.
The earnings growth rate for 2023 is projected at +2%, lower than the 9% average seen over the last decade. Earnings are expected to increase year-over-year in 6 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, 21% of the respondents had a bullish outlook on the stock market, a 2-point increase from the previous week. The investors' bullish sentiment remains unusually low as per 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 fell from 3.4 to 3.0 and tipped back to the bearish side.
THE WEEK AHEAD
1. Economic Calendar
Inflation will take center stage in the upcoming week with the release of the Fed’s favorite measure of inflation, the PCE price index. The market expects a 0.4% month-over-month increase, down from 0.6% in the previous month.
2. Earnings Calendar
The Q1 2023 earnings season is starting slowly, and 6 companies from the S&P 500, including Micron Technology and Walgreens, are set to report their quarterly earnings next week.
3. Next Week’s Earnings Watchlist
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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.
Great Write Up!!! :)