Weekly Market Recap (Mar. 27 - 31)
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 3.5%, the Dow Jones +3.2%, and the Nasdaq +3.4%. Energy (+6.3%) and Consumer Cyclical (+5.6%) were the best-performing sectors.
2. The markets went up as concerns regarding the banking sector eased up, and the most recent inflation data came in slightly lower than anticipated.
3. The long-term trend for the S&P500 is turning more bullish, and the index has broken out of the critical levels it has been consolidating for weeks.
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 1% in 2023.
5. Earnings reports from Constellation Brands and Conagra Brands are scheduled for next week, along with the release of the Non-Farm Payroll report.
My take:
The S&P500 has finally broken out of the critical levels it has been hovering around in the past few weeks, including the 200-day SMA, 1-year trend line, and 4,000 psychological level. Although the gains in 2023 have mainly been in tech and growth stocks, there was more broad participation this week, with all sectors experiencing positive gains and 97% of the S&P 500 stocks seeing gains.
It is a bullish development, but holding the breakout level and overcoming upcoming resistance levels is essential, beginning with 4’180, the 2023 high. The ultimate test for this rally will be the 4,300 level, which was the August 2022 high. While it is likely that we will test these levels, we may need to see some consolidation before continuing upward.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, all the 11 S&P 500 sectors have achieved gains. Energy led the way and rose by 6.3%. By contrast, Health Care was the weakest, still increasing by 1.7%.
Year-to-date, 7 sectors have seen positive results. Communication Services has been the most successful sector, with a 21% gain. On the other hand, Financials has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last five trading days, 97% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Caesars Entertainment, Inc. (CZR, 15%)
McCormick & Company, Incorporated (MKC, 14%)
First Republic Bank (FRC, 13%)
Meanwhile, the worst-performing stocks were:
Generac Holdings Inc. (GNRC, -3%)
Humana Inc. (HUM, -3%)
Match Group, Inc. (MTCH, -5%)
In addition, no stocks within the S&P 500 reached a new 52-week low, while 22 set new highs, indicating the momentum is back to the upside.
The following are the top 5 stocks, ranked by market size, that reached a new high:
MARKET TRENDS & MOMENTUM
1. S&P 500 Long-Term Trend
The long-term trend for the S&P500 is improving. 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 has crossed above its signal line, a positive indication for the index.
2. Short-term outlook and key levels
The S&P500 has finally broken out of the critical levels (200-day SMA, 1-year trend line, 4,000 psychological level) it has been hovering around in the past few weeks. Like any breakout, the key is to maintain the breakout level during any retest and overcome upcoming resistance.
Regarding specific levels to watch, 4’180 (2023 high) is the next significant resistance. The ultimate resistance is 4’300, which would mark the official start of a new bull market. Ideally, we should not break below 4’000, while 3’900 (1-year trend line) is a crucial support range to defend.
3. Momentum Analysis of the Week
This week's momentum analysis is about seasonality, as we are about to start the month of April, the best month of the year over the past 20 years. The S&P500 has been up 80% of the time, for a +2.3% return on average.
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 76%.
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 +1%, 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, 23% 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 3.0 to 2.3 and remain tipped to the bearish side.
THE WEEK AHEAD
1. Economic Calendar
The job market will take center stage in the upcoming week with the release of the Non-Farm Payroll report for March. The market expects payrolls to increase by 238k, down from 311k in the previous month.
2. Earnings Calendar
The Q1 2023 earnings season is starting slowly, and 3 companies from the S&P 500, including Constellation Brands and Conagra Brands, 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.