Weekly Market Recap (Mar 4-8): CPI Looming: Can the Bears Finally Follow Through?
Everything you need to know about last week's markets performance and what to expect next.
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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 -1.2%, and the Dow Jones -0.9%. Utilities (+3.3%) 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 4,920 is support.
3. The earnings season is almost over, and 494 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 (72) as measured by the Fear & Greed indicator, while VIX remains low at 15.
5. Earnings reports from Oracle and Adobe, as well as CPI, PPI, and retail sales reports, are scheduled for next week.
My take:
While the markets did not secure a gain for the week, the pattern remained somewhat unchanged: We saw weakness early in the week, followed by a rally towards the end, culminating in new all-time highs. And we have yet to witness three consecutive red days since the first week of January.
Next week might challenge this trend, with two inflation reports and the S&P 500 nearing the 5,200 mark. However, a shift in momentum will happen only when weakness is sustained and a significant support is lost. Only then can we feel comfortable calling for a (short-term) top.
In this context, I'm watching the 5,050 level, which provided good support in the last two weeks. A break below could signal the first signs of a shift in trend. Below that, a fall below the 4,920-40 zone, Feb's lows, could open the door to a more substantial pullback. Until then, I see no point in (trying to) predict when we will peak.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, 8 of the 11 S&P 500 sectors have achieved gains. Utilities led the way, rising by 3.3%. By contrast, Consumer Cyclical was the weakest, falling by -2.6%.
Year-to-date, the 11 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, 62% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Hewlett Packard Enterprise Co (HPE, 16%)
Kroger Co. (KR, 14%)
Dexcom Inc (DXCM, 11%)
Meanwhile, the worst-performing stocks were:
Brown-Forman Corp. (BF-B, -10%)
Tesla Inc (TSLA, -13%)
Albemarle Corp. (ALB, -17%)
In addition, 144 stocks within the S&P 500 reached a new 52-week high, while 9 set new lows, indicating the momentum remains on the upside.
The Industrials sector has seen the most new highs this week, while most of the lows were in Communication Services.
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 3% over the past month and 13% 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 77% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 76% of stocks are trading above their 20-day SMA, increasing by 3 points compared to the previous week.
Trends: The trend on the 1-day and 4-hour charts is positive, with rising trend lines.
Key levels: the next resistance could be 5,200, where we might finally consolidate. I have no concerns as long as we hold 4,920-40, where we found our footing in February. If we see a more substantial pullback, we could revisit 4,800s.
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3. Momentum Analysis of the Week
This week's momentum analysis is an analysis of several country ETFs. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank 9 country ETFs. Based on this approach, I've identified the Indian, US, and Japanese markets as currently having the best relative momentum.
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%.
The earnings are projected to grow by 10% in 2024, higher than the 9% growth seen on average over the last decade. In the past 4 weeks, 49% of earnings revisions done by analyst 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
494 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, 52% of the respondents had a bullish outlook on the stock market, up 5 points from the previous week. The bullish sentiment is above the historical average for the 18th 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 was stable at 6.4 but not yet 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 72, or the “Greed” level, down from 77 last Friday.
THE WEEK AHEAD
1. Economic Calendar
The week ahead is packed with critical economic data releases, beginning with Tuesday's Consumer Price Index (CPI). Thursday will bring us the Producer Price Index (PPI) and Retail Sales. These reports will likely impact the markets and influence the Federal Reserve's decisions regarding the timing of interest rate cuts.
2. Earnings Calendar
The earnings season continues next week, and 7 companies from the S&P 500, including Adobe 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.
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 Dollar General (DG). In this post, I break down key data points around Dollar General’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions.
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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.
For any1 interested, here are my Feb CPI estimates:
https://open.substack.com/pub/arkominaresearch/p/feb-2024-cpi-estimates?r=1r1n6n&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true
Is there a list of all your portfolios somewhere here? Just see a ton of them at savvytrader and want to read more about them (especially the crypto swing trade portoflio). Thanks.