Weekly Market Recap (Nov 18-22): The S&P 500 Bounces After Critical Support Holds - 6,000 Next?
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 positive this week, with the S&P 500 up 1.7%, the Nasdaq 1.7%, and the Dow Jones 2%. Materials (+3.1%) and Utilities (+2.8%) were the best-performing sectors.
2. The S&P 500's long-term trend is positive, and the short-term momentum is mostly positive. 6,000 is the next resistance, while 5,850 is support.
3. The Q3 earnings season is almost over and 475 companies from the S&P 500 index have released their Q3 results, with 76% beating estimates. Earnings are expected to be up 9% in Q3 2024 and 10% in 2024.
4. Market sentiment is at the "Greed" level (61) as measured by CNN’s Fear & Greed indicator, while VIX is at a low value of 15.
5. Earnings reports from Dell Technologies and CrowdStrike, and the latest PCE Price Index, and the FOMC meeting minutes are scheduled for next week.
My take:
The S&P 500 tested the critical 5,850 area multiple times last week, a critical support zone sitting just above the election gap. Ultimately, the support held, and after Nvidia's earnings were behind us, the markets rallied. The price action over the past two weeks has been healthy, as a brief pause was required following the strong post-election rally. It sets us up nicely for the holiday season, which is often a seasonally favorable period.
That said, the sticky 6,000 barrier remains a challenge ahead, and it remains to be seen if the bulls can push us above it before year-end. Regardless of what unfolds over the next few weeks, this bull market—despite being hated by many—appears to have more room to run heading into next year.
PERFORMANCE RECAP
1. S&P 500 Sector Performance
Over the week, all the S&P 500 sectors have achieved gains. Materials led the way, rising by 3.1%. By contrast, Health Care was the weakest, falling by 1.6%.
Year-to-date, all the sectors have seen positive results. Financials has been the most successful sector, with a 3%5 gain. On the other hand, Healthcare has been trailing behind.
2. S&P 500 Top & Worst Performers
In the last 5 trading days, 85% of the stocks in the S&P 500 index rose in value.
The best-performing stocks were:
Super Micro Computer Inc (SMCI, 78%)
Keysight Technologies Inc (KEYS, 14%)
Vistra Corp (VST, 14%)
Meanwhile, the worst-performing stocks were:
AES Corp (AES, -7%)
Intuit Inc (INTU, -7%)
Ulta Beauty Inc (ULTA, -7%)
In addition, 74 stocks within the S&P 500 reached a new 52-week high, while 23 set new lows. Most of the highs this week came 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 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 line is around its signal line, a neutral 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, 6% 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 71% of S&P 500 stocks are trading above their 200-day moving average (SMA). Meanwhile, 71% of the stocks are trading above their 20-day SMA, up from 54% the previous week. A reading above 80% or below 20% typically indicates an overextended trend.
Trends: The trend on the 1-day and 4-hour charts is mostly positive, with the index trading back above to its 21-period exponential moving average.
Key levels: The next resistance level is 5,940. On the other hand, the next support area is at 5,850.
3. Momentum Analysis of the Week
This week's momentum analysis is about the commodity sector. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank 9 commodities. Based on this approach, I've identified Uranium and Gold as having the best relative momentum currently.
EARNINGS RECAP
1. Q3 and Full Year 2024 Expected EPS & Revenue Growth
Q3 2024 earnings for the S&P 500 are expected to be up 9%. Excluding the energy sector, the figure is +12%.
Earnings are projected to grow by 10% in 2024, slightly higher than the 9% growth seen on average over the last decade. In the past four weeks, 59% of earnings revisions made by analysts were to increase their outlook.
The forward 4-quarter P/E ratio is 22.6, higher than the average over the past five and ten years.
2. Q3 Earnings Season Summary
475 companies from the S&P 500 index have released their third-quarter earnings, with 76% posting higher EPS than expectations. This is slightly below the previous four-quarter average of 79% 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, 41% of the respondents had a bullish outlook on the stock market, decreasing by 9 points 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 latest reading available of the indicator was 5.9, a slightly bullish 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 61, or a “Greed” level, up from 51 last Friday.
THE WEEK AHEAD
1. Economic Calendar
Next week will be a short trading week due to the Thanksgiving holiday, with markets closed on Thursday. On the agenda, investors will closely watch the release of the latest FOMC meeting minutes and the PCE Price Index, the Fed’s preferred measure of inflation. Both reports are expected to provide further clarity on the potential path for interest rate cuts in the coming months.
2. Earnings Calendar
Earnings season continues next week, and 8 companies from the S&P 500, including Dell Technologies and CrowdStrike, 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 my analysis of 1 stock reporting earnings in the coming days, focusing on implications for long-term investors. This week, I prepared an in-depth overview of CrowdStrike ($CRWD). In this post, I break down key data points around CrowdStrike’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions. Check out the post and learn why I gave a “BUY” rating to $CRWD.
That’s a wrap for this week’s recap! I hope it helped you understand the market better.
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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.
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