Weekly Market Recap (Nov. 20-24)
Everything you need to know about last week's markets performance and what to expect next
Dear subscribers,
Welcome to my 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 1.0%, the Nasdaq 0.9%, and the Dow Jones 1.3%. Health Care (+2.2%) and Consumer Defensive (+1.3%) were the best-performing sectors.
2. This was a relatively quiet and low-volume week due to the US Thanksgiving holiday.
3. The long-term trend for the S&P 500 is positive, and so is the short-term momentum. The next resistance is at 4,600, while support is at 4,400.
4. The earnings season is well underway, and 481 companies from the S&P 500 index have released their 3rd quarter results, with 82% beating estimates. Earnings are expected to be up 7% in Q3 2023 and 11% in 2024.
5. Earnings reports from Salesforce and Intuit and the PCE Price Index are scheduled for next week.
My take:
In a week marked by low trading volume, the market posted its 4th consecutive weekly gain. On the one hand, we're seeing a clear positive trend in the short, medium, and long term and favorable seasonality. On the other hand, we're hitting a critical resistance, and several indicators suggest this rally is running out of steam.
Now, predicting short-term market movements is notoriously difficult. A better action is to take a step back, focus on key levels, and look at the bigger picture. And on that matter, as long as we maintain above the 4,400 level, any pullback could be healthy and set the stage for the next move ahead.
In the long term, my view has not changed, and I believe the S&P500 is poised to test its previous all-time high (circa. 4,800) in the coming months.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, all the 11 S&P 500 sectors have achieved gains. Health Care led the way and rose by 2.2%. By contrast, Energy was the weakest, but rose by 0.3%.
Year-to-date, 6 sectors have seen positive results. Technology has been the most successful sector, with a 48% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 80% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Paramount Global (PARA, 11%)
Agilent Technologies Inc. (A, 11%)
Enphase Energy Inc (ENPH, 11%)
Meanwhile, the worst-performing stocks were:
Zions Bancorporation N.A (ZION, -4%)
Autodesk Inc. (ADSK, -5%)
Jacobs Solutions Inc (J, -7%)
In addition, 61 stock within the S&P 500 reached a new 52-week high, while 3 set new lows, indicating the momentum is back to the upside.
The following are the top stocks, ranked by market size, that reached a new high or low in the last 5 days:
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 MACD as an additional tool to detect trend changes. The MACD is about to cross above its signal line, signaling potentially more gains ahead.
2. S&P 500 Short-Term Outlook and Key Levels
The index continued showcasing positive momentum and posted a 4th weekly gain. Many indicators suggest we need to consolidate. However, as long we stay above the 4,400 support, I am looking for a retest of 4,600 in the coming weeks. It should be challenging, given that this is where we failed this summer.
In the longer term, my target would be to, at minimum, test 4,800, the all-time high of the index. On the other hand, a break below 4,110 would be a setback to the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis focuses on the S&P 500 sectors' trends. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these sectors and identify potential outperformers. Based on this approach, I've identified the Technology sector as having the best relative momentum.
EARNINGS RECAP
1. Q3 Earnings Season Summary
481 companies from the S&P 500 index have released their Q3 2023 earnings, with 82% posting higher EPS than expectations. This is higher than the previous four-quarter average of 74%, and the historical average of 67%.
2. Q3 and 2024 Expected EPS & Revenue Growth
Q3 2023 earnings for the S&P 500 are expected to be up 7%. Excluding the energy sector, the figure is +13%.
The earnings are projected to be up 11% in 2024, higher than the 9% growth seen on average over the last decade. Earnings are expected to increase year-over-year in all the 11 sectors, with the Healthcare and Communication Services sectors leading the way. On the other hand, the Materials and Energy sectors are projected to see a softer performance.
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, 45% of the respondents had a bullish outlook on the stock market, a 1-point increase from the previous week.
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 rose from 1.7 to 2.1.
THE WEEK AHEAD
1. Economic Calendar
The Personal Consumption Expenditures (PCE) data is on our radar for the upcoming week. As the Fed's favored measure of inflation, it plays a pivotal role in shaping interest rate decisions. Stay also tuned for a speech from the Fed chairman on Friday.
2. Earnings Calendar
The Q3 earnings season is well under way next week, and 9 companies from the S&P 500, including Salesforce and Intuit, 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 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" value and/or low growth expectations.
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 one stock reporting earnings in the coming days. This week, I prepared an in-depth overview of Intuit Inc. ($INTU). In this post, I break down key data points around Intuit’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
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.
What stands out to me is how much more selected micro and small cap stocks did than the best of the S&P 500 i.e 11%