Weekly Market Recap (Nov. 6 - 10)
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 up for the week, with the S&P 500 up 1.3%, the Nasdaq 2.4%, and the Dow Jones 0.7%. Technology (+4.6%) and Communication Services (+1.3%) were the best-performing sectors.
2. The stock indices continue to rally behind another strong performance from mega-cap tech stocks.
3. The long-term trend for the S&P 500 is improving, while the short-term momentum is positive. The most critical level to watch in the coming week is 4,400, with the index just breaking above this Friday.
4. The earnings season is well underway, and 455 companies from the S&P 500 index have released their 3rd quarter results, with 81% beating estimates. Earnings are expected to be up 6% in Q3 2023 and 11% in 2024.
5. Earnings reports from Walmart and Home Depot and the latest CPI and Retail Sales data are scheduled for next week.
My take:
We smoothly consolidated last week's blockbuster gains, marking another victorious week for the bulls, and the momentum is currently skewing upwards. This rally from the October lows seems fueled mainly by hopes that the Fed's rate hikes might be nearing an end. And in this light, the upcoming CPI data next week is more pivotal than ever.
Technically speaking, the S&P 500 is at a fascinating juncture, having reclaimed the 4,400 level. Ideally, I'd prefer the index to maintain above this threshold. However, note that with no significant support until the 4,180-4,110 zone, we could be in for a steep descent if we fail to sustain this gain. Market breadth is another indicator to keep an eye on and broader stock participation, beyond mega-cap stocks, would be a positive sign.
While scenarios are always essential, my approach centers around momentum and trend-following, and for now, I am looking upwards. Long-term, my stance remains cautiously optimistic. I believe in the potential for new all-time highs eventually, but as always, the market's movements will be the ultimate guide.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 6 of the 11 S&P 500 sectors have achieved gains. Technology led the way and rose by 4.6%. By contrast, Energy was the weakest, and fell by 3.8%.
Year-to-date, 4 sectors have seen positive results. Technology has been the most successful sector, with a 44% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 41% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Transdigm Group Incorporated (TDG, 12%)
Extra Space Storage Inc. (EXR, 11%)
Gen Digital Inc (GEN, 9%)
Meanwhile, the worst-performing stocks were:
Corteva Inc (CTVA, -13%)
Warner Bros. Discovery Inc (WBD, -14%)
Illumina Inc (ILMN, -16%)
In addition, 37 stock within the S&P 500 reached a new 52-week high, while 18 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 mixed but 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 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 improving from negative territory and could soon signal a bullish trend is forming.
2. S&P 500 Short-Term Outlook and Key Levels
Momentum remained largely positive all the week, and the S&P 500 was positive for 9 days in a row, its longest winning streak since 2021. The series stopped on Thursday, but the bulls retook controls immediately, and we are now back above 4,400. Supports remain at 4,180 and then 4,100, where we found our footing in October. The downside risks are quite significant if we don’t sustain this move above 4,440. But until the markets say differently, the momentum remains on the upside.
In the longer term, 4,600 is the next significant resistance, and a break above would open the door for new all-time highs. On the other hand, a break below 4,100 would be a setback to the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis is about the trends in asset-class ETFs. Using a combination of performance metrics and technical indicators, I've developed a proprietary algorithm to rank these various segments of the market and identify potential outperformers. Based on this approach, I've identified Bitcoin as having the best relative momentum currently, but remember, we have a long way to new all-time highs.
EARNINGS RECAP
1. Q3 Earnings Season Summary
455 companies from the S&P 500 index have released their Q3 2023 earnings, with 81% 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 6%. Excluding the energy sector, the figure is +12%.
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 Real Estate 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, 43% of the respondents had a bullish outlook on the stock market, a 18-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 1.4 to 1.7, still flashing a “contrarian” buy signal.
THE WEEK AHEAD
1. Economic Calendar
The upcoming week will be dense on the economic report front. Next Tuesday, the Consumer Price Index (CPI) report is on the agenda, offering insight into the current inflation landscape and what it could mean for the direction of interest rates. Retail sales data will also be one to watch.
2. Earnings Calendar
The Q3 earnings season is well under way next week, and 50 companies from the S&P 500, including Walmart and Home Depot, 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 TJX Companies ($TJX). In this post, I break down key data points around TJX Companies’ 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.