Weekly Market Recap (Oct 23 - 27)
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 down for the week, with the S&P 500 down 2.5%, the Nasdaq 2.6%, and the Dow Jones 2.1%. Utility (+1.3%) and Materials (-0.4%) were the best-performing sectors.
2. The stock indices sold off sharply due to disappointing earnings reports.
3. The long-term trend for the S&P 500 is deteriorating, and the short-term trend is firmly to the downside. The next resistance is at 4,180, while support is at 4,100.
4. The earnings season is well underway, and 245 companies from the S&P 500 index have released their 3rd quarter results, with 78% beating estimates. Earnings are expected to be up 4% in Q3 2023 and 12% in 2024.
5. Earnings reports from Apple and Eli Lilly are scheduled for next week, as are the Federal Reserve interest rate decision and the release of the latest Non-Farm Payroll report.
My take:
It was another tough week for the Bulls. We have been on a freefall since the S&P500 lost the 4,220 support – where we consistently found support throughout October. Alarmingly, we also breached the 4,180 mark, a support I've previously stressed. Though we might witness a few green days ahead, given how oversold many indicators are, it won't mean much unless we reclaim 4,180. My year-long stance has been one of "cautious" optimism. However, if we don't recover this level promptly, our bull run might be in jeopardy. And brace yourself for another roller-coaster week ahead with earnings reports, notably from giants like Apple, and data from FOMC and job reports.
It's crucial not to make impulsive decisions but equally vital to adapt if the market trajectory shifts. As always, keep an eye on critical levels, and our roadmap is clear: regain the lost supports, starting with 4,180, then 4,220, to finally resume our march to new highs. Until we do so, however, we need to look down.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 1 of the 11 S&P 500 sectors have achieved gains. Utility led the way and rose by 1.3%. By contrast, Energy was the weakest, and fell by 6.2%.
Year-to-date, 3 sectors have seen positive results. Communication Services has been the most successful sector, with a 32% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 22% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Willis Towers Watson Public Limited Co (WTW, 11%)
Rollins, Inc. (ROL, 9%)
RTX Corp (RTX, 9%)
Meanwhile, the worst-performing stocks were:
Hasbro, Inc. (HAS, -18%)
Whirlpool Corp. (WHR, -21%)
Align Technology, Inc. (ALGN, -29%)
In addition, 1 stock within the S&P 500 reached a new 52-week high, while 65 set new lows, indicating the momentum is negative.
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 now mixed and deteriorating. 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 giving a negative signal at the moment, indicating potentially more pain ahead.
2. S&P 500 Short-Term Outlook and Key Levels
I was closely monitoring the 4,220-4,240 support for the S&P500, and as I'd anticipated, breaking below has led to more downward momentum. What's more concerning? The drop below 4,180 - June's low. This level plays a pivotal role in shaping the course of our current bull run. Ideally, I want to see a rebound to 4,180 and then to 4,220 soon. Until that unfolds, caution is critical, with 4,100 looming as the next support area.
3. Momentum Analysis of the Week
This week's momentum analysis is about the S&P 500 stocks trading the most above or below their 200-day moving average. The 200-day moving average is a powerful indicator that calculates the average price of a stock over the past 200 trading days. It acts like a "smoothing tool," reducing short-term market noise and giving us a clear view of the long-term trend.
EARNINGS RECAP
1. Q3 Earnings Season Summary
245 companies from the S&P 500 index have released their Q3 2023 earnings, with 78% 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 4%. Excluding the energy sector, the figure is +10%.
The earnings are projected to be up 12% 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 Energy 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, 29% of the respondents had a bullish outlook on the stock market, a 5-point decrease from the previous week. The investors' bullish sentiment is at its lowest level since May.
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 1.9 to 1.5, the lowest level since November 2022.
THE WEEK AHEAD
1. Economic Calendar
The upcoming week has the Federal Reserve meeting in the spotlight. Beyond the rate decision, words from the chairman will be crucial in shedding light on potential future rate movements. Expect some turbulent waves in the market and potentially tricky trading days. Additionally, the Non-Farm Payroll data is on the calendar, offering a glimpse into the job market's pulse, which will undoubtedly influence stock indices.
2. Earnings Calendar
The Q3 earnings season is picking up steam next week, and 164 companies from the S&P 500, including Apple and Eli Lilly, 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 McDonald’s Corp ($MCD). In this post, I break down key data points around McDonald’s Corp’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.
So I have a question/request. Not sure if this is the right place to ask.
So a guy on Tim Pools IRL show, called Ian Crossland bangs on and on about graphene. He says its the future etc.
Are there any decent companies who produce graphene etc. I tried looking but I was kinda overwhelmed so thought I could ask the experts. Do oyou have any thoughts?
MCD is the safe bet on the earning week. I hope aapl will have a surprise