Weekly Market Recap (Sep 25 - 29)
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.
I hope you enjoy this week's edition and find it helpful. If you like what you see, please share it with your network on social media and, if you haven't already, subscribe to our email updates.
Thank you for joining us, and let's get started!
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 0.7%, the Nasdaq flat, and the Dow Jones down 1.4%. Energy (+1.2%) and Materials (+0.2%) were the best-performing sectors.
2. The stock indices finished the week in the red due to persistent worries about higher interest rates and a potential government shutdown.
3. The long-term trend for the S&P 500 is positive but deteriorating, and the short-term momentum remains on the downside. The next resistance is at 4,450, while support is at 4,260.
4. The Q2 earnings season is almost over, and 499 companies from the S&P 500 index have released their 2nd quarter results, with 79% beating estimates so far. Earnings are expected to be up 2% in Q3 2023 and 2% in 2023.
5. Earnings reports from Constellation Brands and McCormick are scheduled for next week, as well as the release of the Non-Farm Payroll report.
My take:
There was much more volatility this week than the weekly performance might suggest. The markets dipped early in the week, with continuous pressure on interest rates and more hawkish comments from Fed officials.
However, the S&P 500 found some support in the 4,240-60 range. I'll closely monitor this level next week, as going below could mean more trouble ahead. The index tried bouncing back later in the week, but I would be more confident once we get back above the 4,450 resistance.
Long-term? I remain "cautiously" optimistic. However, we have many hurdles on our way to new highs, starting with clearing the 4,600 level, where we failed in July.
PERFORMANCE RECAP
1. SP500 Sector Performance
Over the week, 2 of the 11 S&P 500 sectors have achieved gains. Energy led the way and rose by 1.2%. By contrast, Utilities was the weakest, and fell by 6.9%.
Year-to-date, 6 sectors have seen positive results. Communication Services has been the most successful sector, with a 37% gain. On the other hand, Utilities has been trailing behind.
2. S&P 500 Weekly Heat Map
Over the last week, 39% of the stocks in the S&P 500 index have risen in value.
The best-performing stocks were:
Resmed Inc. (RMD, 8%)
Trimble Inc (TRMB, 7%)
Advanced Micro Devices Inc. (AMD, 7%)
Meanwhile, the worst-performing stocks were:
NextEra Energy Inc (NEE, -15%)
Newmont Corp (NEM, -9%)
Carmax Inc (KMX, -8%)
In addition, 9 stocks within the S&P 500 reached a new 52-week high, while 74 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 positive but 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
The index found support around 4,240-60 this week, and I hope we don't fall below that level in the coming weeks. The index tried to recover in the 2nd part of this week but was insufficient to finish the week positive. I need to see the index back above 4,450 to be more confident that we are done with the negative momentum.
In the longer term, a successful break above 4,600 would set the stage for testing new all-time highs at 4,800, but it might take some time before getting there. Conversely, a break below 4,180, June's low, would be a setback to the bullish case.
3. Momentum Analysis of the Week
This week's momentum analysis is about seasonality, as we are starting the month of October. Over the past 20 years, the S&P 500 has been up 65% of the time, for a +1.5% return on average.
EARNINGS RECAP
1. Q2 Earnings Season Summary
499 companies from the S&P 500 index have released their Q2 2023 earnings, with 79% posting higher EPS than expectations. This is higher than the previous four-quarter average of 73%, and the historical average of 66%.
2. Q3 and 2023 Expected EPS & Revenue Growth
Q3 2023 earnings for the S&P 500 are expected to be up 2%. Excluding the energy sector, the figure is +7%.
The earnings are projected to be up 2% in 2023, lower than the 9% growth seen on average over the last decade. Earnings are expected to increase year-over-year in 8 of the 11 sectors, with the Consumer Cyclical and Communication Services sectors leading the way. On the other hand, the Energy and Materials sectors are projected to see the worst decline.
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, 28% of the respondents had a bullish outlook on the stock market, a 3-point decrease from the previous week. The investors' bullish sentiment is at 4-month low.
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 3.4 to 3.0, the lowest level in a month.
THE WEEK AHEAD
1. Economic Calendar
Slated for next week is the Non-Farm Payroll data, a valuable indicator of employment trends and the overall health of the economy. In addition, stay tuned for a speech from the Fed Chair on Monday, which will provide perspectives about future policy directions and the Fed's economic outlook.
2. Earnings Calendar
The earnings season is almost over, and 4 companies from the S&P 500, including Constellation Brands and McCormick & Co., 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 McCormick & Co. ($MKC). In this post, I break down key data points around McCormick’s fundamentals, stock returns, analyst ratings, and past earnings performance to help you make informed investment decisions.
Thank you for reading my weekly market recap! I hope you found it helpful in understanding the stock markets better. If you did, please share this post with your friends and followers.
If you have any questions or feedback, please don't hesitate to reach out by email or in the comment section. Your support helps me to continue creating high-quality content and is greatly appreciated!
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.
My reaction to getting to the end and reading the upcoming overview - SPICY! :)
It's already NFP Friday again, where does the time go ✈️