The Safe Investing Blog

Stock Market Outlook entering the Week of May 12th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Mixed
• On Balance Volume Indicator: Uptrend

ANALYSIS
The stock market outlook shift back to an uptrend with two of the three signals in bullish territory.

The S&P500 ($SPX) rose 1.9% last week and now sits above the 50 and 200-day moving averages (~2% and ~11% respectively).

SPX Price & Volume Chart for the Week of May 12 2024

The ADX signal flipped back to bullish on Tuesday, followed by the On Balance Volume indicator on Friday.  The combination shifted the outlook back to an uptrend.

Price volume shifts to mixed.  Though the index continued higher last week, none of the up days have come with the necessary trading volume.   Notice the similar trend in trading volume at the start of the last rally in early November (below average/declining while prices rise).  This time, the 11 day window has passed, so caution is warranted.

Friday’s session also qualified as a “stalling day”, highlighting under-the-radar selling pressure.  A stalling day occurs when trading volume is ~95% or more of the previous session, but there’s little to no price increase. It’s an easily overlooked type of distribution day because price doesn’t drop.

S&P Sector Performance for Week 19 of 2024

All sub-sectors of the S&P500 were green last week, with Utilities ($XLU) leading the way for a second week in a row.  Consumer Discretionary ($XLY) was essentially flat for the week, thanks in large part to Amazon ($AMZN).

Gold returned to the winners circle last week, outpacing most asset classes by a wide margin, while Bitcoin continued its recent correction.

Asset Class Performance for Week 19 of 2024

COMMENTARY
~90% of the S&P500 have reported Q1 results; earnings are on pace to grow roughly 6% year over year.

Next week, the Bureau of Labor Statistics releases April inflation data (PPI/CPI) and Federal Reserve Chairman Powell speaks at the Foreign Bankers’ Association in Amsterdam.  Monthly option expiration on Friday as well.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of May 5th = Downtrend

• ADX Directional Indicators: Downtrend
• Price & Volume Signals: Downtrend
• On Balance Volume Indicator: Downtrend

ANALYSIS
The stock market outlook remains in a downtrend, starting May in roughly the same position as it ended April.

The S&P500 ($SPX) rose 0.5% last week, reaching the 50-day moving average and sitting ~9% above the 200-day moving average.

SPX Price & Volume Chart for the Week of May 05 2024

The ADX signal is bearish heading into the week, and on-balance volume shows sellers remain in control.

Price/volume remains bearish, despite Friday’s gap higher.  The session met the price increase criteria (+1.25%), but didn’t come with the needed trading volume.  Instead, added volume came in the form of 2 distribution days.

There’s still time for the index to turn things around, but the odds of a robust rally drop further if the market doesn’t follow-through within 11 days (5/7).

S&P Sector Performance for Week 18 of 2024

Within U.S. equities, most major sectors were green last week.  Despite all the labor and inflation talk (and Apple earnings), Utilities ($XLU) outperformed the other sectors. Energy ($XLE) struggled again, largely due to the continued weakness in oil.

U.S. bonds were the best asset class last week, while oil dropped almost 7%.

Asset Class Performance for Week 18 of 2024

COMMENTARY
The big news last week was the “Powell Pivot” during the FOMC press conference on Wednesday. Did you miss it?   That’s probably because the committee left rates unchanged, and said that inflation hadn’t come down as much as they had hoped.  Or maybe it was the surprise statement that the Federal Reserve will begin tapering Quantitative Tightening in June.

But the real story was Powell’s remarks related to labor, and the renewed focus on employment, rather than inflation. Technically, the Federal Reserve’s dual mandate mean they equally split their focus between labor and inflation. But job data remained strong (at least according to lagging data sources), giving them cover to focus on inflation. It appears that now, the labor market will play a larger roll in determine the potential for rate cuts.

Markets also cheered Powell’s comments on the potential size and speed of any rate cuts later this year. When asked if he felt like the Federal Reserve was running out of time to get in “enough” rate cuts before year end, Powell flatly dismissed the notion. Fed watchers interpreted that as a willingness by Powell to use larger rate cuts, versus the prior 0.25% increments.

And as if on cue, Non-Farm Payrolls (NFP) came in lower than expected on Friday.  Equities responded by gapping higher, while rates fell.

In other news, last week’s ISM manufacturing and services PMI surprised to the downside, showing a contraction in the April data.

And not to be outdone by the likes of Tesla, Apple ($AAPL) overcame a less than stellar financial results by increasing their dividend and unveiling a massive, $110B buyback program during their earnings announcement. That’s equivalent to the GDP of many small countries!

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of April 28th = Downtrend

• ADX Directional Indicators: Downtrend
• Price & Volume Signals: Downtrend
• On Balance Volume Indicator: Downtrend

ANALYSIS
The stock market outlook remains in a downtrend, though the SPX looks poised to test that signal this week.

The S&P500 ($SPX) rallied 2.7% last week, and is now just ~0.5% below the 50-day and ~9% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Apr 28 2024

The ADX signal is bearish, but the positive direction indicator was on the rise last week and could crossover with a little more bullish price action.

Price/volume still shows a correction in place, despite a constructive week on the bullish side.  The SPX looks likely to test the 50-day moving average this week, after putting in a potential rally start on Monday (4/11).

Be on the lookout for an upside follow-through (+1.25% on high trading volume) during the next 4 to 11 trading sessions (4/26 – 5/7).  What you don’t want to see are distribution days, particularly within 3 days of the rally start.  Unfortunately, the SPX rally attempt also had one of those on day 3.

On-balance volume remains in correction territory, but could retest the trendline soon, similar to the other signals.

S&P Sector Performance for Week 17 of 2024

Within U.S. equities, all major sectors were green last week.  Technology ($XLK) and Discretionary ($XLY) outperformed the index, thanks to large gains from Alphabet ($GOOGL), Microsoft ($MSFT), and Tesla ($TSLA); more on those results below.  Materials and Healthcare underperformed ($XLB and $XLV, respectively).

Equities were also the best asset class last week, rallying 2.7%. Gold led to the downside, falling 2%.

Asset Class Performance for Week 17 of 2024

COMMENTARY
Despite disappointing economic data, at least for those still clinging to hopes of rate cuts, Magnificent 7 earnings reports stole the show last week.

The first (i.e. “advance”) estimate of Q1 GDP came in well below expectations, showing a slowdown in growth and an increased in inflation (i.e. stagflation environment).  This release showed the large role government spending played in keeping the U.S. economy out of a recession.

PCE for March came in higher than expected as well.  And you know it’s bad (i.e. hawkish) when talking heads switch their focus to justifying why the Federal Reserve doesn’t need to raise rates, rather than the number of cuts this year.

March Durable Goods orders were higher than expected, but February numbers were revised down, so this release had limited market impact.

On the earnings front, about 1/3 of the S&P500 reported with some interesting surprises along the way.  Tesla ($TSLA) started things off with a miss on both revenue and earnings.  That didn’t stop investors from sending the stock price higher, closing 12% higher the next day.

Alphabet ($GOOGL) beat revenue, crushed earnings estimates, announced a $70 billion stock buyback and it’s first dividend of 0.20/share.  The stock price ended the next session up over 10%.

Microsoft ($MSFT) beat revenue and earnings estimates.  The stock price gapped higher pre-market, but sold off most of Friday’s session, meeting resistance at the 50-day moving average and end the day up less than 2%.

Meta Platforms ($META) beat revenue and earnings estimates, but the stock price was crushed.  Apparently, investors were unhappy with lower revenue forecast and higher capital spending plans.

More earnings this week, as well as jobs data and the latest FOMC rate decision on Wednesday.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of April 21st = Downtrend

• ADX Directional Indicators: Downtrend
• Price & Volume Signals: Downtrend
• On Balance Volume Indicator: Downtrend

ANALYSIS
The stock market outlook begins the week in a downtrend, after confirmation during last Monday’s session.

The S&P500 ($SPX) dropped 3% last week, with sellers in control each day.  The index sits ~3% below the 50-day and ~6% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Apr 21 2024

All three technical indicators are in confirmed downtrends.  Price/volume joined the ADX in bearish territory on Monday, after slicing through the 50-day moving average and confirming the downtrend signal.  The price/volume action also pushed OBV into a downtrend.

In total, the SPX gained ~16% (704 points) between the uptrend initiation on November 3 (4358) and the start of the downtrend last Monday (5062).  Now, the outlook is in capital preservation mode until signs of the next rally.  Fortunately, money market funds offer attractive alternatives these days, thanks to higher interest rates.

Asset Class Performance for Week 16 of 2024

Gold was the best asset class for the second week in a row, rising 2%.  Bitcoin led to the downside, although Oil and US Equities weren’t far behind.

Within major equity sectors, Technology ($XLK) was the biggest loser, dropping over 6%, while Utilities ($XLU) gained ~2%.

S&P Sector Performance for Week 16 of 2024

COMMENTARY
For the first time since Q3 last year, “buy the dip” gave way to “sell the rip”.  Even “better than expected” Q1 earnings couldn’t stem the tide of selling.  Instead, investors focused on weaker forward guidance, as well as higher-for-longer interest rates and geopolitics.

Last Tuesday, Federal Reserve Chairman Powell spoke at a forum on U.S.-Canada economic relations.  His comments on inflation threw cold water on the rate-cut crowd and sent longer-term interest rates higher:

“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence.”

“We can maintain the current level of restriction for as long as needed.”

Thursday evening, Israel conducted airstrikes against Iranian targets.  The move came as a surprise to many, as most media outlets expected a delayed response due to religious holidays.  Although the events took place outside of market hours, futures spiked; equities down, gold and oil up.  Those knee-jerk reactions were undone by the time the market opened on Friday, but buyers weren’t motivated to put capital at risk in equities over the weekend.

A big week for Q1 earnings, with 4 of the “Magnificent 7” reporting: $MSFT, $GOOG/$GOOGL, $META, $TSLA.  Microsoft, Google, and Meta combine for more than 12% of SPX market cap, so any surprises will have an outsized impact on index performance.

#earnings for the week of April 22, 2024
https://t.co/hLn2sKQhEY
$TSLA $META $MSFT $GOOGL $INTC $XOM $IBM $V $F $BA $VZ $CMG $GM $SNAP $ENPH $UPS $GE $T $CLF $OSIS $ROKU $NOW $PEP $LMT $FCX $RCL $VRT $WDC $HUM $SPOT $VKTX $AAL $NUE $NEM $MO $RTX $TXN $LRCX $CAT $CVX $JBLU $DXCM… pic.twitter.com/Tw2r43GFaw

— Earnings Whispers (@eWhispers) April 18, 2024

Data-wise, most news outlets will focus on Friday’s release of March PCE, due to its impact on rate cut narratives.  But we’ll also March Durable Goods orders (Wednesday morning) and the first (i.e. “advance”) estimate of Q1 GDP (Thursday morning).

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of April 14th = Uptrend

• ADX Directional Indicators: Downtrend
• Price & Volume Signals: Mixed
• On Balance Volume Indicator: Mixed

ANALYSIS
The stock market outlook shows an uptrend, but both remaining signals are on the verge of confirming a downtrend so be ready this week.

The S&P500 ($SPX) dropped 1.6% last week, unable to re-establish the trend line and dropping to the 50-day moving average.  The index still sits ~10% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Apr 142024

After a borderline crossover the week prior, the ADX confirmed a downtrend signal last Tuesday.  It’s a similar set-up for On-Balance Volume this week, thanks to a marginal crossover on Friday, so the signal moves to mixed while we look for confirmation early this week.

Institutional selling increased, hitting 8 distribution days within the past 5 weeks, which is above the threshold for a correction.  For now, the price/volume signal shifts to mixed, while we wait to see if the index finds support at the 50-day moving average.

S&P Sector Performance for Week 15 of 2024

Every major equity sector in the S&P registered a loss last week.  Relative to the index, Technology ($XLK) outperformed by 1%, while Financials ($XLF) dropped an additional ~2%.

Gold was the best asset class, rising almost 1%, although all 5 underperformed versus the U.S. dollar.  You’d have to dig a bit more into precious metals to find real outperformance (i.e. Palladium, Platinum, Silver).

Asset Class Performance for Week 15 of 2024

COMMENTARY
Stocks have had an incredible run from late October, and the factors in play have changed. Given the recent weakness in equities, it’s a good time to review your holdings and make adjustments (i.e. take profits and redeploy capital).

Inflation continues to be a concern for the Federal Reserve, producers, and consumers.  The March FOMC minutes revealed that the U.S. central bank that wouldn’t commit to rate cuts, out of concern that inflation remains elevated from their targets.  The release of the latest CPI and PPI data validates those worries.

March CPI was higher than expected, with the recent surge in oil and other commodities working its way through supply chains to the consumer.

On the producer side, Core PPI was the main story.  Even after an upward revision to February data, March came in higher still, and that’s without food and energy costs.

In response to March inflation readings, the probability of a rate cut moved further into the future.  Last month, the odds of a rate cut in June fell to 50/50, as measured by the CME Group’s 30-Day Fed Fund futures prices.  As of today, probability of a rate cut in June is less than 30%, and July is 50/50.

Earnings season kicked off last week with big banks (JPMorgan Chase, CitiGroup, and Wells Fargo) beating expectations.  This week the announcements really get going:

#earnings for the week of April 15, 2024https://t.co/hLn2sKQhEY$NFLX $TSM $BAC $GS $UNH $ASML $JNJ $UAL $AXP $MS $ISRG $PG $SCHW $ABT $AA $NOK $SLB $LVS $SKIL $PLD $BK $MTB $KMI $IBKR $TRV $JBHT $BX $DFS $KEY $USB $PNC $PPG $GNTY $DHI $CSX $ELV $FBK $ALK $SSLG $TCBI $WIT… pic.twitter.com/FpuAXB5bxX

— Earnings Whispers (@eWhispers) April 12, 2024

https://platform.twitter.com/widgets.js

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of April 7th = Uptrend

• ADX Directional Indicators: Mixed
• Price & Volume Signals: Uptrend
• On Balance Volume Indicator: Uptrend

ANALYSIS
The stock market outlook remains in a uptrend, despite Thursday’s volatility.

The S&P500 ($SPX) dropped 1% last week, starting Q2 with a loss.  The index also broke  below the November trendline, though reaching a new high would re-establish the line and create a new support level.   The index sits ~4% above the 50-day moving average, and ~12% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Apr 07 2024

The ADX signal is borderline, crossing over by the slimmest of margins on Friday.  Monday’s price action will determine if the signal can sustain the bearish view or reverts to bullish.  Institutional selling is elevated, but not excessive, so the signal remains in an uptrend for this week.  On Balance Volume also remains in an uptrend, but shows a negative divergence with price since mid-March.

S&P Sector Performance for Week 14 of 2024

Sector-wise, Energy ($XLE) outperformed by a wide margin.  Heathcare ($XLV) was the worst performer, although several sectors were in rough shape.  Oil and gold were the top asset classes last week; bitcoin was the worst.

Asset Class Performance for Week 14 of 2024

COMMENTARY
ISM Manufacturing PMI showed an expansion (reading above 50) for the first time in 16 months!  ISM Services PMI declined slightly, though still shows an expansion as well.

On the jobs front, JOLTS data was inline with expectations, while non-farm payrolls exceeded expectations, reaching its highest level in 10 months.

Speeches from Fed officials didn’t provide much excitement.  Some commentators thought Neel Kashkari may have spooked the markets, leading to Thursday’s sell-off.  His remarks were likely an example of correlation not causation.  Instead:

This type of “sequenced” move rather than a simultaneous move suggests “somebody” (the proverbial ,”I heard of a guy”) blew up and position unwinds were the bigger story. Perhaps a dollar bull was short bitcoin and crude against 2yr bonds. Who knows? But somebody felt more pain than the rest of us.

https://x.com/t1alpha/status/1776287914160525470

This week, CPI data and FOMC minutes are published on Wednesday, followed by PMI data on Thursday.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.