The Safe Investing Blog

Stock Market Outlook entering the Week of June 16th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place for U.S. equities.

The S&P500 ($SPX) rose 1.6% last week.  The index ended the week ~4% above the 50-day moving average and ~13% above the 200-day moving average.

SPX Price & Volume Chart for the Week of June 16 2024

All three indicators (ADX, On Balance Volume and Institutional activity) remain bullish, thanks in large part to technology stocks.

So it’s no surprise to see the Tech sector ($XLK) leading the way last week.  What is a bit of a surprise?  All of the other sectors underperforming versus the index.  That’s not a sign of a healthy market, but we have to play the cards we have, not the cards we want.

Energy ($XLE) led to the downside.  Energy sector stocks have not been kind to investors since April.  Industrials and Financials also weakening significantly over the past month.

S&P Sector Performance for Week 24 of 2024

Oil was the big winner last week, rallying 4.2% and reclaiming its 200-day moving average after a rough couple of months.  Bitcoin did not fair well, dropping 5.4% and is now looking for support from its 50-day moving average.

Asset Class Performance for Week 24 of 2024

COMMENTARY
The May Consumer Price Index (CPI) declined versus April and came in below expectations, giving stocks a boost mid-week as investors looked forward to eventual rate cuts.

The Producer Price Index also showed signs of improvement, although that was due to an upward revision in the April figures (prior Headline reading was +1.8%, prior Core reading was +2.1%).

Despite seemingly positive inflation data, the U.S. FOMC decided to keep rates unchanged, citing the need for more evidence that inflation is really in the rear-view mirror.

For the week ahead, May retail sales figures are released on Tuesday, U.S. markets are closed Wednesday (Juneteenth holiday), and Quarterly options expiration is Friday.

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 June 9th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place for U.S. equities.

The S&P500 ($SPX) climbed 1.3% last week to hit a new, all time high.  The index closed ~3% above the 50-day moving average and ~12% above the 200-day moving average.

SPX Price & Volume Chart for the Week of June 09 2024

ADX flipped back to bullish on Wednesday, rejoining On Balance Volume and institutional activity showing uptrends.

S&P Sector Performance for Week 23 of 2024

Some sectors didn’t benefit from the indexes strong performance. While Technology ($XLK) led the way higher (+2.6%), rate sensitive sectors lost ground, with Utilities ($XLU) and Energy ($XLE) both dropping more than 3%.

Sector performance was a read-through from asset classes, with Oil leading to the downside.  Bitcoin gained 2.3%, erasing the prior week’s loss.

Asset Class Performance for Week 23 of 2024

COMMENTARY
Did you watch TheRoaringKitty webcast?  No?  Good.

Last week’s economic data was “conflicted”.  On the one hand, April ISM manufacturing PMI fell unexpectedly, although employment grew.  On the other hand, April ISM Services PMI rose dramatically, although employment contracted.  The JOLTs number showed job openings declined in April, while May NFP had the highest job growth in 5 months.

This week we get May CPI and another Federal Reserve Rate decision (Wednesday), May PPI (Thursday), and a smattering of Treasury auctions throughout the week.

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 June 2nd = Uptrend

• ADX Directional Indicators: Downtrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook starts June in an uptrend after a wild day of trading to close out the month.

The S&P500 ($SPX) was down 0.5% last week.  The index closed ~2% above the 50-day moving average and ~11% above the 200-day moving average.

SPX Price & Volume Chart for the Week of June 02 2024

ADX flipped to bearish on Thursday, and OBV stays bullish.

Institutional activity was mixed last week, but remains bullish overall.  Market makers sold mid-week (2 more distribution days for a total of 4), then bought substantially at the 50-day moving average on Friday.

S&P Sector Performance for Week 22 of 2024

Although a majority of sectors ended the week in positive territory, large capitalization stocks like Microsoft ($MSFT) counteracted those gains in the broader index.  Technology ($XLK) dropped 2.3%, while the Energy ($XLE) rebounded from its recent losing streak and finished 2% higher.

Across asset classes, it was a case of “least bad”, with each one registering a loss last week.  Bonds suffered the least damage, down 0.10%, while Bitcoin fell 2.3%.

Asset Class Performance for Week 22 of 2024

COMMENTARY
The second estimate for Q1 GDP came in at 1.3%, which is 0.3% below the first estimate of 1.6% and well below Q4 GDP at 3.4%.  Consumer spending slowed more than initial estimates, for both good and services, while government spending was revised slightly higher.  Inflation remains sticky, with PCE showing no additional reductions in April.

Weaker growth and sticky inflation will put even more pressure on interest rate policy, as any move to improve one will hurt the other.  Rates resumed their rising trend over the past two weeks, making any kind of spending or stimulus even more expensive.  On the equity side, sector performance and institutional activity gives the impression of rotation and re-balancing, rather than any kind of reduction in exposure to equities.

And if Friday proved anything, it’s that this isn’t your father’s stock market. After a brief rise at the open, the $SPX sold off during the morning, losing roughly 1% by mid-session.  But once the index closed in on the 50-day moving average, buyers stepped in and pushed prices up roughly 0.5%.  Turns out that was just a warm-up.   In the final 30 minutes of trading, the S&P500 rallied almost 1%.  Not 1 stock.  Not the Magnificent 7.  The entire index of 505 tickers, representing 500 companies and ~44 trillion dollars of market cap.

Source: Google.com

Let it serve as a reminder about the nature of today’s financial markets.  Corporate financials (corporate revenue, earnings, debt) had nothing to do with the move.  Nothing.  No macroeconomic data (i.e. GDP, CPI) or fundamental research on Apple, Microsoft or Tesla would’ve prepared you to take or not take a position.  Instead, market makers had an imbalance of some kind, and needed to buy equities at whatever price was available before the market closed…at a rate of ~15 Billion dollars per minute.

This week, the market will digest May ISM manufacturing and services PMI data, as well as jobs-related data (April JOLTS and May Non-Farm Payrolls)

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 26th = Uptrend

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

ANALYSIS
The stock market outlook remains in an uptrend, heading into a holiday shortened trading week.

The S&P500 ($SPX) was flat last week.  The index closed ~3% above the 50-day moving average and ~12% above the 200-day moving average.

SPX Price & Volume Chart for the Week of May 26 2024

All three signals (ADX, Price/Volume, and On-Balance Volume) ended the week in bullish territory. The index did pick up 2 distribution days. Given the “late” follow-though that erased a stalling day, the current rally is off to a weak start.

S&P Sector Performance for Week 21 of 2024

Under the hood, most S&P500 sub-sectors were losers last week.  Technology ($XLK) and Communications ($XLC) were the only gains, thanks to their inclusion of Mag 7 stocks.  Energy ($XLE) and Real Estate ($XLRE) were the worst sectors, each dropping more than 3%.

Asset Class Performance for Week 21 of 2024

Equities weren’t the only asset class to struggle, as gold dropped more than 3%, joining energy and real estate sectors. Bitcoin led the way again, rising another 3%.

COMMENTARY
Nvidia ($NVDA) stole the show last week, beating earnings estimates once again, and breaching the psychological $1,000/share mark. The company also announced a 10 to 1 stock split, which will lower the price of shares and options. The market needed a strong performance from this heavyweight to stay close to even on the day, since ~80% of the S&P sold off.

FOMC minutes showed that participants aren’t convinced interest rates are restrictive, given the recent string of higher than expected inflation readings. And Fed Fund Futures responded by pushing timing for the first-rate cut into November…that’s a far cry from the 6 rate cuts projected just a few short months ago.

U.S. markets are closed tomorrow (Monday) in observance of Memorial Day, so a short trading week ahead.  The U.S. Bureau of Economic Analysis releases the second Q2 GDP estimate on Thursday, and the latest PCE data comes out Friday pre-market.

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 19th = Uptrend

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

ANALYSIS
The stock market outlook starts the week in an uptrend, with the index just shy of an all time high, thanks to April CPI data.

The S&P500 ($SPX) rose 1.5% last week and now sits above the 50 and 200-day moving averages (~3% and ~12% respectively).

SPX Price & Volume Chart for the Week of May 19 2024

The ADX and OBV signals are bullish heading into the week, showing buyers remained more aggressive than sellers last week. Price/volume shifted to an uptrend on Wednesday, after the SPX responded to dovish CPI data with a follow-through day. The move also resets the distribution day count.

S&P Sector Performance for Week 20 of 2024

Most sub-sectors of the S&P500 were green on an absolute basis, but most of those gains were generated by the general index.  Technology ($XLK) lead the way last week, while Industrials ($XLI) were the worst performer.

From an asset perspective, a weak dollar benefited all classes. The risk-on reaction to a dovish CPI print sent the price of Bitcoin almost 11% higher for the week, breaking out of the recent consolidation pattern.

Asset Class Performance for Week 20 of 2024

COMMENTARY
The “big news” last week was the return of the “RoaringKitty” X.com/Twitter account.  After radio silence since June 17 2021, a cryptic meme appeared Sunday:

This image was all it took to ignite a frenzy of social media speculation about a potential short squeeze in Gamestop ($GME), the ticker that made Keith Gill a household name.  Which, of course, led to a massive level of trading in several meme stocks prior to the market opening on Monday, as well as the rest the week.

Unsurprisingly, there was no “real” news driving the move, and the tickers gave back a majority of their gains.  There’s even some who claim that Mr. Gill sold the “RoaringKitty” account, calling into question who is posting and for what purpose (other than your classic pump and dump).  Just another reminder to be careful when you’re on the internet.

In other news, Federal Reserve Chairman Jerome Powell participated at the Foreign Bankers’ Association’s Annual General Meeting in Amsterdam, reiterating the stance that inflation remains sticky, but the U.S. economy is still performing well based on GDP growth, tight labor markets, and solid household finances.

His remarks came after the pre-market release Producer Price Indexes, which showed Headline and Core inflation accelerated in April. Market reaction was muted, likely due to the fact that the increases were in line with expectations.

*March Headline PPI was revised down to 1.8% from 2.1%; Core PPI to 2.1% from 2.4%

On Wednesday, the BLS released April CPI data, showing that Core and Headline figures eased slightly in April. Market reaction was bullish on renewed expectations for interest rate cuts.

This week kicks off with a Sunday speech from five (!) speeches from Federal Reserve officials; one Sunday afternoon from Chairman Powell, and 4 Monday morning from Bostic, Barr, Waller, and Jefferson.  Then Tuesday is more of the same, with eight (!!) more speeches!

FOMC minutes from the last meeting get dissected Wednesday afternoon, and Durable Goods Orders for April hit the wires on Friday.

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 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.