Stock Market Outlook entering the Week of April 28th = Downtrend
ADX Directional Indicators: Downtrend
Price & Volume Signals: Downtrend
On Balance Volume Indicator: Downtrend
ANALYSISThe 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 $XLV, respectively).
Equities were also the best asset class last week, rallying 2.7%. Gold led to the downside, falling 2%.
Asset Class Performance for Week 17 of 2024
COMMENTARYDespite disappointing economic data, at least for those still clinging to hopes of rate cuts, Magnificent 7 earnings reports stole the show last week.
The first (i.e. “advance”) estimate of Q1 GDP came in well below expectations, showing a slowdown in growth and an increased in inflation (i.e. stagflation environment). This release showed the large role government spending played in keeping the U.S. economy out of a recession.
PCE for March came in higher than expected as well. And you know it’s bad (i.e. hawkish) when talking heads switch their focus to justifying why the Federal Reserve doesn’t need to raise rates, rather than the number of cuts this year.
PCE (y/y)
Actual
Prior
Expected
Headline
+2.7%
+2.5%
+2.6%
Core
+2.8%
+2.8%
+2.6%
March Durable Goods orders were higher than expected, but February numbers were revised down, so this release had limited market impact.
On the earnings front, about 1/3 of the S&P500 reported with some interesting surprises along the way. Tesla ($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.