by Ben Weiss, for the Call to Leap Team
To all of our community members in the US, Happy July 4th! For everyone everywhere, happy start of July and kickoff to the financial Q3!
Let's take a look at what happened this week in the market and what's coming up...
The market this week
To start the quarter off, we saw a strong, positive week in the market. Coming off a flat week previously to close the quarter, all of the Magnificent 7 stocks boasted impressive gains, highlighted by TSLA's massive breakout. Check out the heatmap above...you read that right: TSLA gained 26% this week after consolidating and trading sideways for much of 2024.
The S&P 500 and Nasdaq 100 indices once again notched fresh all-time highs this week. July is historically a strong month for the stock market as Smart Money often likes to kickoff Q3 with a bullish bang. With summer earnings season a few short weeks away, I wouldn't be surprised to see this bullish run continue, but I'm keeping a close eye on a potential top out or correction with some profit taking around major earnings announcements.
By the numbers, the S&P 500 (+1.43%) and Nasdaq 100 (+2.90%), and Dow 30 (+0.73%) all registered healthy gains while small-cap Russell 2000 (-1.16%) saw a modest retreat as the gap between large/mega-cap and small-cap growth widens. The S&P 500 closed the week at a blistering $5570, while the Nasdaq 100 shattered the $20,000 level to close just shy of $20,400!🧯🔥
Fresh all-time highs are certainly exciting, though I'll continue to watch closely to see if these indices can continue their upward momentum with earnings season approaching or if a short-term pullback is what the doctor ordered. As always, anything can happen in the market, however the case for the bulls continues to appear solid for now.
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To the charts
SPY
In the S&P 500 (SPY), we saw a return to strong bullish momentum after a brief period of sideways consolidation.
You can view the diagonal channel lines I've drawn in two sets
First, the solid upper and lower green lines are showing a well-defined up trend dating back to 2023, suggesting we may still have quite a bit more headroom to grow into before we reach the upper limit.
Alternatively, I noticed a midway trend line shown with the dotted green line that can also be traced back into 2023, serving over time as both support and resistance. While I'm still overall bullish, SPY might be find resistance against this dotted line, suggesting we might see short-term resistance, possibly with retracement back towards previous support levels like ~$540.
Adding some indicators to the daily chart, we can see a mix of potentially short-term bearish and longer-term bullish clues to keep an eye on:
[top chart] The stock price bounced off the middle dotted green line, which could continue to act as temporary resistance. The price is also riding just inside the top red Bollinger Band, though it has yet to break out above.
[middle chart] RSI (Relative Strength Index) remains elevated at 77 and rose back into overbought territory above 70. More significantly, the 14-day moving average of RSI has now moved slightly above overbought 70 for the first time since January 2024, suggesting SPY is even more bullish now than it's been since the start of the year.
[bottom chart] MACD (Moving Average Convergence Divergence) remains above the zero line and quickly shed that shallow "death cross" from last week, where the blue MACD line dipped below the orange signal line, a potentially bearish reversal indication. Instead, the MACD line has now turned up, indicating potentially continued bullishness. Keep in mind that MACD is a lagging indicator so the bullishess we see on this indicator could already be behind us.
While no indicator is a guarantee of future performance, these charts keep me cautiously bullish for the near term. I'll be watching closely!
QQQ
Like SPY, the Nasdaq index and QQQ broke out bullishly above the upper solid green line. I drew an additional secondary dotted green line on top of the other lines. While the top solid green line seems to have acted as resistance more often dating back to 2022, this new dotted line drawn above connects at least 4 high peaks dating back to 2023 and beyond. Regardless of which upper bounding line you like more, QQQ appears to be butting up to some overdue resistance. Will QQQ face resistance at the top of this channel and pull back towards the middle dotted green line, or will momentum carry it higher like we saw last summer? Nasdaq and tech stocks have historically performed well in July so I'll be watching closely.
Similarly to SPY, indicators for QQQ are suggesting mixed, cautious optimism with hints of needing a potential short-term bearish "cooling off":
[top chart] QQQ is facing resistance from both the upper dotted channel line and the upper Bollinger Band.
[middle chart] RSI remains significantly (but not extremely) overextended at 77.
[bottom chart] MACD for QQQ also recovered quickly from last week's shallow death cross, turning upwards bullishly. That said, MACD is at 9.0 and QQQ has never exceeded MACD 10.0 in its entire 25-year history, so how much farther can this bullish momentum continue?
In the news
Jobs and wages... We received a handful of economic reports this week, none of which seemed to have any immediate negative effect on the market:
The June jobs report from the US Labor Department showed the economy added 206,000 jobs, down from 218,000 in May (which itrself was revised downward sharply from the originally reported 272,000). Unemployment rose slightly to 4.1%, climbing above 4% for the first time since late 2021, yet still historically low. While job growth is always good for a healthy economy, a cooler labor market may not be such a bad thing as we continue to battle inflation lower.
Average wages increased 0.3% to $35/hour, an increase of almost 4% from this time last year. While prices for goods and services may continue to rise, data show that wages are growing faster than inflation which is a great sign.
The average American work week last month was 34 hours.
Let's hear from the Fed... The Federal Reserve released minutes from its most recent meeting, where nearly all of the participants agreed that the US economic growth (aka inflation) appeared to be gradually cooling. The Fed interpreted May's Consumer Price Index (CPI) data as positive evidence towards achieving their 2% inflation goal.
BOLO!... Be on the lookout for fresh CPI (consumer price) and PPI (wholesale price) data this coming week.
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