by Ben Weiss, for the Call to Leap Team
We made it through Q2 and now we're heading into a short holiday trading week. Maybe you can take some time off and celebrate the start of summer. Please be safe and have fun!
We had a bit of a choppy, rollercoaster week in the market. Let's take a look at what happened this week in the market and what's coming up...
The market this week
In contrast to the string of previous positive weeks, we saw mostly flat outcomes across all 4 major indices, with some ups and downs throughout the week. The Magnificent 7 were split, with NVDA staying cool and AMZN and GOOGL carrying the green flag. With summer earnings season a few short weeks away and the financial quarter coming to a close, there seems to be a hint of a "wait and see" sentiment currently. Fortunately for us options traders, we have tools in our toolbox to trade in all market conditions--including a sideways direction! For those keeping score in the world's MVC (Most Valuable Company) contest, MSFT, AAPL, and NVDA continue to top the chart, respectively. But nothing's written in stone--AMZN just passed $2 trillion for the first time and is nipping at the heels of GOOGL at $2.25T to round out the Top 5.
By the numbers, the S&P 500 (+0.02%) and Nasdaq 100 (+0.18%), and Dow 30 (-0.17%) all registered flat-line results while small-cap Russell 2000 (+1.21%) made the strongest movement as investors showed "the little guys" some love. That said, the S&P 500 did deliver a new all-time high at $5,524 early Friday morning, around the time when the Nasdaq 100 revisited its previous all-time high from a week ago at $19,990. Can the bulls push the index over the momentous (yet arbitrary) $20,000 mark next week?
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. Did you know?... The S&P 500 just recorded its 2nd-strongest start to the year in history: +15% since January. Thanks in large part to NVDA and the megacaps huge growth, the market has added $16 trillion in value so far this year. 🤯
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To the charts
SPY
In the S&P 500 (SPY), we saw a bit of a holding pattern, or "consolidation", around its all-time high, briefly passing the $550 level for the first time. The index also continues to post higher lows, a good bullish indicator.
I've drawn my trading channel lines on this chart to give a more zoomed-out view. You can think of these diagonal lines 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 be traced back into 2023, serving over time as both support and resistance. While I'm still overall bullish, this dotted line suggests we might see short-term resistance, possibly with movement back towards previous support levels.
Adding a few indicators to the daily chart, we can see a few potentially short-term bearish clues to keep an eye on:
[top chart] The stock price bounced off the dotted green line, which could continue to act as temporary resistance.
[middle chart] RSI (Relative Strength Index) remains elevated and close to overbought at 66, though it has come down quite a bit from previous high at 78.
[bottom chart] MACD (Moving Average Convergence Divergence) remains above the zero line but has recently had a shallow "death cross" where the blue MACD line has dipped below the orange signal line, a potentially bearish reversal indication.
While no indicator is a guarantee of future performance, these charts make me cautiously bullish for the near term.
QQQ
Like SPY, the Nasdaq index and QQQ also re-tested recent all-time highs around $487 before retracing back down off the top green channel line. 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 cautious optimism with hints of a potential short-term bearish "cooling off":
[top chart] QQQ bounced off the top channel line acting as resistance.
[middle chart] RSI remains overextended for QQQ at 65, though it has come back down considerable from its overbought peak at 82.
[bottom chart] MACD looks to have peaked and has also formed a shallow death cross, further suggesting a temporary bearish reversal. That said, we also saw a MACD death cross at the end of May and QQQ quickly rebounded bullishly to push even higher.
In the news
Data, data everywhere... We received a handful of encouraging economic reports this week, all of which were closely in-line with analysts expectations and didn't seem to jar the market in either direction:
PCE, or "Personal Consumption Expenditures", price index had very little increase in May and only 2.6% year-over-year, marking the lowest rate since March 2021, when inflation first rose above the 2% threshold at the beginning of the pandemic-era hyperinflation peak. This is great news according to San Francisco Federal Reserve President Mary Daly, adding: “It is just additional news that monetary policy is working, inflation is gradually cooling. That’s a relief for businesses and households who’ve been struggling with persistently high inflation. It’s good news for how policy is working.”
US GDP, or "Gross Domestic Product", rose a modest annualized 1.4% in Q1 as expected but is expected to accelerate to 2% in Q2. The GDP is a sum total measure of all the goods and services produced in an economy and is a helpful measure of economic growth.
Initial jobless claims were reported mostly inline with expectations at 233,000. Continuing jobless claims grew slightly from last month to 1,839,000.
Personal income rose nicely from a 0.3% increase in May to 0.5% increase in June, beating expectations, while personal spending held steady at 0.2%.
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