by Ben Weiss, for the Call to Leap Team
I hope everyone had a safe and fun Memorial Day weekend and made it through the short trading week well! Maybe the markets had a bit too much fun last weekend because they seemed to be taking a breather this week.
Let's take a look at what happened this week on the market and what's coming up...
The market this week
For the second consecutive week, we saw mixed-to-negative results on the market. The Magnificent 7 were roughly split down the middle, with NVDA leading on the bullish side. While the major market indices showed difficulty breaking through to fresh all-time highs, NVDA had no problem maintaining positive momentum from its huge earnings last week, closing out the month of May with a cool 32% share price increase. 😎
Other notable tech stocks DELL and CRM (Salesforce) didn't fare as fell following their earnings announcements, both suffering about 20% declines during the day after earnings. DELL in particular has been recently hitching a ride on NVDA's rocketing success, though investors sold off DELL aggressively to hit the reset button on the stock's recent sharp bullish advance (see the daily chart below).
By the numbers, the S&P 500 (-0.07%), DOW 30 (-1.03%), Nasdaq (-0.31%), and Russell 2000 (+0.44%) showed flat and indecisive movement. All four indices had been steadily declining through the week before a strong Friday-late-afternoon rally clawed us back closer to even for the week (see below SPY's 5-min interval chart for Friday).
With a couple volatile and choppy trading weeks in the rear view mirror, I'll be watching very closely to see if the market can shake off these mixed emotions and resume marching upward with conviction. As always, anything can happen on the market, however the case for the bulls appears solid thanks to continued strong earnings from many companies across a variety of sectors.
To the charts
SPY
This week's price action on SPY continued the downward trend established last week, however with the strong Friday rally, SPY still closed above April's then-all-time high at $525.
Often, but not always, firm resistance can turn into firm support, so I'll be interested to see if that $525 level will serve as a solid wall and encourage SPY to climb further upward next week. I included blue horizontal lines for that $525 level and the most recent all-time high at $533.
While I'm no expert on spotting chart patterns yet, I can't help but notice some potential patterns forming since the beginning of April. I see either a "double top" pattern or "cup and handle" pattern. The double top pattern is often a bearish clue whereas the cup and handle pattern can be a bullish indicator. We will likely need more time to see if either pattern fully happens.
QQQ
We also saw a bearish correction from QQQ. The index broke above the $450 level two weeks ago, corresponding to the former all-time high back in March, and closed Friday's big rally at the same level. I'll be watching closely to see if the Nasdaq finds support at $450 and continues climbing higher.
Last week, we noted how the RSI or "Relative Strength Index" was hovering right at the 70 level, hinting at a potential overbought environment if the climb continues higher. Sure enough, QQQ bounced off the RSI 70 level and sold off somewhat (see yellow circle below).
Additionally, on the MACD indicator, we can see a bearish crossover where the teal MACD line has crossed below the orange signal line (inside the pink circle below).
In the news
What the numbers are saying... We received PCE (Personal Consumption Expenditures) Price Index data this week, which is the Federal Reserve's preferred tool for measuring progress against inflation. "Core PCE" (which excludes volatile food and energy costs) rose 0.2% in April and 2.8% year over year, mostly inline with expectations.
Investors seem to receive the news well by initially lifting the market higher following the report release. However, inflation is proving to be "stickier" or harder to lower than previously expected, leading to anticipated interest rate drops to be pushed further out in the 2024 calendar. The Federal Reserve will meet next to discuss policy and the path forward on June 11-12. 👀
You got this! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. As always, let us know if you have any questions. 🙌🏻
-Steve & Ben
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