📈 Weekly Market Recap 📈
Riding the Waves 🌊: A Mixed Market Reacts to Fed and Inflation Data 📉📈
Market Overview
Last week, major averages traded mixed as investors digested Fed President Jerome Powell's testimony and awaited the June CPI and PPI data. A rebound in semiconductors propelled the NASDAQ to extend its record-setting daily run to seven. However, a cooler CPI report led to a dip in mega-cap tech stocks.
Key Highlights:
June CPI: Eased by -0.1%, increasing the odds for rate cuts—92% chance of the first cut in September, per CME Group FedWatch.
Market Movement: While 80% of S&P 500 stocks rose on the inflation news, the NASDAQ fell by 329.75 points (-1.77%) due to declines in the Magnificent 7.
Performance Snapshot:
DJIA: +625.03 points (+1.6%) at 40,000.90 📊
S&P 500: +48.16 points (+0.9%) at 5,615.35 📈
NASDAQ: +45.69 points (+0.2%) at 18,398.45 🖥️
Russell 2000: +121.54 points (+6.0%) at 2,148.27 🏗️
Sector Performance
The anticipation of lower interest rates spurred buying in rate-sensitive sectors, with strong performances from:
REITs (XLRE)
Utilities (XLU)
Materials (XLB)
Healthcare (XLV)
Industrial (XLI)
Only Communication Services (XLC) closed in the red.
Market Outlook
The market's technical condition remains positive but is nearing overbought levels:
Broadening Participation:
51 out of 91 industry groups are now rated as Strong or Improving, up from 28 three weeks ago. The Russell 2000 also reached its highest level since January 2021.
Breadth Indicators:
NYSE Advance/Decline line hit a new all-time high, indicating broad participation in the rally.
Sentiment Analysis
Investor sentiment is showing signs of being overly optimistic:
AAII Survey: Retail bulls at 49.2%, outnumbering bears 2.3:1, marking the largest divergence since March.
Investors Intelligence (II): Highest percentage of bullish advisors since 2021.
Margin Levels: Reached $809.43 billion, the highest since February 2022, raising caution for potential contrarian signals.
Inflation and Economic Outlook
While the CPI report was a relief, a hotter-than-expected PPI signals a challenging road to the Fed's 2% goal. However, the likelihood of a rate cut in September enhances the prospect of a soft landing for the economy.
Upcoming Week
Earnings Season: Q2 earnings will dominate market action, with manufacturing and housing data prominent on the economic calendar. The next inflation gauge, June PCE, is due in late July.
Volatility Outlook: Low VIX readings suggest traders anticipate stability, but rising VIX futures indicate potential volatility as August approaches.
Market Posture
Current Posture: Neutral as of 07/12/2024 (DJIA: 40,000.90).
Industry Group Rankings
Strong Groups (51):
Media-Publishing
Advertising
Computers & Information
Communications
Weak Groups (40):
Oilfield-Drilling
Retailers-Drug based
Household Products-Durable
Oil-Secondary
Top Performing ETF Categories
Top Performers:
Sector-Alternative Energy: +6.25% 🌿
Blend-Small Cap: +5.51% 📈
Specialty Real Estate: +5.10% 🏢
Specialty Health: +4.25% 🏥
Growth-Small Cap: +3.92% 🚀
Weakest Categories:
Shorts: -3.98% 🔻
Commodity-Energy: -1.68% ⛽
Commodity-Base Metals: -1.18% 🪙
Commodity-Blend: -1.08% 📉
*Disclaimer: The information in The Options Oracle is my opinion, not financial advice.
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