📈 Weekly Market Recap 📈
New Highs and Mixed Signals: Navigating a Volatile Market
July 5, 2024 🗓️
The S&P 500 and NASDAQ notched a string of new record highs during the short holiday week as yields ticked lower on slowing economic data. June job reports showed a resilient but slowing market, with Friday's Bureau of Labor Statistics showing an increase of 206k payrolls but the Unemployment Rate rising to 4.1%, the highest since October 2021. Manufacturing data was weaker than expected, with the ISM Manufacturing Index lower for a third consecutive month and a drop in Factory Orders.
📉 Market Summary:
DJIA: +257.01 points (+0.7%) to 39,375.87
S&P 500: +106.71 points (+2.0%) to 5,567.19
NASDAQ: +620.16 points (+3.5%) to 18,352.76
Russell 2000: -20.96 points (-1.0%) to 2,026.73
🛢️ Crude Oil: Increased fears of expansion in the Middle East closing at $83.13 a barrel, a high mark since April, and up +14.3% from the June low.
📊 Market Sectors:
Outperforming: Consumer Discretionary (XLY) +3.78%, Technology (XLK), Communication Services (XLC)
Underperforming: Energy (XLE), Healthcare (XLV), Industrial (XLI), Materials (XLB)
📅 Week Ahead:
Next week, investors will get another opportunity to gauge the effect of higher rates on inflation with the June CPI and PPI due. In addition, the Money Center Banks, including JP Morgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C), will kick off Q2 earnings on Friday. With JP Morgan and Citigroup at record highs, traders are looking for the banks to beat estimates.
📉 Technical Condition:
The technical indicators are positive with MACD, a short-term trend gauge, crossing back into bullish territory for the S&P 500 and NASDAQ, while Momentum, as measured by the 14-day RSI, is strong but readings in the mid-70s confirm the indexes being overbought. The S&P 500 is also 13.7% above its 200-day MA, the most since the end of March. This could lead to some backing and filling over the short-term.
📈 Breadth:
Underlying breadth was mixed and has yet to signal that the rally is beginning to broaden out. The NYSE and NASDAQ Advance/Decline lines, which are considered leading indicators of market direction, saw a small increase in the NYSE, but despite the NASDAQ's outperformance, it was based on a small group of stocks with the NASDAQ A/D line moving lower. One caveat, however, is that the NYSE A/D line has been improving modestly over the last three weeks and finished the period less than 2,000 units off its previous high.
🧠 Investor Sentiment:
Bullish Investor Sentiment grew over the last few weeks and is pushing extreme levels. FINRA reported a jump in May margin levels to $809,431,000, which is the highest level since February 2022. The National Association of Active Investment Managers (NAAIM) Exposure Index jumped to 103.7, the highest exposure to equities since the last week of March. The DJIA pulled back about -5% as it rolled into April. Investors Intelligence (II) shows the Percentage of Bullish Investment Advisors outnumber the Bears 3.7:1. Overly bullish investors isn't in itself a reason to sell, but certainly is a reason for caution.
📈 Key Indicators:
Cyclical Trend Index (CTI): Positive at +3, unchanged from the previous week. Expected to turn negative soon.
Momentum Index (MI): Positive at +4, down six notches from the previous week. NYSE breadth positive, NASDAQ breadth negative.
Sentiment Index (SI): Negative at -8, down a notch from the previous week.
💡 Industry Group Rankings:
Strongest: Advertising, Media-Publishing, Marine Transportation, Automobile Manufacturing
Weakest: Trucking, Semiconductors & Related, Restaurants, Retailers-Drug Based, Insurance-Life
📊 ETF Center:
Top Performing: Specialty Technology (+3.28%), Commodity-Precious Metals (+3.15%), International-Ex Europe (+2.02%)
Weakest: Specialty Health (-1.94%), Shorts (-1.77%), Bond-Government Long Term (-1.39%)
📰 Conclusion: A Mixed Bag with a Dash of Optimism
This week saw a rollercoaster ride, with the Magnificent 7 leading the charge and inflation data keeping us on our toes. As we head into a short, potentially volatile week, keep your eyes on job reports, manufacturing data, and those ever-cryptic Fed minutes. The market may be playing hard to get, but with some technical resilience and a bit of bullish sentiment, we might just see a few more surprises before summer heats up! 🌞📈
*Disclaimer: The information in The Options Oracle is my opinion, not financial advice.
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