The 48th market week continued the upward trend. A big rally for U.S. stocks on Wednesday offset the impact of Monday’s decline, sending the major indexes to modest weekly gains. (S&P 500) closed at 4071 (+46 bp). NASDAQ has an even stronger week closing at 11994 (+237).
S&P 500 weekly candles
Also, this trend is supported by VIX index which has closed at $19.07. The market seems to gain more and more confidence. Rhe U.S. government bond yields continued to fall this week. US10Y Yield closes at 3,488%. This is a very interesting indicator for Smart Money behavior.
| Index | Closed at | Week Change | YTD % |
|---|---|---|---|
| S&P 500 | 4071 | 45.58 | -14.57% |
| Dow Jones Industrial Average | 34429 | 82.85 | -5.5% |
| NASDAQ | 11994 | 237 | -26.74% |
| US10Y | 3.488% | -0.2% | 2.0% |
Bullish sentiment
On Wednesday markets were focused on Federal Reserve chair Powell speech. He highlighted the risk of relaxing monetary policy too soon and reiterated that the peak interest rate for this tightening cycle is likely to be “somewhat higher” than previously estimated. Rates could also remain higher for longer. He also acknowledged that the central bank is mindful that the effects of monetary policy take time to filter through to the economy and in light of this lag, Powell indicated that the Fed could slow the pace of rate increases. So, not really said anything new, but as reaction markets developed more confidence that the next interest rate increase will be 50bp and not 75bp.
Otherwise, we don’t see any significant new changes in the macroeconomic field compared to last week. There is rather more confidence in the model. US Treasures continue to rise, DXY continues to fall. All positive.
Bearish Indicator
However, the bigger macro picture is far away of being positive. Investors continue to ignore the fact that FED’s targeted inflation is still 2% and the US CPI is far, far away from this target at the moment. The inflation in EU stays high at 2 digits, and ECB needs to fight inflation more.
Also, the following problems are still here with us:
- Money Supply is declining every month.
- Lockdowns in China
- Geopolitical problems
Outlook (The week ahead)
This week the volatility (VIX) continued to fall and this should not be overseen. The positive trend might persist, but it lacks support and need to go over 4100 (S&P 500) and also the 200 MA line. Those are resistance levels.
So there is an increased possibility of pivoting to the bear market.
Next week to be aware of
| Monday | Tuesday | Wednesday | Thursday | Friday |
|---|---|---|---|---|
| . | Trade balance, U.S. Census Bureau | Consumer credit, U.S. Federal Reserve | Producer Price Index, U.S. Bureau of Labor Statistics | |
| . | Michigan Index of Consumer Sentiment |
Interesting tickers
Stocks to watch out for in the next weeks:
| Symbol | price level | Comment |
|---|---|---|
| ZIM | below $19, | Please don’t rush, learn where ZIM finds true support. Also read ZIM detailed review |
| AAP | $147 | Signs of support at this level. |
| DDOG | $70 | Below this becomes attractive. |
| GTLB | $34 | Below $34 would not regret going long. |
| LUMN | $5.3 | Good pricing. Beware of an uncertain future. |
| NET | $40 | Below this becomes attractive. |
| PLUG | $14,50 | Would not consider above this level |
| VZ | $37 | Good level for long term strategies. |
Other than that, most sectors are overpriced at the moment.
Stay careful! Happy investments!