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Saturday, July 22, 2023

Stocks Mostly Higher Begining of Earnings Season

Weekly Wrap Content for the week of Jul 21:

1. Week 29 major indexes performance;

2. Week 29 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S.

Key Takeaways:

- For the week ended Jul 21, 2023, most of the major U.S. equity indexes advanced on hopes that the tight labor market and moderating inflation would help the economy avoid a hard landing.

- The tech-heavy Nasdaq Composite(COMP), however, suffered a modest pullback. The S&P 500 within 6% of the all-time high, after impressive gain it has had so far this year.

- Stocks have rallied sharply off of the October bear-market low, recouping the majority of the 26% decline between January and October of last year.

- The latest batch of corporate earnings announcements offered an additional boost. Refer to major indexes’ weekly and YTD performance table below.

Key highlights for the week and outlook:

1.    Initial jobless claims decline. With initial claims reaching their lowest level since May. Labour market remains in great shape by historical standards, there are early signals that some softness is emerging. Initial jobless claims are one of the credible leading indicators among analysts. The three-week moving average in weekly initial jobless claims is up nearly 20% over the last six months. 

2.    Earnings remained squarely in focus. About 79% of S&P 500 companies that have reported earnings thus far have topped earnings per share forecasts. Still, we're not even one-fifth of the way through earnings season. 

3.    Fed rate hikes. Analysts expect the Fed to hike by another quarter point (0.25%) at its meeting on July 26 and hold its policy rate steady over the course of the year. 

4.    Yield curve (10y treasury yield - 2 year treasury yield) remains deeply inverted, in fact, the most inverted it's been in more than 40 years.

SPX sectors in play

Seven of 11 sectors within the SPX index closed with gains for the week. Value stocks outperformed their growth counterparts. Health Care(XLV) and Financials(XLF) are among top gainers, while Communication Services(XLC) and Consumer Discretionary(XLY) lagged. Refer to below SPX sectors ETF weekly performance table.


Indexes technical levels

Technically, Dow rose for the 10th consecutive session Friday, and the SPX ended with a modest weekly advance. The Nasdaq (COMP) posted a small weekly drop. The SPX now within 6% of the all-time high. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as the latest economic data pointed to faltering growth.  The Shanghai Stock Exchange Index(SSE) tumbled 2.16%, while the blue chip CSI 300 declined 1.98%. In Hong Kong, the benchmark Hang Seng Index(.HSI) fell 1.74% ( refer to the above weekly performance table).  

Key highlights for the week and outlook for China/HK:

1.    On a year-over-year basis, China’s gross domestic product expanded 6.3% in the second quarter—below expectations but faster than the 4.5% growth rate recorded in the first quarter. On a quarterly basis, the economy grew 0.8%, down from the first quarter’s 2.2% expansion. 

2.    The government pledged to improve conditions for private businesses to boost corporate confidence amid the faltering recovery, according to a statement released Wednesday. Separately, Chinese authorities unveiled an 11-point consumption plan to boost household spending.

Technically, both .HSI and SSE index are trading under their major moving averages- facing downside selling pressure. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

The STI index recorded 2nd weekly gains in a row, has since fully recovered its losses and closed highest since May 2023, though the index remains largely in its consolidation range this year. It recorded moderate ytd gain of 0.83%.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

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