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Stock Market Outlook
For The Week Of March 14th =
Uptrend

INDICATORS

    ADX Directional Indicators: Downtrend
    Price & Volume Action: Mixed
    On Balance Volume Indicator: Mixed

ANALYSIS

The stock market outlook shows an uptrend, but both remaining signals are on the verge of confirming a downtrend so be ready this week.

The S&P500 ($SPX) dropped 1.6% last week, unable to re-establish the trend line and dropping to the 50-day moving average.  The index still sits ~10% above the 200-day moving average.

Technical analysis of daily SPX prices

SPX Technical Analysis entering the Week of Apr 142024

After a borderline crossover the week prior, the ADX confirmed a downtrend signal last Tuesday.  It's a similar set-up for On-Balance Volume this week, thanks to a marginal crossover on Friday, so the signal moves to mixed while we look for confirmation early this week.

Institutional selling increased, hitting 8 distribution days within the past 5 weeks, which is above the threshold for a correction.  For now, the price/volume signal shifts to mixed, while we wait to see if the index finds support at the 50-day moving average.

Weekly price performance of S&P500 sector ETFs

S&P Sector Performance for Week 15of 2024

Every major equity sector in the S&P registered a loss last week.  Relative to the index, Technology ($XLK) outperformed by 1%, while Financials ($XLF) dropped an additional ~2%. Gold was the best asset class, rising almost 1%, although all 5 underperformed versus the U.S. dollar.  You'd have to dig a bit more into precious metals to find real outperformance (i.e. Palladium, Platinum, Silver).

Weekly price performance by asset class

Asset Class Performance for Week 15of 2024

COMMENTARY

Stocks have had an incredible run from late October, and the factors in play have changed. Given the recent weakness in equities, it's a good time to review your holdings and make adjustments (i.e. take profits and redeploy capital).

Inflation continues to be a concern for the Federal Reserve, producers, and consumers.  The March FOMC minutes revealed that the U.S. central bank that wouldn't commit to rate cuts, out of concern that inflation remains elevated from their targets.  The release of the latest CPI and PPI data validates those worries.

March CPI was higher than expected, with the recent surge in oil and other commodities working its way through supply chains to the consumer.

CPI(y/y) Actual Prior Expected
Headline +3.5% +3.2% +3.4%
Core +3.8% +3.8% +3.7%

On the producer side, Core PPI was the main story.  Even after an upward revision to February data, March came in higher still, and that's without food and energy costs.

PPI(y/y) Actual Prior Expected
Headline +2.1% +1.6% +2.2%
Core +2.4% +2.1% +2.3%

In response to March inflation readings, the probability of a rate cut moved further into the future.  Last month, the odds of a rate cut in June fell to 50/50, as measured by the CME Group's 30-Day Fed Fund futures prices.  As of today, probability of a rate cut in June is less than 30%, and July is 50/50.

Earnings season kicked off last week with big banks (JPMorgan Chase, CitiGroup, and Wells Fargo) beating expectations.  This week the announcements really get going:

Earnings for the week of April 15, 2024
$NFLX $TSM $BAC $GS $UNH $ASML $JNJ $UAL $AXP $MS $ISRG $PG $SCHW $ABT $AA $NOK $SLB $LVS $SKIL $PLD $BK $MTB $KMI $IBKR $TRV $JBHT $BX $DFS $KEY $USB $PNC $PPG $GNTY $DHI $CSX $ELV $FBK $ALK $SSLG $TCBI $WIT…

— Earnings Whispers (@eWhispers) April 12, 2024

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don't, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics



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Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.

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