This week is fairly quiet when it comes to economic data and earnings, but there are still some things that could move the markets. But given the fact that market has been mostly flat for the past 6 weeks, I wouldn’t be surprised to see another flat week this week. Still, you should know about what’s happening this week just in case there are any surprises.
Last Week Recap
The biggest news event last week was the April CPI report. Shockingly, despite CPI coming in lower than expected, the market barely moved. The lower than expected CPI report was quite bullish, but the market didn’t rally as expected. At the same time, the week prior we got a much stronger than expected labor market report that would normally have crashed the market, and the stock market barely moved on that report either. The stock market doesn’t appear to be reacting to any news – good or bad. At this point, it’s uncertain what it will take to get the stock market to start moving again. The stock market remains near the level it was at in the beginning of February. And over the past 6 weeks, the stock market has barely moved. But with the labor market remaining stronger than expected, and inflation coming down, most people think the Fed will pause at their June meeting, and some people are starting to believe that the economy might avoid the recession that everyone is predicting.
Market Sentiment
The fear and greed index (https://www.cnn.com/markets/fear-and-greed) remains in the greed stage for a 4th week in a row, but continues to decline in strength ever so slowly. Last week, we finished at 58, the week prior 59, and the month prior 60. The fear and greed index is reflecting the flat nature of the market, but is indicating that bulls are still in control, even if that control is quite weak. The fear and greed index is hovering just above neutral, indicating another flat week this week, with a slightly greater chance for a small increase on the week, rather than a decline.
The volatility index (VIX) declined every so slightly this week, finishing just a hair below the prior week’s close. The VIX closed at 17.03 last week vs 17.19 the week prior. This is again a reflection of the flat nature of the market, with a slight tilt towards bullishness.
Technical Analysis
The daily technicals turned quite bearish last week. On the DOW, we just got a 10 / 21 EMA crossover which is bearish. The candles on Thursday and Friday also closed below the 10, 21, and 50 day EMAs, which is bearish. And both the MACD and RSI also closed bearish. The technicals on the S&P were more mixed, with the candles and RSI still being bullish, but the MACD turning bearish. The NASDAQ on the other hand remains 100% bullish, but is approaching resistance at the 50% Fibonacci Retracement level. And the Russel is finally showing some signs of bullishness, but just barely. The candles and EMAs remain 100% bearish, while the MACD is neutral, and the RSI is bullish. I think the change in the technicals last week was more a reflection of the market trading flat, rather than an indication of a reversal though. And with the technicals so mixed across the different indices, there’s really no clear direction at all for this week – other than the NASDAQ which remains 100% bullish.
The weekly charts are also changing, with the DOW now showing some sings of bearishness. Last week’s candle closed below the 10 week EMA, but above the 21 week EMA. The MACD and RSI are both neutral though – indicating more flat trading this week. The S&P and NASDAQ both remain 100% bullish on the weekly charts, and while the bullishness on the S&P is slowing down, the bullishness on the NASDAQ is increasing. The Russell remains 100% bearish on the other hand, and the bearishness is increasing. It remains quite odd to have the Russel and NASDAQ moving in opposite directions. The last time this happened was during the 9 month period from April – December 2021 when small caps started falling while mega caps continued rising. Eventually the market topped out in December of 2021, and then started a massive drop. Often small caps are an indication of where the overall market will go in the future, and concern is building that we’ll get another 2021 repeat where the market eventually tops out and then goes through another 2022 style crash. For now though, the mega caps remain bullish. But be wary of a possible drop. As Warren Buffett says, be fearful when others are greedy.
Economic News
This week’s economic news will be a little light, but there is still some news that could move the markets, especially on Tuesday. On Tuesday we get US Retail sales as well as the Business Inventories report. With consumer spending making up the majority of the economy, the retail sales will be an important look into whether we might still be heading into a recession or not. And the business inventories report will also be important because concern is building that retail companies will need to start selling their excess inventory at huge discounts as retail spending slows down. Warren Buffet warned about this during this annual investor conference last week, so now we’ll get some data that might indicate the timing on what Warren Buffett warned about.
We also have Federal Reserve members speaking every day this week except Wednesday, so make sure to review the Fed calendar below so that you don’t get surprised by any intra-day sudden movements in the markets.
Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar
Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm
Earnings
Earnings season continues this week with the focus now moving to retail companies. Home Depot reports Tuesday before the open, then Target and TJX and Wix report before the open on Wednesday. That is followed by Alibaba and Walmart reporting Thursday before the open, before finally wrapping things up on Friday with John Deere.
Other Things to Know
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Wishing you the best of success trading this week,
Stock Curry