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Stock Market Outlook
For The Week Of May 19th =
Uptrend

INDICATORS

    ADX Directional Indicators: Uptrend
    Price & Volume Action: Uptrend
    On Balance Volume Indicator: Uptrend

ANALYSIS

The stock market outlook starts the week in an uptrend, with the index just shy of an all time high, thanks to April CPI data.

The S&P500 ($SPX) rose 1.5% last week and now sits above the 50 and 200-day moving averages (~3% and ~9% respectively).

Technical analysis of daily SPX prices

SPX Technical Analysis - May 19 2024

The ADX and OBV signals are bullish heading into the week, showing buyers remained more aggressive than sellers last week. Price/volume shifted to an uptrend on Wednesday, after the SPX responded to dovish CPI data with a follow-through day. The move also resets the distribution day count.

Weekly price performance of S&P500 sector ETFs

Most sub-sectors of the S&P500 were green on an absolute basis, but most of those gains were generated by the general index.  Technology ($XLK) lead the way last week, while Industrials ($XLI) were the worst performer.

From an asset perspective, a weak dollar benefited all classes. The risk-on reaction to a dovish CPI print sent the price of Bitcoin almost 11% higher for the week, breaking out of the recent consolidation pattern.

Weekly price performance by asset class

COMMENTARY

The "big news" last week was the return of the "RoaringKitty" X.com/Twitter account.  After radio silence since June 17 2021, a cryptic meme appeared Sunday:

This image was all it took to ignite a frenzy of social media speculation about a potential short squeeze in Gamestop ($GME), the ticker that made Keith Gill a household name.  Which, of course, led to a massive level of trading in several meme stocks prior to the market opening on Monday, as well as the rest the week.

Unsurprisingly, there was no "real" news driving the move, and the tickers gave back a majority of their gains.  There's even some who claim that Mr. Gill sold the "RoaringKitty" account, calling into question who is posting and for what purpose (other than your classic pump and dump).  Just another reminder to be careful when you're on the internet.

In other news, Federal Reserve Chairman Jerome Powell participated at the Foreign Bankers' Association's Annual General Meeting in Amsterdam, reiterating the stance that inflation remains sticky, but the U.S. economy is still performing well based on GDP growth, tight labor markets, and solid household finances.

His remarks came after the pre-market release Producer Price Indexes, which showed Headline and Core inflation accelerated in April. Market reaction was muted, likely due to the fact that the increases were in line with expectations.

PPI (y/y) Actual     Prior     Expected
Headline +2.2% +1.8% +2.2%
Core +2.4% +2.1% +2.4%

*March Headline PPI was revised down to 1.8% from 2.1%; Core PPI to 2.1% from 2.4%

On Wednesday, the BLS released April CPI data, showing that Core and Headline figures eased slightly in April. Market reaction was bullish on renewed expectations for interest rate cuts.

CPI (y/y) Actual     Prior     Expected
Headline +3.4% +3.5% +3.4%
Core +3.6% +3.8% +3.6%

This week kicks off with a Sunday speech from five (!) speeches from Federal Reserve officials; one Sunday afternoon from Chairman Powell, and 4 Monday morning from Bostic, Barr, Waller, and Jefferson.  Then Tuesday is more of the same, with eight (!!) more speeches!

FOMC minutes from the last meeting get dissected Wednesday afternoon, and Durable Goods Orders for April hit the wires on Friday.

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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