Weekly Market Analysis: Recap and Forecast. The Week of May 20, 2024

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 “A Goldilocks scenario where growth remains healthy and inflation is cooling has historically been a favorable condition for risk assets,” according to some Wallstreet experts. We see stocks rose after April CPI released last Wednesday, showing inflation is at slower pace than economists had expected, and it’s a lowest reading since April 2021. In addition, employment numbers are showing job market is cooling down, unemployment is edging up. This is once again, bad news for the economy is good news for the stock markets. The optimists believe given how the markets reacted to last week economic data, we may see a market rally continues into the summer.

According to FactSet data, 470 companies of the S&P500 had reported earnings. So far, 78% surpassed Wall-street forecasts for EPS, more than the 10-year average. However, there is the most IMPORTANT company to be reported this week; it’s none other than the glorious $NVDA. It is so significant that many experts believe it could help carry the rally forward or could derail it, depending on if it’s not just meet, but beating estimate of $24.5 billion in revenue or 240% increase year over year. Also, if $NVDA can continue rising guidance and beating the raised guidance next quarter, to show the AI trade can and will proceed for more. However, if there is any sign of weakness, it may not only affect $NVDA stock, but it may put pressure on others. Therefore, all eyes are on $NVDA this week, AGAIN!

Other risk factors may be taken in consideration, not immediately, but as we are heading to the 2nd half of the year, are if the economy shifts from soft to hard landing and stock rally goes too fast ahead of itself. Economic data for April released so far have hinted at a start of a slowdown that could snowball, potentially threatening the markets. Job openings are shrinking, unemployment rate is ticking higher, economic activity in services sector is contracting, retail sales stagnated in April. Together, these data suggest the economy appears to be losing its momentum. So far, this has been a welcome news for Wallstreet. But too much of good things can be no longer good if the market rallies too far too fast. We rather see a pullback and consolidate before it goes again.

Last week, both the $SPY and the $QQQ moved exactly how we projected. $SPY held $520, broke over $525 and closed at $530 on Friday. $QQQ held $440, retraced back to $446 and broke over $450 to new high 31c shy of $455. This week, we want to see $SPY holds $530-$531 and trade to $535, then $539-$540 and possible $545-$546 if $NVDA earning can lift all the boats. Under $529, $SPY may trade down to $526.50-$525-$523, then $520. $QQQ is currently in $450-$455 range. It if can break over $456, look to trade to $460, then $464-$466. If it goes below $450, it should trade $2 below $448-$446-$444-$442-$440.

Certainly, we will focus on $NVDA this week along with our FAANG-Tech stocks and earnings such as $PANW, $ZM, $TGT, $PDD, $SNOW, $WDAY, and possible $QQQ trade if it heads its way over $456. Until then, have a great profitable week. Namaste!!!