Weekly Market Analysis: Recap and Forecast. The Week of July 8, 2024

market analysis Sep 19, 2024

The market has extended its summer rally, with both the S&P 500 and the Nasdaq climbing to yet another record peak Friday as June’s employment report reflected a steady unemployment rate and weaker hiring like they expected. The U.S. economy added 206,000 jobs in June while the unemployment rate rose slightly to 4.1%. While jobs growth is slowing this year, the unemployment rate remains steady. As of Friday close, the S&P500 index has rallied 16.7% so far in 2024, kicking off July with gains. So far, the stock market seems to “heat up” with the view that the Fed may start lowering interest rates this year because inflation is easing toward its target, as opposed to fears that the economy is falling apart with high unemployment and high inflation. Traders in the federal-funds futures market are expecting the Fed to begin cutting rates in September, showing a 71.1% chance on Friday’s trades.

As mentioned on last week’s forecast, July is imperative for the market with events of deciding factors if stocks are heating up or cooling downs in the next few weeks. Investors will get a reading on June inflation from the consumer-price index this week, with the CPI report due out July 11. Consensus estimates by FactSet call for a 3.1% year-over-year increase, which would be down from May’s 3.3% result; that would help validate the market’s narrative that the Fed could cut rates soon.

This week will be a busy week with the main event of Thursday’s CPI report, PPI report and banks kick off the 2nd Quarter earnings season on Friday, some Treasury debt auctions and possible developments in the presidential election race. A smaller than expected number in inflation could encourage the Fed for a rate cut in September meeting, but some suggest that a sufficiently weak number could even open the door to a rate cut in a few weeks. However, a hotter than expected reading could pause the stock market rally. On the other hand, any indication that the Fed might be close to cutting rates could help to boost those stocks that are lagged the S&P 500, including small-caps and more cyclical and interest-rate sensitive stocks like those belonging to the real estate and lending sector; and we want to be ready for those trades when not if the Fed does cut rate.

Last week, even with the holiday in between, $SPY did exactly how we forecasted. It reclaimed $546, retested $550 and made new high to $553-$556 area. It closed at $555. Now $SPY is in $550-$555 range. A break over $556, it may make new high again to $559-$560, then $1.50 above. If it fails to hold $550-$549.50 area, it may trade down to $546--$545 then $543.50. $QQQ traded passed our $490 PT and closed the week over $496. Now, if it can hold $495 and go over $497, it should make its way to $500-$502, which may be a natural resistance. Over $502, look to trade it every $2 above. If it fails to hold $494, it may go back down to $490-$488, then $485-$483, then $2 below.

This week we will focus on our FAANG’s stocks that are breaking out like $MSFT, $GOOG, $AMZN, $META, $AAPL and possible next week earnings and sectors that may be benefited from potential rate cut if CPI numbers show some hope. Until then, have a wonderful July and thank you for utilizing this market forecast and analysis for your trades. Namaste!!

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