Good evening. Stocks market finally pullbacks after a six-week consecutive run higher, and earnings season continues with more mega-cap tech companies reporting this week. Here are the top stocks to watch this week and what’s moving the markets.

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Top Stocks & Setups To Watch This Week

• $MU
Break above 117.45 🎯 123.03 & 127.49
• $NVDA
Break below 116.44 🎯 112 & 109.63
• $NFLX
Break above 644.37 🎯 660.64 & 675.58
• $GOOGL
Break below 176.30 🎯 172.65 & 169.44
• $COIN
Break above 263.01 🎯 276.38 & 283.48
• $MSFT
Break above 444.85 🎯 449.52 & 457.37

KV’s S&P 500 Analysis

KV here with your weekly SPY levels! The S&P 500 finally pulled back from all-time highs again last week, coming close to the $540 zone we talked about in the newsletter last week. We have another big week ahead of us, as you’ll read below, especially with the mega-tech earnings continuing to report, which will be key to understand if we might see all-time highs again, or did we just leave the top.

Weekly Market Recap

Soft Landing Anticipation

Last week saw weakness in the tech sector, leading to losses in the S&P 500 and Nasdaq, while the Dow, with fewer tech components, reached new highs. The relationship between stocks and rates in 2024 has shifted through three phases. Initially, both rose together despite inflation, then rates hiked and stocks fell in April. Recently, stocks rallied as rates dropped, anticipating a Fed rate cut. The "soft landing" scenario of easing inflation, stable growth, and Fed cuts is now priced in. While we expect the Fed to cut rates in September, unanimous market expectations could cause volatility if inflation data disappoints.

Leadership Change

Equity gains this year have been driven by mega-cap tech stocks like Apple and Microsoft, continuing a trend from 2023. However, last week saw a shift, with the S&P 500 equal-weight index outperforming as cyclical sectors like financials and energy outperformed tech. This doesn't signal the end of tech leadership but suggests a broadening trend where lagging sectors catch up. The "Magnificent 7" tech stocks have moderated in growth, while other S&P 500 profits are expected to accelerate. This rotation indicates a potential for more balanced market leadership moving forward.

Small-Caps Surge

Small-cap stocks surged last week, breaking their 2024 trend of stagnation. This shift is attributed to confidence in an upcoming Fed rate cut, signs of a resilient yet slowing economy, and election expectations favoring pro-growth policies. The performance of small-caps reflects a shift towards cyclical, economically sensitive investments, benefiting from easier Fed policy. Small-cap earnings estimates for the second half are strong, and dependent on continued economic resilience. While the recent rally may not be a false start, sustained evidence of a soft landing is crucial for this rotation to continue.

Coming Up…

We still have one more week until the July FOMC meeting, but there are still some important economic releases this week with second-quarter GDP numbers coming out this Thursday and PCE inflation data for June on Friday. On the earnings front, TSLA, GOOGL, AAL, F, GE, GM, T, V, and IBM are expected to report this week.

Key Headlines We’ve Been Reading

This is what’s caught our eye over the past 7 days.

• Apple achieves record $8 billion annual sales in India.
• Amazon advertising portal crashes, disrupting Prime Day sale.
• Pound hits highest level against dollar for a year.
• Verizon is exploring selling thousands of towers in US.
• Five takeaways from Trump's convention speech.

Trading Rule Of The Week

That was it for this week!

Stay safe,
KV 👋

Week #30 | July 21, 2024

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