Last week, the stock market saw continued swings as daily doji sell signals shifted momentum to negative on Tuesday. The FOMC announcement on Wednesday led to a brief rally in the S&P 500, which was short-lived as stocks dropped sharply into the close. The lower close likely encouraged market bears as major averages recorded the largest monthly decline of the year in April, with the Dow Industrials losing 5% and the S&P 500 and Nasdaq Composite down over 4%. Despite this, new buying emerged towards the end of the week, driven by positive jobs reports and earnings from companies like Apple.
The Dow Jones Utility Average led the way with an impressive gain of 3.4% for the week, outpacing the iShares Russell 2000 and the Dow Jones Transportation Average. The Nasdaq 100 gained 1%, slightly higher than the S&P 500, which is now leading on a year-to-date basis. The SPDR Gold Shares was down 1.7% for the week but remains up 11.4% year-to-date. Overall, the market action last week indicated a positive outlook, with advancing issues on the NYSE leading declining issues by a 3-1 margin on both Thursday and Friday.
Technical analysis of the stock market also showed positive signs last week, as the S&P 500 and NYSE Stocks Only Advance/Decline lines continued to rise above their EMAs. The A/D lines had previously been in a downtrend since early April but turned up last week, suggesting an end to the correction and a resumption of the uptrend from the October 2023 lows. The positive formation from the weekly A/D lines, along with the break of downtrends, indicated a short-term uptrend despite the possibility of sharp corrections against the trend.
Growth stocks continued to outperform value stocks last week, with another positive week for growth indicating a potential transition where growth is leading once again. The Invesco QQQ Trust (QQQ) showed improved technical outlook, closing above important levels and facing resistance at $442.15. The daily Nasdaq 100 A/D line was positive, but the weekly was still below its WMA. More positive readings from the daily A/D lines are needed to indicate a trending higher stock market, with bullish sentiment rising to 38.5% according to AAII.
The dynamic Trailing Stop (DTS) analysis also saw some significant improvements last week, with new bullish signals for companies like Apple and Amazon. The overall reading for this group rose from 25% to 62.5%, indicating potential market leaders. Monitoring sector ETFs based on yearly pivot analysis is also crucial to determine if they have completed their corrections. Keeping an eye on risks and using stops is essential for reducing the risk of new buying in the market.
