S&P 500 Momentum Report

US retail sales in focus to start the week

Wall Street managed to get past the recent Federal Open Market Committee (FOMC) meeting unscathed, as market participants looked beyond the hawkish hold from policymakers and continue to find traction in artificial intelligence (AI) names. With the Federal Reserve (Fed) being very much data-dependent, markets are likely to take their cue from incoming economic data to drive expectations around the Fed’s rate outlook, with broad consensus still leaning towards two rate cuts versus the one cut guided recently by policymakers.

Ahead, the US retail sales will be the focus to start the week. Expectations are for US retail sales to increase 0.2% month-on-month, up from the 0% prior, which may help to offer markets with some relief around growth risks, while not overly hot to trigger inflation concerns.

S&P 500: Rising channel pattern in place

Strength in mega-cap stocks has shown little signs of abating over the past week, paving the way for the S&P 500 to scale yet another fresh record high. A rising channel pattern since October 2023 stands in place, with the index potentially setting its sight for the 5,700 level next. For now, while near-term overbought technical conditions may call for some slight breather into the new week, the broader upward trend is likely to persist, leaving any buying-on-dips as still the preferred strategy.

Levels:

R2: 6,000
R1: 5,700

S1: 5,260
S2: 5,000

Source: IG charts

Dow Jones Industrial Average: Attempting to bounce off trendline support

After retracing close to 5% from its May 2024 peak, the DJIA is attempting to pare some losses lately, finding support from an upward trendline from its April low. This seems to leave the 38,200 level as key support to defend, as the index eyes for any formation of a new higher high to keep the near-term upward bias intact. The 39,000 level will be on watch as resistance to overcome, while for now, greater conviction for buyers may have to come from a move in its daily relative strength index (RSI) back above the key mid-line, which it has failed to overcome since end-May this year.

Levels:

R2: 39,400
R1: 39,000

S1: 38,200
S2: 37,700

Source: IG charts

Sector performance

The AI hype continues to gain traction over the past week, as growth sectors pulled ahead from the rest to lift the S&P 500 to record high level. The S&P 500 was up 2.1% for the week despite most of the sectors trading underwater, once again highlighting the US equity market concentration. Performance among the Magnificent Seven stocks have been stellar last week, notably with Apple (+12.2%), Nvidia (+7.6%), Microsoft (+4.8%) and Tesla (+7.9%) witnessing strong gains. Previously deemed to be late in the AI race, investors cheered greater clarity on Apple’s AI roadmap at its Worldwide Developers Conference, which triggered a wave of catch-up buying. Despite so, year-to-date, Apple is still trailing behind its Magnificent Seven peers (except Tesla) with a 12.5% gain, which may leave room for further upside.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 11th – 17th June 2024.

Source: Refinitiv
*Note: The data is from 11th – 17th June 2024.

Source: Refinitiv
*Note: The data is from 11th – 17th June 2024.