S&P 500 momentum report
The S&P 500 is inching up towards its all-time high.
US markets delivered a positive start to the week, as easing inflation concerns drove a bounce in tech. This marked a continuation of momentum from the end of last week, with the S&P 500 having recovered its earlier losses from investors’ jitters over the outcome of the Federal Reserve minutes. That said, cautious sentiments may still remain over the next two weeks as we look towards the core Personal consumption expenditures (PCE) inflation figure this week and non-farm payroll the next.
The S&P 500 continues its move higher, after rebounding off its 50-day moving average (MA) last week and staying above its Fibonacci 161.8% extension level. A bullish crossover is formed on the moving average convergence divergence (MACD) indicator, potentially suggesting further momentum ahead. Prices may move higher to retest its previous all-time high with a series of economic indicators ahead, key focus being US first quarter Gross Domestic Product (GDP -2nd estimate) and core PCE price index this week.
Sector performance
Sector performance for the past week suggested that the technology sector is seeking to rebound from earlier weakness, after being down by 3.5% over the past month, while most other sectors delivered gains. The recent one-week movement seems to suggest a near-term shift in sentiments from reopening sectors in the likes of industrials, materials and energy sector towards technology and communications services. One to watch if the renewed sentiments towards growth stocks last, considering that sector rotation towards value has been largely the theme since the start of this year.
Momentum stock studies
Note: We have selected various inputs to screen for stocks with the strongest positive momentum. The logic behind the screener is that if any stock passes all these momentum screens, there is a higher probability that they will continue on the current trajectory in the short-term. The idea of buying high and selling higher is key here.
Screening for the strongest stocks in the S&P 500 will require a stock price to: 1) be above the 20-day moving average; 2) be above the 50-day moving average; 3) be above the 100-day moving average; 4) price has closed above the upper Bollinger band.
Copart Inc (TMUS) nearing all-time high
Copart’s recent third quarter 2021 financial results saw a 33.4% and 94.5% year-on-year (YoY) increase in revenue and net income respectively, supported by growth in used car prices and increased driving activity on economic reopening. Its share price has broken out of its previous consolidation zone and is potentially moving to test its all-time high. A bullish crossover of its 50 and 100-day MA may suggest ongoing strength ahead. That said, this is one to watch if it can break a new high where resistance may be expected at the US$130 level.
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