The stock market was tentative this week: S&P 500 tested new highs but retreated | chart watcher

There is a lot of activity at the end of the trading week, including earnings, Bitcoin ETFs, inflation data, geopolitical tensions, and more. And the pesky S&P 500 ($SPX) failed to reach new highs.

Earnings season kicks off this week with JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), and Bank of America (BAC) reporting fourth-quarter results. Overall, earnings were a mixed bag with some misses and some sluggishness, but that was partly due to fourth quarter charges faced by banks. On the surface, the returns may not be as bad as they seem. However, there are concerns about how banks will perform in a low interest rate environment. C shares closed higher.

Delta Air Lines (DAL) also reported earnings, and although its results were better than expected, its stock price fell due to weak forward guidance. The stock fell more than 8% on Friday, and the impact of the report rippled throughout the airline industry.

Another notable event this week was the SEC’s approval of a spot Bitcoin exchange-traded fund (ETF). This ETF will provide investors with greater access to cryptocurrencies. After this news broke, Bitcoin rebounded and hit a high of $49,435, but then fell and ended the week at around $43,600. Bitcoin’s decline was not surprising, as many traders expected a “buy on the rumor, sell on the news” scenario to unfold.

We also got inflation data this week. December CPI came in higher than expected, suggesting inflation remains hot. However, PPI fell 0.1%, below expectations, calming investors although they still showed hesitation. Wages are still rising, but energy and raw material costs are decreasing. The 10-year Treasury yield ($TNX) fell after hitting resistance at the 200-day moving average (see chart below).

Chart 1. Treasury yields fell. The 10-year Treasury yield rose but fell after hitting resistance at the 200-day simple moving average.Chart source: StockCharts.com. For educational purposes.

There has been some ups and downs in the stock market so far this year, but the daily chart of the S&P 500 ($SPX) maintains support at its 21-day exponential moving average. (EMA) is close to hitting an all-time high. During Friday trading, the S&P 500 rose above 4800 before falling. It is not uncommon for indices like the S&P to test key resistance levels. A strong performance next week could see the index close at an all-time high.

Chart 2. S&P 500 maintains support. Although the S&P 500 has not yet closed at a new high, it still maintains support, and the NYSE upward and downward trend shows an even sentiment between bulls and bears.Chart source: StockCharts.com. For educational purposes.

The atmosphere inside the market is also steady. The NYSE pre-decline line in the bottom panel of the chart above. This indicates that the number of rises and falls is fairly balanced. The CBOE Volatility Index ($VIX) rose in the first week of the month, but the index settled back below 13. This indicates that investors remain calm.

With geopolitical tensions on the Red Sea further heightened, it would not be unreasonable for investors to be hesitant to add to positions ahead of the holiday weekend. On this news, the price of crude oil rose, exceeding $75 per barrel, but then began to decline. Looking at the weekly chart of crude oil below, we see support at the 200-week simple moving average (SMA).

Chart 3. Crude oil maintains support at the 200-week moving average. Crude oil prices rose on news of tensions in the Red Sea, but then fell.Chart source: StockCharts.com. For educational purposes.

Shipping stocks also rose on today’s news. Many shipping exchange-traded funds (ETFs), such as SonicShares Global Shipping (BOAT), US Global Sea To Sky Cargo (SEA), and Breakwave Tanker Shipping (BWET), posted gains on Friday.

With the S&P 500 rising slightly, it’s no surprise that investors are paying extra attention. If things are stable and the stock market is rising next week, it may be time to keep a close eye on the market for signs of weakness. The stock market cannot predict geopolitical tensions, so it is best to be cautious.

weekend wrap up

• $SPX was up 0.08% at 4783.83, while $INDU was down 0.31% at 37592.98. $COMPQ was up 0.02% at 14972.76.
• $VIX up 2.09% from 12.70
• Top performing sector this week: Technology
• Worst performing sector this week: Energy
• Top 5 Large Cap Stocks SCTR Stocks: Affirm Holdings (AFRM); USX-US Steel Group (X); CrowdStrike Holdings, Inc. (CRWD); Karuna Therapeutics, Inc. (KRTX); Vertiv Holdings (VRT).

On the radar next week

• Earnings week continues with reports from Goldman Sachs (GS), Morgan Stanley (MS), Charles Schwab (SCHW), Taiwan Semiconductor (TSM), and American Airlines (AAL).
• Housing construction started in December
• December existing home sales

disclaimer: This blog is written for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.