Sage Investment Club

Good Friday evening to all of you here on r/StockMarket! I hope everyone on this sub made out pretty nicely in the market this week, and are ready for the new trading week ahead. :)Here is everything you need to know to get you ready for the trading week beginning January 23rd, 2023.Stocks close higher Friday, Nasdaq notches third straight week of wins – (Source)Stocks rallied on Friday to finish the week strong after briefly losing the momentum of the January rally.The Dow Jones Industrial Average added 330.93 points, or 1%, to close at 33,375.49, while the S&P 500 advanced 1.89% to 3,972.61. Both indexes snapped a three-day losing streak. Meanwhile, the Nasdaq Composite rose 2.66%, with help from Netflix and Alphabet, to end the day at 11,140.43.The Nasdaq was also the outperformer for the week, posting a 0.55% gain and its third positive week in a row. The Dow finished the week lower by 2.70%, and the S&P posted a 0.66% loss, both breaking two-week win streaks.All of the major averages are still in positive territory for the year.“We’re having a more emotional reaction that expected,” said Jeff Kilburg, founder and CEO of KKM Financial. “A lot of people got so pessimistic and we saw parabolic moves to kick off the year. Now, as expected, the markets aren’t going in a straight line.”“We are finding a way to continue to move and have higher lows,” he added. “The higher lows put a little bit of confidence in the bulls. However, the technicals are still favoring the bears and selling rallies.”Investors continued to monitor earnings reports and mega cap tech shares led the market higher. Netflix gained about 8.5% after posting more subscribers than expected even though its quarterly earnings missed analysts’ estimates. Alphabet rose more than 5% after the company announced it will lay off 12,000 employees.“You’re seeing more weight go into some of the beat-up technology and because people are becoming a little bit more thoughtful of opportunity in the absolute tech wreck we saw in 2022,” Kilburg said.This past week saw the following moves in the S&P:S&P Sectors for this past week:Major Indices for this past week:Major Futures Markets as of Friday’s close:Economic Calendar for the Week Ahead:Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday’s close:S&P Sectors for the Past Week:Major Indices Pullback/Correction Levels as of Friday’s close:Major Indices Rally Levels as of Friday’s close:Most Anticipated Earnings Releases for this week:(CLICK HERE FOR THE CHART!)(T.B.A. THIS WEEKEND.)Here are the upcoming IPO’s for this week:Friday’s Stock Analyst Upgrades & Downgrades:Staying Classy: Market Breadth, Buying Thrusts, and Brian Fantana“They’ve done studies, you know. 60% of the time, it works every time.” -Brian Fantana (a.k.a. Paul Rudd) in Anchor ManThe big rally to start in 2023 is a welcome change from what we saw last year, but the extreme nature of the rally could be a significant clue that higher prices could be in the cards.Walter Deemer (retired institutional market analyst) noted a “Breakaway Momentum” (BAM) thrust took place last week. This rare event happens after the total 10-day NYSE advancers to decliners is higher than 1.97. In other words, very strong market breadth over ten days. A day or two of strong breadth is normal, but to see it persist for ten days is a clue that something is happening, and we should pay close attention. Market breadth is simply how many stocks are going up versus down, suggesting a good deal of buying is happening underneath the surface.According to Walter, there have been 24 of these events since 1949, and the S&P 500 was up a year later 23 times and up 20.7% on average. The only time it didn’t work was a year after a signal in January 1987.With help from our friends at Ned Davis Research, I looked at the data and took things further. The recent total 10-day NYSE advance to decline came in at 2.16, so I looked at all the times it was above 2.10 versus the 1.97 that Walter used. In other words, even stronger breadth.Doing this showed 14 previous instances (the one last week was number 15). Once again, the future returns appear solid, higher a year later 13 times but up six months later every single time. I’ll say that again, six months later, stocks have never been lower after this signal and were historically up nearly 16%. That would be a first-half rally that virtually no one is expecting.Here’s a breakdown of all the previous buying thrusts, again only the year after the January 1987 signal was in the red. Up more than 20% on average, a higher 94.9% of the time a year later, is something the bulls shouldn’t ignore here.This is just one bullet point, and as the great field reporter Brian Fantana told us, studies with high success percentages might sound good in theory, but they don’t always work out.The good news is that we’ve seen many other examples lately that suggest a change in trend has occurred, and the potential for higher prices could be coming. As I noted in “What Happens When Everyone Agrees That Stocks Will Fall?,” most investors expect a rough first half of 2023 and better second half. This is another clue that the masses could be wrong (just as they’ve been throughout history), and a surprise early 2023 rally could be firmly in the cards.Bulls and Bears Almost Evenly SplitAs we noted in last night’s Closer, the S&P 500 has seen a bit of technical damage done in the past few sessions. In spite of the turn lower, sentiment readings have improved. For the AAII sentiment survey, bullish sentiment has risen up to 31%. That 7 percentage point jump makes for the largest week-over-week increase and the highest reading since the week of November 17th.Bearish sentiment plummeted to 33.1% of respondents which is down sharply from just a month ago when more than half of those responding reported as pessimists. The four straight weeks of declines is now the longest such streak since August leaving bearish sentiment only 0.2 percentage points above the second half of 2022’s low reached in the first week of November.As a result of the big moves, the bull-bear spread has narrowed all the way to -2.1. As we have frequently noted over the past few months, we are currently on a record streak of 42 weeks in a row with a negative bull-bear spread. This week’s reading is now the narrowest reading in the spread during that streak.Taking into account other sentiment surveys, this week’s readings also showed a healthy improvement in sentiment, putting a record streak on the ropes. Below, we show our sentiment composite combining the AAII bull-bear spread with that same spread from the Investors Intelligence survey as well as the NAAIM Exposure index. At the moment, sentiment is only slightly more bearish than the historical norm with the composite at -0.14. While that does extend the streak of negative readings to 54 weeks in a row (tying an identically long streak that ended in June 2009), it is one of the least pessimistic readings of the current streak. In other words, across surveys sentiment may not have turned bullish, but it appears to be much less bearish than at other points in the past year.Claims Peak EarlyJobless claims were anticipated to reverse much of last week’s improvement as forecasts were calling for initial claims to rise from 205K to 214K. Instead, there was a sub-200K print as claims fell to the lowest level since the end of September.Before seasonal adjustments, claims fell to 285.58K from a seasonal peak of 339.16K last week. As shown below, a decline in the second week of the year is not unheard of but is not exactly the norm either. In most years, the second week of the year has marked the annual high for claims as the week has historically seen a week-over-week increase in claims 85% of the time. 2017 and 2018 are the two other most recent examples of claims peaking in the first rather than the second week of the year.All that is to say, the week-over-week drop in the seasonally adjusted number per today’s print is perhaps a bit overstated. The end and start of the year tend to be volatile for seasonality thus the weeks ahead will help to provide a clearer picture of where claims really stand.Turning over to continuing claims, the first week of the year saw claims rise by 17K up to 1.647 million. That is still below higher levels observed throughout late November and December as the deterioration in claims over the past month has subsided.After Bear Market January Indicator Trifecta AmazingWhen there has been a bear market in the prior year and our January Indicator Trifecta is 3-for-3 positive it’s super bullish for the year. January is off to a great start with the Trifecta 2-for-2 so far with our Santa Claus Rally (2023 STA, page 118) and the First 5 Days (2023 STA, page 16) logging S&P 500 gains. Keep your eye on our January Barometer (2023 STA, page 18)!Using the Ned Davis Research bull and bear market definitions there were thirteen years since 1949 with bear market bottoms preceding a positive January Indicator Trifecta. The full year has never been down with double-digit gains every year, up 22.1% on average. The next 11 months have also never been down, up 16.8% on average.The December Low Indicator (2023 STA, page 36) should also be watched with the line in the sand at the Dow’s December Closing Low of 32757.54 on 12/19/2022.We invented our January Indicator Trifecta in 2013 by combining our Santa Claus Rally and January Barometer, both invented by our late-founder Yale Hirsch in 1972 published in the 1973 Almanac, with the age-old First Five Days Early Warning System.The market is on the cusp of confirming the bull market we believe we are in and our bullish 2023 annual forecast we made on December 22. S&P 500 is flirting with clearing the downtrend line and the 200-day moving average. Next important levels are the December and August highs around 4100 and 4300.Is the Surge in Purchases and Refis Believable?Early this morning, the weekly release of mortgage purchases and refinance applications from the Mortgage Bankers Association posted outright impressive week-over-week increases for both metrics. Beginning with a look at purchases, the reading surged almost 25% week over week for the highest reading in the index since 9/23. Even though that was a massive move higher, the purchases index remains at the low end of the past several year’s range and would be only slightly better than those readings observed in the spring of 2020.Refinance applications have been at some of the lowest levels in more than 20 years, and that continues to be the case even after rising well over 30% versus last week. Similar to purchases, that massive increase only brings refis back up to levels last seen in September.While a portion of those large improvements could potentially be the result of mortgage rates dropping to some of the lowest levels in the past few months, seasonality appears to be another and more plausible factor. Likely as a result of backlogs built up during the holidays, the second week of the year has plenty of precedent for outlier-like jumps in applications. As shown below, multiple times since the early 1990s the second week of the year has seen mortgage and refinance applications rise by at least 20% and 30% week over week, respectively. In other words, even if the surge in mortgage applications is eye-catching, we would caution against jumping to the conclusion that these increases are material without further follow-through in the weeks to come.STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending January 20th, 2023(CLICK HERE FOR THE YOUTUBE VIDEO!)(VIDEO NOT YET POSTED.)STOCK MARKET VIDEO: ShadowTrader Video Weekly 1/22/23(CLICK HERE FOR THE YOUTUBE VIDEO!)(VIDEO NOT YET POSTED.)Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-(CLICK HERE FOR NEXT WEEK’S MOST NOTABLE EARNINGS RELEASES!)(T.B.A. THIS WEEKEND.)(CLICK HERE FOR NEXT WEEK’S HIGHEST VOLATILITY EARNINGS RELEASES!)(T.B.A. THIS WEEKEND.)Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:Monday 1.23.23 Before Market Open:Monday 1.23.23 After Market Close:Tuesday 1.24.23 Before Market Open:Tuesday 1.24.23 After Market Close:Wednesday 1.25.23 Before Market Open:Wednesday 1.25.23 After Market Close:Thursday 1.26.23 Before Market Open:Thursday 1.26.23 After Market Close:Friday 1.27.23 Before Market Open:Friday 1.27.23 After Market Close:(T.B.A. THIS WEEKEND.)(T.B.A. THIS WEEKEND.) (T.B.A. THIS WEEKEND.).DISCUSS!What are you all watching for in this upcoming trading week?I hope you all have a wonderful weekend and a great trading week ahead r/StockMarket. 🙂

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