Momentum in the Stock Market: An In-Depth Analysis
Economic Data Overview
As the stock market continues its relentless climb, investors are eyeing economic data with bated breath. This week, only a few key economic reports are set to release, with a focus on Federal Reserve speakers. Amid the speeches, investors will closely monitor ISM and PMI services reports on Monday, the US trade deficit and Consumer Credit on Wednesday, and Initial Jobless Claims on Thursday. Notably, 11 members of the Fed board are scheduled to address the public, four on Tuesday and five on Wednesday.
Notable Earnings Reports
The upcoming week is also brimming with a flurry of earnings reports from major corporations. Notable mentions include McDonald’s Corporation, Caterpillar Inc., and Palantir Technologies on Monday; Eli Lilly and Company, Toyota Motor Company, Chipotle Mexican Grill, and Amgen Inc. on Tuesday; Alibaba, The Walt Disney Company, Uber Technologies, PayPal Holdings, and Yum Brands on Wednesday; S&P Global, Philip Morris International, and Duke Energy Corporation on Thursday; and PepsiCo, Enbridge, and Honda Motor Co. on Friday.
Broad Market Aftermath
Following last week’s Federal Open Market Committee (FOMC) meeting, equities initially spiraled into a minor sell-off, only to recover with remarkable gusto by week’s end, propelling stock indexes to unprecedented heights. Despite the jubilation, a sense of caution looms among investors. The relentless surge has persisted for three months without any substantial pullbacks – a reason for vigilance rather than panic. While the ongoing rally presents an alluring trajectory, prudent investors are considering strategic moves to fortify their positions against an inevitably impending market correction.
In particular, attention is fixated on the S&P 500SPY as a barometer of sentiment. Gaining insight from its upward trending channel, investors are warily gauging the market’s trajectory. The possibility of a downward breach necessitates a defensive stance, even though testing the 5,000 milestone seems increasingly plausible.
Image Source: TradingView
Monetary Policy Reflections
At the latest FOMC meeting, Jerome Powell’s announcements downplayed expectations of an interest rate cut. Bolstered by the robust labor and wage market performances, the committee signaled dwindling prospects of a rate hike in March. This stance is corroborated by the fluctuating odds in the futures market, with the probability of a March rate cut plummeting from 64% a month ago to a mere 17% at present. Consequently, speculation on a May rate cut has surged to 60%, indicating a slightly more hawkish inclination by the Fed. This subtle shift paints a precarious picture, as higher interest rates could potentially impede stock market dynamics in the run-up to the mid-March meeting.
Image Source: CME Group
Technical Trade Setups
In line with recent market trends, four compelling technical trade setups are poised to command investors’ attention. Two aggressive stocks with bullish momentum, NetflixNFLX and CrowdStrikeCRWD, exhibit strategic patterns. Netflix, manifesting a bullish flag post-an impressive earnings surge, and CrowdStrike, entrenched in a bullish consolidation phase, are both teetering on the brink of significant breakouts. As the market shapes their trajectories, investors await pivotal breaches in price levels for discernible signals.
Image Source: TradingView.com Image Source: TradingViewHot Stocks and Wealth Creation
Hot Stocks and Wealth Creation
The Progressive PGR stock has been on a tear since mid-way through 2023, barely ticking down since then. The stock continues to build bullish patterns, and over the last nine days has formed a clean bullish consolidation. A break above $181.50 should send the stock to another new high, but below $176, and it should be avoided.
Image Source: TradingView
Textron Inc. (TXT)
Finally, Textron TXT, an aerospace manufacturer, has formed a compelling bullish pattern after a strong earnings gap up. Above $86.50 and the stock should make a swift move higher. Alternatively, a break below $84.50 would invalidate the setup.
Image Source: TradingView
Bottom Line
Even the best trading setups fail, so it is always important for traders to prioritize making a trading plan, following the plan, and utilizing strict risk management protocols. Good luck this week traders!
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