Weekly Stock Market Update & SPY Technical Analysis
The market finished lower last week as traders continue to shift from higher risk assets like high growth stocks and crypto. Even prominent AI players are struggling to attract buyers. The last 24 months has ballooned valuations to astronomical levels, making it difficult to justify entry at these prices.
Luckily, capital in the market rarely stays still. Money is rotating into energy, industrials, consumer defensive / staples, and healthcare. Rather than technology leading the way as usual, investors are placing their money into classic names like Coca-Cola, Boeing, P&G, Costco, Walmart…etc. These names are often “slept on” because they’re not high risk high reward and are not “exciting” enough for traders, but these very names hold so much value, especially at a time like now. This is why we’ve been highlighting names across these industries on our watchlists for months, long before we entered this year. Even if it takes a while, if there’s value, the market eventually takes notice…and many of these classic names held value.
Why else are these names attractive?
Because they don’t rely heavily on debt and they have strong free cash flow. Last year, the market overlooked companies with little to no revenue. Investors were happy to pay premiums for stocks that held zero cash at hand and had weak balance sheets…all in hopes of them being the “next Nvidia.” However now investors are more focused on quality and predictability. Plus, an uncertainty around interest rates makes companies that can finance their own debt or use cash a lot more attractive.
The overall state of the market:
We are noting weakness in the broader in indexes like the S&P 500 and Nasdaq, but the Russell 2000 and the Dow Jones are still looking strong. We may see technology stocks (especially high growth) continue to struggle, but industrials, healthcare, and energy continue to remain strong. Keep in mind that a market wide panic sell-off may occur if a negative catalyst comes up. We’ll manage our positions accordingly and remain diversified (notice we scaled back on higher risk names in recent weeks).
SPY Technical Analysis:
SPY has been stuck in a range for more than two months now, meanwhile the Dow Jones and Russell 2000 have been making new highs. Since SPY is highly concentrated in tech, we’ll likely need to see a large upside move from a couple of the largest companies by market cap…names like Nvidia, Apple, Google, Microsoft…etc.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of capital. Always conduct your own research or consult with a licensed financial advisor before making investment decisions.
Hyper Stocks and its contributors may hold positions in some of the securities or assets mentioned above. These positions are subject to change without notice. Any opinions expressed reflect current views at the time of writing and are not guarantees of future performance. Past performance does not guarantee future results.