Stock Market Outlook for Fri Jul 12 2024 – Potential Bounce But Lower Close

Prior Trading Day Summary:

On Thursday investors shifted out of many large tech names who have been leading the index higher and shifted into other sectors not related to AI and tech. But while the close looked bearish, the number of stocks climbing far outweighed those falling. The biggest problem for the indexes was stocks like Microsoft, Apple, Tesla, NVIDIA and others are overweighed in the indexes. With their decline the indexes closed lower despite the majority of the markets actually rising.

The S&P closed down 49 points ending at 5584 but 78% of stocks were advancing and only 18% were declining.

The same picture was seen on the NASDAQ where the index fell 364 points to close at 18,283 but 71% of all stocks and 67% of all volume were to the upside. This shows the results of overweighing of some names in the indexes. Those names included Tesla Stock (TSLA), NVIDIA Stock (NVDA), Meta Stock (META), Netflix Stock (NFLX), Alphabet Stock (GOOGL), Microsoft Stock (MSFT), Apple Stock (AAPL) and Amazon.com Stock (AMZN).

Many analysts called the tech and AI rally over after the close on Thursday but I think they are premature. We have seen the tech sector sold off a number of times this year. Each time analysts have turned negative on tech names only to see the sector rally still higher.

On Thursday the trading action was still, by far bullish.

Let’s review the technical indicators from the close on Thu Jul 11 2024 to see what to expect on Fri Jul 12 2024.

Stock Market Outlook: SPX Closing Chart For Thu Jul 11 2024

The index closed above the 21 day moving average but below the Upper Bollinger Band. Intraday at the open it made a new 52 week high but the close was bearish.

The closing candlestick indicates the index is oversold short-term and could bounce but a lower day is still expected either Friday or Monday, if Friday ends positive.

The 21 day moving average is still climbing continuing the latest up signal.

The 50 day moving average is climbing which is bullish.

The 200 day moving average is still climbing. The 200 day is at 4993 which is bullish and the 100 day is also climbing to 5231.

The Lower Bollinger Band is above the 50 day moving average which is bullish. The Upper Bollinger Band is climbing which is also bullish.

The S&P chart is more bullish than bearish for Friday but the closing candlestick is a definite cautionary signal.

SPX Stock Market Outlook review of Thu Jul 11 2024

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Fri Jul 12 2024 

For Friday the Producer Price Index numbers are released. If the numbers are weaker than estimated we could see some further selling.

All the technical indicators are advising that investors should stay cautious until after the start of next week. With the indexes near all-time highs, dips are more likely which will bring in more sellers. With many investors nervous it will not take much to see the index slip lower.  At the same time, analysts have called for small cap stocks to outperform, repeated this year. Almost every dip this year has seen analysts promote small caps but they have not performed. Instead it is the large cap stocks, particularly those name associated with AI that have continued to perform well. On Thursday the small caps rose around 3% and many analysts after hours repeated their outlook that now “finally” small caps are set to outperform. I think they are early and could be wrong again. I don’t think we will see investors abandon some of the largest names in the indexes, like Microsoft Stock (MSFT), NVIDIA Stock (NVDA), Apple Stock (AAPL), Meta Stock (META) and more. I do think investors are interested in taking some profits but if these stocks fall a bit further, I believe buyers will quickly return to snap up shares. I would stay aware of small caps but skeptical that they will “finally” outperform large caps.

On Friday we should see a bounce attempt at the open if the PPI numbers meet estimates. The close though still looks to be lower.

Potential Economic and Political Market Moving Events

The biggest economic events this week are Fed Chair Powell’s House testimony on Wednesday, CPI numbers on Thursday and PPI numbers of Friday.

Monday:

3:00 Consumer credit was expected to come in at $8 billion, but came in at $11.4 billion which shows strength from consumers.

Tuesday:

6:00 NFIB optimism index which is expected to remain flat at 90.3 came in higher at 91.5

10:00 Fed Chair Powell testifies to congress

Wednesday:

10: Wholesale inventories came in as estimated at 0.6%

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims were expected to be 236,000 but came in lower at 222,000

8:30 Consumer price index was expected to rise slightly to 0.1% but fell to -0.1% in June.

8:30 CPI year-over-year was estimated to slip to 3.1% from 3.3% but fell to 3.0%

8:30 Core CPI was estimated unchanged at 0.2% but fell to 0.1%

8:30 Core CPI year-over-year was estimated unchanged at 3.4% but came in slightly lower at 3.3%

2:00 Monthly federal budget for June was expected to be -$33 Billion but was -$66 billion.

Friday:

8:30 Producer Price Index is expected unchanged at 0.1%

8:30 PPI year-over-year is expected unchanged at 2.2%

8:30 Core PPI os estimated at 0.2%

8:30 Core PPI year-over-year is estimated unchanged at 3.2%

10:00 Consumer sentiment is estimated at 68.5, up slightly from 68.2