The stock market gained ground again last week, reaching all time highs, as I pointed out in the latest Market Week show. The S&P 500 (SPX) rose 49 points to 3026, an increase of 1.6%. Yet based on near term market cycles, our projection is for weakness into the end of this week.
Last week’s move was driven by earnings performance that exceeded analyst expectations. On Friday, for example, companies such as Google, Starbucks, Intel, and Twitter all rose on better then expected earnings.
In fact, the majority of companies have exceeded the average estimates for last quarter. Yet as we previously pointed out, that is based on lowered earnings guidance. This may continue, as for the current quarter, managers have continued to provide negative guidance by a ratio of 3 to 1.
S&P 500 (SPX) Daily Chart
Our approach to technical analysis uses market cycles to project price action. While we believe that momentum will continue to carry the S&P 500 higher, our analysis is for a small down week, within the context of its current minor cycle, as shown on the chart above.
Amongst the individual stocks that performed well last week was Alphabet (GOOGL), which was up by 10% for the week to $1245. The company reported earnings of $14 per share and revenue of $38.9 billion, compared to estimates of $11 and $38.2 billion.
CEO Sundar Pichai highlighted that the company’s performance was driven by demand growth for products including Google Cloud and the Pixel 3a. The company also announced that it is planning to repurchase $25 billion in stock.
Alphabet (GOOGL) Stock Weekly Chart
Based on its market cycles, it is clear that GOOGL is still in the rising phase of its current cycle. However, the stock failed at around $1300 in the previous two cycles and we continue to view this level as resistance.
For a more detailed analysis of both of these charts, check out the latest episode of the askSlim Market Week show.
