Welcome to our weekly newsletter where we provide an overview of the main US and UK indices, along with analyses of selected assets that are outperforming the market.
Let’s get into this week’s newsletter!
US & UK INDICES OVERVIEW
S&P 500
For April, the S\&P 500’s monthly candle is down 9.66%, and for the year so far, it’s down 13.76%. That’s nearly 14% in total for 2022.
Currently, the price is approaching the major psychological level of $5,000, which acts as both support and resistance. If the price moves down to this level, we expect a potential bounce. However, for the index to break its all-time high, it will need to recover by 21%.
Looking at the bigger picture, the S\&P 500 is now down more than 1,000 points from its all-time high. To compare, the 2000 market crash saw a 782-point drop, and the 2007-2009 crash had a decline of 904 points. While this current drop is larger in points, it’s only a 17% decline in percentage terms. In past crashes, declines reached 50%, and those markets eventually recovered. This suggests that even though the current drop is significant, there’s potential for a turnaround. The focus now should be on identifying strong support levels where the price might reverse upward.
On a daily chart, Friday saw the S\&P 500 drop 5.97%, while Thursday showed a decline of 3.27%. Over the last two trading days, this adds up to a 9% drop. The market gapped down at the openings on both Thursday and Friday. Going into the new week, the key will be watching for a sharp reversal above the $5,118 resistance level and for the price to fill these gaps. If the decline continues, the $5,000 level will likely be the next support.
Some stocks have been hit hard by this drop, while others are holding above key support levels. It’s worth reviewing your portfolio to spot opportunities in stocks that remain strong, as they may outperform when the market recovers. Stocks that hold their ground during a downturn typically perform well when conditions improve. For now, it’s a good idea to tighten stop-loss levels on underperforming stocks and keep an eye on those maintaining strong support.
Dow Jones
On the monthly time frame, the Dow Jones is down 8.5% for April and 9.76% for the year so far. Compared to its all-time high, it has dropped by 15%.
The Dow Jones has experienced significant declines, falling below the $40,000 mark. On the monthly chart, the next key support level appears to be the high of 2024, which is at $37,100. If the Dow Jones continues to weaken, it’s likely to move towards this level before potentially reversing back upwards.
Nasdaq 100
On the monthly time frame, the Nasdaq is down 9.88% for April and 17.4% for the year. From its all-time high, the Nasdaq has dropped 21.6%.
This is yet another index experiencing significant declines. The next key support level is at $16,774, which was formed in November 2021. If the price continues to drop and reaches this level, a reversal to the upside is expected.
FTSE 100:
On the monthly chart, the FTSE is down 6.2% for April, dropping below the 2024 high of 8470. It has now reached a major support level at 8051, which corresponds with a resistance level, formed from the February 2023 high.
This support level is significant, and we expect a potential bounce and a move back upward. However, if the price breaks below 8051, the next support level is the 8000 round number, followed by 7903, which was established from the May 2018 high.
For now, it’s a waiting game to see how the FTSE reacts to this support level. If the price begins to rise, the goal is for it to surpass the 2024 high and eventually break above the all-time high of 8908, set in March.
On the daily chart, most of the recent declines happened in the last two trading days. Friday saw a sharp drop of 4.93%, following a smaller decline of 1.63% on Thursday. These significant moves pushed the price below key support levels. Again, we are watching to see if the price will hold at support and resume the long-term uptrend.
Year-to-date, the FTSE is down 1.5%, a big reversal from March, when it was up 9% for the year. While the recent drop has been steep, it could be temporary as long as the support levels hold.
PERFORMANCE REVIEW
Berkshire Hathaway (BRK.B)
On the monthly time frame, Berkshire Hathaway is down 7.44% for April but is still holding above a key support level at $492, which marks the high for 2024. Currently, the stock is trading below the $500 mark, having dropped below this psychological support level.
It’s now approaching the $492 level. If the price continues to decline toward this support, a significant reversal to the upside is anticipated. From there, we’d look for a break and close above the all-time high of $538, which was set earlier this month.
Year-to-date, Berkshire Hathaway is up 8.89%, outperforming the broader market indices, which are down for the year. If the stock bounces from the support level at $492, it’s likely to maintain its outperformance compared to the rest of the market.
Over the past week, the stock fell 5.69%, showing notable bearish movement but still holding above major support. On the daily time frame, Friday saw a gap down at market open, with the stock dropping 6.53% for the day. If a reversal occurs around the support level, we expect a continuation of upward momentum.
The stock would need to climb just over 9% to retest its record high and aim for new highs. Overall, the stock remains strong, and a bounce from support could signal further upside, especially if the broader market begins to recover in the coming week.
OUTPERFORMING ASSET FOR THE WATCHLIST
Mr. Cooper Group (COOP)
This stock is particularly interesting as it’s hitting new record highs and outperforming the market in April. For the month, it’s up 12%, and for the year, it’s risen 39%. Clearly, it’s showing strong performance compared to the broader market.
The next key resistance level to watch is the $150 mark, where a reversal could occur. However, given the stock’s current momentum, it could break through this level and continue setting new record highs.
Last week saw a significant gap to the upside, with the stock closing up by 26.72% for the week. On Friday, while the broader market saw bearish moves, this stock climbed another 0.77%. This consistent outperformance suggests it could maintain this strong upward trend.
Looking at its past behavior, the stock used to move in a slow pattern of rising, consolidating, and then rising again. However, since gapping up on March 31st by 14%, it has gained momentum, breaking into new record highs. This shift in behavior could indicate a new phase for the stock. If it breaks above $150, the next major resistance level could be $200, signaling even more upside potential.
Looking Ahead
The market is clearly weak due to tariff announcements by President Trump. However, markets have faced volatile conditions before, such as during the Covid pandemic, and have recovered. The key is to stay calm, observe market trends, and act accordingly.
Keep it simple. Keep it Sublime.
The ST Team
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