Author: Kenley Scott

Key points from this report:

• Leading Nasdaq 100 (QQQ) was once again 23% above 40-WMA to end the week. Same % above as four weeks ago, which started a minor consolidation.
  • However, this time, only 6% above 10-WMA versus 9% above before. Also, no resistance until about 5% higher.
• U.S. breadth is much better, % of stocks in NYSE above 30-WMA up to 70% from 54% a week ago. Highest % since March breakdown.
• Breakouts were strong again, above 200 for the third week in five. No huge spike but very healthy.
  • Also, very healthy – where recent breakouts are versus their pivot price. ~75% are above the pivot price. Through May and early June, this proportion was consistently below 50%.
  • By-sector, Tech, Cap, and Cyclicals have outsized proportions of recent breakouts (since May 1). Financial, Staple, Energy, and Utility are under-represented.

Key Points:

• Global benchmark (VT) ends the first half of 2023 up 13%. It is also 26% off Oct. 2022 lows and just below 52-week highs, but still 12% off all-time highs.
• Leading global markets included the U.S. (Nasdaq), Japan, Ireland, Greece, Egypt, and Taiwan…all up over 20%.
• Still, about a third of markets, including Hong Kong, Belgium, Finland, Thailand, and South Africa are down YTD.
• U.S. market once again had a great first half in the third year of the presidential cycle, which has by-far the best average of any half.

Key Points:

• S&P 500 earnings expectations have come down markedly over the past five months but may be at an inflection.
  • Q2–Q3 2023 earnings are expected to fall 8% and 1%, y/y, respectively.
  • Q1 2023 earnings were also expected to fall 8%, but easily beat, falling by ~3%.
  • Q4 is expected to mark the turnaround, with +7% y/y growth.
  • Estimates have stabilized more recently, not falling further over the past month.
  • By sector, four (Basic Material, Capital Equipment, Consumer Cyclical, Consumer Staple) have seen median 2023 estimates rise over 90 days.
• Good places to look for ideas (see attachment)
  • 1) Standout companies, with growth expected in the coming quarter, for 2023 and 2024, and above 50/200-DMA (For example: TDG).
  • 2) Mismatch between earnings and price action: Weak estimates but very strong price action (For example: GNRC).
  • 3) Mismatch the other way: Strong estimates but weak price action (For example: ENPH).

Key points:

• Comparing the leading index now (Nasdaq 100) to the leaders off the prior two major bear market lows (Nasdaq Comp in 2002 and 2009).
  • In the prior cases, the Nasdaq reached a max of 21-24% above its 40-WMA and 6-8% above its 10-WMA.
  • Now, the Nasdaq 100 has reached 23% above the 40-WMA and 9% above the 10-WMA.
  • It would be reasonable to expect some consolidation. In looking at the two prior periods, the consolidations lasted for a few weeks as the 10-WMA caught up. It was not until well after a year into the bull markets when there was a major consolidation.