The S&P 500 and Nasdaq are now up three weeks in a row, rising further into new highs
on subdued summer volume. Positive reactions to earnings from large cap bellwethers in the
Financial and Transportation sectors aided this week’s move. Earnings will be coming in at a
steady pace beginning next week, playing a critical role in the direction of the major averages
from here. We believe a pullback is likely after such a sharp rally, but as long as there is no
meaningful rise in distribution, we continue to recommend buying fundamentally sound
ideas at proper pivot points or as they emerge from areas of support. We would like to see
2,100-2,120 hold on the S&P 500 and 4,970-4,980 hold on the Nasdaq should this occur
over the next few days. The market remains in a Confirmed Uptrend with no distribution
days.
Author: Neeraj Khanna
European Focus Long
After a slight pause last week, European markets continued their
run higher with every major index finishing positive for the week.
On average, the indices were up more than 3%, recouping all losses
from the prior week. The best-performing indices were Austria
(+7%), Germany (+4.4%), Italy (+4.3%), Spain (+4.2%), and France
(+4.1%). Lagging countries with gains of 1% or less were the U.K.
(+1%) and Denmark (+0.9%).
Global Focus Developed Long
The Australia ASX All-Ordinaries Index gained 3.7% this week,
closing at weekly highs and at its highest level in 11 months. The
market had a follow-through day on Monday and continued higher each
day throughout the week. It has gained about 6% in three weeks and is
now within 3% of 52-week highs.
Global Focus Emerging Long
Chinese markets advanced for a third consecutive week with the Shenzhen
rising 1.3% and the Shanghai climbing 2.2%. The Shenzhen has continued to
trend higher above its 40-week moving average, although the Shanghai has not
tested it since December 2015. A break above the 40-week moving average
for the Shanghai would be extremely positive, as it has not traded above it for
nearly a year. Markets have shown signs of bottoming since late March and
could be on their way to a sizeable move higher. Markets are in a Confirmed
Uptrend with only one distribution day for both indices.
Global Focus Frontier Long
US Focus Long
The S&P 500 and Nasdaq rallied for a second straight week, completely erasing Brexit losses.
A solid jobs number on Friday was the catalyst for a further rise in equities, with growth
outperforming defensive ideas for the first time in several weeks. The Brexit selloff can now be
viewed as a massive shakeout since the major averages are once again testing resistance near
new highs. We have moved the market back into a Confirmed Uptrend as both the S&P 500
and Nasdaq are now trading well above support levels in conjunction with healthy action in a
number of growth ideas.
• The market continues to sit just below what has been major resistance for over a year. Q2
earnings kick off next week and will act as the near-term catalyst for multiple ideas and the
general market itself.
European Focus Long
The strong rebound in European markets from the prior week could
not be maintained this week, with all the major indices down through
Thursday. Average losses were 2.7% with six countries, Italy (-5.3%),
France (-3.7%), Germany (-3.7%), Spain (-3.3%), and Belgium (-3.2%),
down more than 3%. The U.K. and Norway (-0.7% each) performed
best through Thursday with losses less than 1%.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index fell 0.2% this week, closing
at the upper end of the weekly range but just below its 10-week
moving average. The market is in a Rally Attempt and awaiting a followthrough
day.
Global Focus Emerging Long
Chinese markets continue to trend higher with the Shenzhen rising
more than 2% and Shanghai increasing 1.9% this week. The
Shenzhen edged higher for most of the week and is now trading at
the highest gap above the 40-week moving average since December
last year. The Shanghai has yet to break above its 40-week moving
average, trading 3-4% below it. The last time the Shanghai traded
above this resistance was nearly a year ago in August 2015. Volume
was strong, more than the previous week for both indices, which
is another positive sign. Markets are in a Confirmed Uptrend.
There are no distribution days for the Shenzhen as all have
dropped off in the recent market move.
