Author: Neeraj Khanna
US Focus Long
The U.S. Market traded flat this week, still unable to break through upside resistance at 2111
and 2117 on the S&P 500. Despite this, the major averages remain resilient, reversing from
early morning losses in each of the four trading sessions this week. Additionally, distribution
days continue to fall off, dropping to six on the S&P 500 and five on the Nasdaq. This action
is largely constructive, leading us to anticipate a break into higher highs in the coming weeks.
If this occurs in combination with a drop in distribution, the market will be moved back into
a Confirmed Uptrend.
We continue to be encouraged by the expansion of leadership ideas over the past few weeks.
Growth ideas are emerging, with nine names added to the U.S. Focus List over the past two
weeks. We expect to add additional ideas to our list if we see this breakout in the general
market.
European Focus Long
After a strong prior week, European markets sold off, exacerbated by a
weak jobs report out of the U.S. Every major European index declined
for the week, decreasing almost 2% on average. Italy (-3.7%), Portugal
(-3.6%), and Spain (-3.6%) fell more than 3%, while Finland (-0.2%)
was the only country to decline less than 1%.
Global Focus Emerging Long
Mainland China markets rose sharply this week. The Shenzhen
surged 6.0% and the Shanghai jumped 4.2% in the indices best
week since mid-March. Both indices had a follow-through day
on Tuesday, rising 4.1% and 3.3%, respectively, on well above
average volume. The Shenzhen is poised to make an attempt to
break above its 40-week moving average for the first time since
slicing sharply below to begin the year. The Shanghai is still well off
the level however, and in general continues to lag.
Global Focus Frontier Long
Economic Summary
Q1 GDP growth revised upward but still lower than Fed’s expectations.
Economic growth rate inched up.
The Q1 GDP growth revised upward to 0.8%, from the initial announcement of 0.5%, the weakest performance
since Q1 2015.Strong dollar and sluggish global demand have eroded the export.
US Focus Long
The U.S. Market remains Under Pressure due to an elevated distribution day count. The
S&P 500 now has seven distribution days, while the Nasdaq has six. The positive is that
multiple distribution days are set to fall off next week. If we continue to see positive price
action, specifically a break and hold above 2117 on the S&P 500, along with a decline in
distribution, the market will be moved back into a Confirmed Uptrend.
We are also encouraged by the expansion of leadership ideas over the past week. A few ideas
were added to the U.S. Focus List, and we expect to add additional ideas to our list if we
see a breakout in the general market sometime in the coming weeks. Until then, we still
recommend a slow approach, as we very well could be near the top of what has been a rangebound
market.
European Focus Long
The European markets were up strongly this week, following
reduced fears of a Brexit and new debt relief for Greece. All the
major European indices were higher for the week, increasing
almost 3% on average. Eight countries, including Spain (+3.9%),
Belgium (+3.7%), Switzerland (+3.7%), Germany (+3.5%), the
Netherlands (+3.5%), Finland (+3.4%), France (+3.4%) and Austria
(+3%), gained 3% or more. Lagging countries the U.K (+1.6%) and
Portugal (+1.5%) gained less than 2%.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index gained 1.0% this week,
rising for a seventh consecutive week. The index has gained 9% over
seven weeks, closing this week just below year-to-date highs. It is in a
Confirmed Uptrend.
Global Focus Emerging Long
Mainland China markets continued to trade in a flat range this week,
with the Shenzhen up 0.7% and the Shanghai down only 0.2%. Markets
have been range bound since the market fell lower three weeks ago
and are in a seventh-day rally attempt but still in a Downtrend. We
continue to await a follow through day signified by a strong price move
of more than 2% on heavy volume. The market has not displayed
much strength this week in contrast to other markets, namely Hong
Kong which had a Follow Through day on Wednesday, May 25. We
continue to advise holding back on any long positions until strength
arises.
