Chinese markets moved higher for the week with the Shenzhen up 3.4%
and Shanghai up 3.1%. The Shenzhen rose for the fifth consecutive week
and is sitting on the 40-week moving average, an area of key resistance.
The market moved positively this week as volume was 1.6 times the
weekly average. Going forward we are looking to see whether the
market will continue its winning streak and move higher on strong
volume or begin to pull back and consolidate. This week’s move
trimmed away two distribution days for the Shenzhen, bringing the
total to one while the Shanghai remains at two. We view the 10-week
moving average (8% below or approximately 1,800) as a key support level
to hold, should the market pull back. Markets remain in a Confirmed
Uptrend.
Author: Neeraj Khanna
Global Focus Frontier Long
US Focus Long
• U.S. indices declined this week but continue to consolidate along key moving averages. Nine
of 11 O’Neil sectors declined, with the only net positive gains in Energy and Healthcare.
Strength in crude and bio-techs contributed to the gains in the aforementioned sectors. In
addition, Consumer Cyclical remains an area to monitor as the breath of quality names in
housing-related groups have increased. The market is looking forward to earnings season next
week despite the weak outlook. For S&P 500 companies, Q1 Sales and EPS are expected to
increase by a median of 1.2% and 1.9%, year-over-year respectively.
• Although volume has been and remains a concern, growth ideas continue to build
constructive bases and we look toward Q1 to gauge the fundamental outlook. The market is
in a confirmed uptrend. The S&P 500 and Nasdaq have risen 8% and 7%, respectively since
the follow through day, however, each now has four distribution days in the past five weeks
European Focus Long
European markets rallied strongly Friday on increasing oil prices to
trim their losses for the week. On average, the markets declined 0.6%
for the week, but the damage was much more extensive prior to Friday. A
majority of European markets are now in a downtrend and those still in
an uptrend have high distribution day totals. For the week, Switzerland
(+1.5%), the U.K. (+0.9%), Denmark (+0.7%), and Sweden (+0.4%)
were positive, while Portugal (-2.8%), Spain (-2%), Germany (-1.7%),
and Italy (-1.6%) finished with losses greater than 1%.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index lost 1.1% this week. It fell
below its 10-week moving average mid-week, but closed near the middle
of its weekly range. The market remains in an Uptrend Under Pressure
and has four distribution days over the past four weeks.
Global Focus Emerging Long
The Shenzhen and Shanghai finished mixed for the week, up 0.7% and
down 0.8%, respectively. Mainland Chinese markets continue trending
in an upward channel but remain below the 40-week moving average
(WMA), an area of key resistance. The Shenzhen is now trading 3%
below key resistance, moving closer from approximately 4% last week.
The market condition was changed to Confirmed Uptrend from
Under Pressure to reflect positive action over the last several weeks.
Distribution days are currently at three, not concerning in our view, and
we remain slightly bullish despite a likely consolidation in the near term.
We also continue to wait for a strong confirmation move to the upside
that would give a more bullish signal that the markets are ready to
move much higher.
Global Focus Frontier Long
US Focus Long
U.S. indices have continued their march higher after a one-week pause. The S&P 500 is
now trading just 3% off highs, while the Nasdaq has retaken its 200-day moving average.
Constructive action continues, with distribution still a non-factor. Volume has been the
only concern, remaining below average for 16 of the past 17 trading sessions. Growth ideas
continue to build the right side of their respective basing patterns, with many now beginning
to test highs reached late last year. We expect volume to pick up in many of these ideas, as
earnings will now drive market behavior, taking the place of short covering and Fed talk.
We recommend a focus on companies showing good earnings stability and a prior history of
handily beating estimates.
• A pullback after a 14% move off February intraday lows should not be a surprise at this point.
The manner in which this occurs will be critical, though. We prefer to see tight consolidation
around current levels. With Q1 earnings season beginning in less than two weeks, we remain
watchful of any pickup in distribution and breaching of key support levels. The market is now
seven weeks into a Confirmed Uptrend, up 9% on the S&P 500 and 8% on the Nasdaq since
the February 17 follow-through day.
European Focus Long
Similar to last week, European markets sold-off at the end of the week
putting them in negative territory for a second consecutive week.
Markets declined on average 0.7% for the holiday-shortened week. A few
indices were able to trend higher, with Sweden rising 1% and the U.K.
lifting 0.6%. The underperforming markets with losses exceeding 2%
were Portugal (-2.2%), Spain (-2.3%), and Norway (-3.3%). The major
markets of Germany, France, and Italy continued to decline for a second
straight week, falling 0.5%, 0.1% and 1.6%, respectively.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index lost 1.5% this week. It closed
right at its 10-week moving average after a two-week slide from its 40-
week moving average resistance. The market is in an Uptrend Under
Pressure and had three distribution days over the past four weeks.
