U.S. indices moved higher for a fifth straight week, supported by a nice bounce in the Health
Care sector and a further rally in large cap growth ideas. Though breadth is still isolated in
large caps, a handful of good earnings reports sparked a rally in the Russell on Wednesday. A
further rally in small/mid-caps would be encouraging, as outperformance is still coming from
just a select group of leadership ideas.
• We continue to monitor the emergence of new growth ideas, with earnings still being the key
catalyst over the next few weeks. We still recommend adding to or buying our U.S. Focus List
ideas as they emerge from areas of support. The market remains in a Confirmed Uptrend,
currently showing few signs of weakness and a limited amount of distribution days.
Author: Neeraj Khanna
Global Focus Developed Long
The Australia ASX All Ordinaries Index lost 1.9% this week, after
gaining in three of the previous four weeks. After recording a followthrough
day last week, and moving into a Confirmed Uptrend, the index
picked up two distribution days to end this week.
Global Focus Emerging Long
The Shenzhen finished flat while the Shanghai fell 0.9% for the week.
The Shenzhen continues to trade near key resistance at its 40-week
moving average while the Shanghai remains approximately 10% below
it. We view a strong break above by the Shenzhen would be a bullish
signal for the Chinese market in general. Volume for the Shenzhen has
risen significantly on a weekly basis over three consecutive weeks, well
above the weekly average. The market remains in a Confirmed Uptrend
with one distribution day.
Global Focus Frontier Long
US Focus Long
U.S. indices moved higher again this week, rising on the back of strong earnings results
from major technology bellwethers and U.S. Focus List constituents Amazon and Alphabet.
Money continues to flow out of Health Care and into large cap Technology as well as sharply
improving sectors such as Transportation. We view ideas from the Technology sector as the
true growth leaders of this current marketplace and continue to recommend holding these
ideas, despite some very strong moves already occurring.
• We continue to look for further leadership in growth to support the sharp move off the
bottom in the major averages. Look for the indices to consolidate above their respective 200-
day moving averages with earnings results continuing to act as the key catalysts going forward.
The market remains in a confirmed uptrend with a limited amount of distribution days.
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 1.6% this week, rising
for the third time in four weeks. The index had a follow-through day
on Friday, moving it back into a Confirmed Uptrend for the first time
since late September. Consumer Cyclical, Health Care, and Technology
continue to be the long-term outperforming sectors.
Global Focus Emerging Long
Chinese markets rose for another consecutive week, with the Shenzhen
and Shanghai up 2.5% and 0.62%, respectively. Markets remain in a
Confirmed Uptrend after a follow through day on October 12 but
remain below the 40-week moving average, an area of key resistance.
A rise above the 40-week in our view would be another bullish
indicator for the market rally to continue.
Global Focus Frontier Long
US Focus Long
U.S. indices continued to move higher this week, with the big move coming on Thursday.
Leadership is gradually emerging, but major support for this move is still coming from lagging
sectors (Energy, Basic Materials, and Transportation) and a recent surge in defensive sectors
(Utilities and Consumer Staples).
• Growth ideas remain limited, though a select group from the U.S. Focus list is continuing
to work well. Earnings will play a pivotal role in the health of the general market and these
leadership ideas going forward. If results begin to beat expectations, the number of growth
ideas will increase and send the major averages above the resistance levels we are currently
testing. Similar to last week, we recommend buying these ideas as they emerge from areas of
support. The market remains in a Confirmed Uptrend, with two distribution days each on the
S&P 500 and Nasdaq.
Global Focus Developed Long
The Hong Kong market closed up 2.71% this week. The market
continued to make progress after the follow-through day last week.
Though still 19% off highs, the Hang Seng is edging higher and is now
5% above its 10-week moving average. Poor economic data from China,
discussed below, increased speculation that more stimulus measures
would be introduced to boost growth in the mainland. Potential new
stimulus measures, combined with the diminished likelihood the U.S.
would raise interest rates, aided market sentiment this week. We added
two ideas to the Hong Kong GFL as stocks continue to recover, though
considerable technical damage remains. The Hong Kong market remains
in a Confirmed Uptrend.
