The U.S. economy grows faster than expected in Q2; Fed defers rate hike amidst global growth
concerns.
Q2 GDP growth revised upward again.
The third and final GDP reading indicated the U.S. economy expanded by 3.9% in Q2, compare
to the earlier estimate of 3.7%. Higher consumer spending and strong non-residential fixed
investment aided the growth.
Author: Neeraj Khanna
US Focus Long
The major indices accumulated two more days of institutional selling, as the S&P 500 and
Nasdaq declined by 1.5% and 3.1%, respectively. The Health Care sector, primarily drugrelated
industries, led the market lower, which put pressure on many of the sector’s leaders
from the prior uptrend. Indices and many stocks on the U.S. Focus List are trading at or near
their moving averages and testing prior support levels.
• The current market status is Under Pressure, with five distribution days on the S&P 500 and
four on the Nasdaq. Indices are back to about 10% off highs, after giving back gains from the
prior two weeks.
Global Focus Developed Long
The Australia ASX All Ordinaries Index lost 2.3% this week, giving
back all of last week’s gains and a bit more. The index gained in four
of five trading days. The index is now in an Uptrend Under Pressure
after picking up its third distribution day in the past three weeks and
trading near 52-week lows mid-week. Despite the weak index, individual
names from the Health Care, Technology, Consumer Cyclical, and Retail
sector have held fairly well.
Global Focus Emerging Long
Chinese markets continue to be range bound with the Shenzhen
and Shanghai up 1% and down 0.2% this week, respectively. Markets
condition is in a Rally Attempt.
Global Focus Frontier Long
US Focus Long
• The market gave back most of this week’s gains, after the Fed left interest rates unchanged,
and concerns over low domestic inflation and a global economic slowdown prevailed.
The uncertainty has presented another challenge for the young rally: the S&P 500 has
accumulated two distribution days, and the Nasdaq is facing upside resistance at its moving
averages. The conviction the market is looking for mostly likely won’t be revealed until
earning season or the next fed meeting, both of which are at least a month away.
• The majority of stocks across the U.S. Focus List have maintained a healthy condition,
confirmed by high Relative Strength Ratings and Accumulation/ Distribution Ratings of B or
higher. The market status remains in an Uptrend.
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 1.9% this week. The
index gained in four of five trading days. The index is in a Confirmed
Uptrend after a follow-through day the prior week, however, it remains
13% off 52-week highs and 7% below its 40-week moving average. It
also has had two distribution days in the first two weeks since the followthrough.
Global Focus Emerging Long
Volatility continued on as the Shenzhen and Shanghai fell over 5% and
3%, respectively. The market condition returned to Correction as the
Shenzhen broke below prior September lows. The markets continue to
trade significantly below key moving averages as the 10-week is now
converging below the 40-week moving average which historically
suggests further downside. We continue to view support for both
indices near the 24-month moving averages which would suggest another
12% and 9% downside for the Shenzhen and Shanghai, respectively.
Global Focus Frontier Long
US Focus Long
U.S. indices rallied over 2% on Tuesday, on volume greater than the previous day, signaling
a Day 9 follow-through day. There are multiple things we are looking for subsequent to
this new rally confirmation. The most important thing is newly actionable ideas from
fundamentally sound companies. Currently, the majority of big price moves have been
coming from beaten down sectors that still need quite a bit of work before becoming
actionable again. Most critical is to see ideas that participated during the last cycle firm up
and retake resistance levels, while new ideas also begin to emerge.
• Thus far, the majority of ideas are still chopping around below their respective 10-week
moving averages. If the major indices are able to hold their August 26, Day 1 lows, allowing
leadership to consolidate and break higher, we will become more confident in this new
rally. If, however, multiple distribution days begin to pile up, it is highly likely that this
follow-through day will fail. New ideas added to the U.S. Focus List will act as a sign of our
confidence that this new rally will gain steam. The market’s status has been changed back to a
Confirmed Uptrend.
