The Australia ASX All Ordinaries Index gained 0.5% this week. The
index had a follow-through day on Wednesday, gaining 2% on 24%
above average volume. It is the first time the index has been back in a
Confirmed Uptrend since August 6th. Still, the index remains 14% off
52-week highs and 8% below its 40-week moving average. It also had a
heavy day of distribution the day after the follow-through day, increasing
the likelihood of failure.
Author: Neeraj Khanna
Global Focus Emerging Long
After three consecutive weeks down, Chinese markets finished the week
higher. The Shenzhen and Shanghai gained 6.4% and 1.3%, respectively,
on below average weekly volume and is now in a Rally Attempt.
Global Focus Frontier Long
US Focus Long
The U.S. market continues to chop around with high volatility. Leadership ideas are forming
new bases, with the majority trading below resistance at their respective 10-week or even
40-week moving averages. This justifies a defensive approach that avoids any new buys at
the moment. The indices remain above last Wednesday’s low, so we are monitoring for new
leadership ideas to emerge, especially ones that did not participate in the prior uptrend. A new
follow-through day, combined with multiple actionable ideas, would give us confidence that
this correction is over. Now we are on Day 8 of a Rally Attempt, with no actionable ideas.
Global Focus Developed Long
The Australia ASX All Ordinaries Index lost 4.0% this week. The
index finished at its lowest weekly closing level since August 2013, failing
to build on gains during the latter part of the prior week. It is 15% off
52-week highs, well below its 40-week moving average.
Global Focus Emerging Long
The Chinese markets continued their decline at the end of a short trading
week. The markets have now fallen for three consecutive weeks. The
Shenzhen fell over 9% while the Shanghai fell over 2%. Despite the
decline in the markets, the Shenzhen still remains up approximately
18% YTD while the Shanghai is down 2% YTD.
Global Focus Frontier Long
Economic Summary
U.S. economy grows faster than anticipated; Fed rate hike fears looms on markets.
GDP growth exceeds economists’ estimates.
The Q2 GDP growth rate was revised upward to 3.7% from the earlier estimate of 2.3%, beating
average expectations of 3.2%. Higher government and consumer spending, and a lower trade
deficit boosted the GDP.
US Focus Long
U.S. indices traded with extreme volatility this week, breaking down to levels not seen since
last year before snapping back later in the week. On Monday, the S&P 500 traded nearly
13% off all-time highs, while the Nasdaq traded 18% off highs. Many leadership ideas broke
down and are now trading below key moving averages even after the dead cat bounce in the
general market. We expect this volatility to continue. We recommend a defensive approach,
lightening up on positions until the market firms and a new follow-through day materializes.
We do not expect a V-shaped recovery, but remain objective to the possibility if the averages
and leading ideas alike show constructive action again. Day 1 of a new rally attempt began on
Wednesday. This rally attempt will remain, until either we undercut Wednesday’s lows, or a
new follow-through day occurs.
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 1% this week,
snapping a three week losing streak. Early in the week, the index briefly
touched its lowest level since July 2013, falling to 17% off 52-week highs,
before rebounding on heavy volume to close positive. It is in a Rally
Attempt and remains 12% off highs. Health Care, Consumer Staple, and
Consumer Cyclical sectors are sharply outperforming.
