The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq reversed off early week gains to close flat for the week. Despite a sharp pullback Friday, both indices avoided distribution as volume came in below Thursday’s spike. Distribution now stands at two and three days, respectively, with one set to expire on the S&P 500 next week. Support remains the rising 21-DMA on both indices (S&P 500: 2,797; Nasdaq: 8,421).
Tag: Confirmed Uptrend
European Focus
On Thursday, the Stoxx 600 ended 3.17% above last Friday’s close. Of the 17 indices that we cover 16 are in a Confirmed Uptrend, and one is in an Uptrend Under pressure.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating gains with low
distribution. The S&P 500 is trading at its 50-DMA, while the Nasdaq is trading at its 100-DMA. Distribution
stands at one day each, not including Thursday’s stalling action. The 21-DMA remains a key level of short-term
support.
Four of 11 O’Neil sectors are trading above their respective 50-DMA, with leadership largely isolated among
Technology and Health Care stocks. Despite Energy leading over the last five sessions, the sector remains 6%
below its 50-DMA. Top ranked industry groups outperforming over the last week include Mining, Biotech, Diversified Health Care, Pharmaceuticals, Medical Products/Equipment, Medical Software, Enterprise Software, Gaming Software, Semiconductors, Telecom, and Internet. 38% of S&P 500 stocks are now trading above their respective 50-DMA, up from 30% last week.
China A Shares
The CSI 300 fell 1.11% this week on lower volume. The market remains in a Confirmed Uptrend with five distribution days. The index has hit resistance at its 50-DMA and is consolidating after hitting highs following March’s low of 3,503 (-7.7%). With consistently thin trading volume, we expect the market to trade sideways between resistance and the gap of ~3,738 (-1.5%) in the near term. We would like it to stay above 21-DMA support to remain constructive, followed by support at ~3,627 (-4.5%). China further cut its benchmark lending rate this week to support the economy amid the pandemic and raised expectations of a comprehensive rate cut. However, since the coronavirus spread overseas has not yet peaked and unprecedented oil price declines boosted fears of a recession, the domestic market is in a wait-and-see mood. As volatility picks up and rotation speeds up, investors are advised to stay cautious and focus on ideas that benefit from policy support, mainly targeted at stimulating domestic consumption. The Consumer Staple, Health Care, and Retail sectors are outperforming while Technology lagged over the last four weeks. With earnings to continue next week, we recommend watching closely.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating gains with low distribution. The S&P 500 is trading at its 50-DMA, while the Nasdaq is trading at its 100-DMA. Distribution stands at one day each, not including stalling action on Thursday. The 21-DMA remains a key level of short-term support.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue their V-shaped recovery
with both regaining their respective 50-DMA this week. We will be looking for this level to now act as support
over the next week. Overall action remains constructive with strong and instant progress since the April 2 followthrough day leading to an increase in breakouts among high quality ideas over the last several days. The distribution day count remains a non-factor at just one day on each index.
Sectors have diverged with Health and Technology showing strong gains over the last week at the expense of
Basic Material, Financial, and Transports. We will be looking for lagging sectors to find their footing and hold
above March lows, while leading sectors continue to push higher. In order for further gains, we do believe leadership will have to broaden over the next few weeks. The best performing industry groups over the last week include Gaming Software, Software Security, Medical Software, Semiconductors, Biotech, Medical Products/Equipment, Discount Retail, and Mining.
China A Shares
The CSI 300 rose 1.87% this week on higher but below average volume after falling 0.62% on low volume last Friday. The market remains in a Confirmed Uptrend with three distribution days. China’s GDP fell 6.8% y/y in Q1 2020, larger than the -6% forecast and reversing Q4 2019’s 6% expansion. This marks the first contraction on record in China. Factory production fell less than expected, -1.1% versus the -5.2% forecast. The market expects the economy to remain under pressure in the second quarter because consumption slumps and the pandemic is devastating demand from its major trading partners, so we would watch China’s further policy support. This week’s trading volume was higher than last week’s but remained under the 50-day moving average, so we believe it’s still too early to be aggressive. We recommend a disciplined and selective approach, focusing on stocks with high RS breaking out from a sound base. The CSI 300’s next support is at ~3,627 (-5.5%), followed by ~3,503 (-8.7%). Resistance is at the 50-/200-DMA at ~3,890 (+1.3%), followed by the 100-DMA at ~3,940 (+2.6%).
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to v-shape recover with both regaining their respective 50-DMA this week. We will be looking for this level to now act as support over the next week. Overall action remains constructive with strong and instant progress since the April 2 follow-through day leading to an increase in breakouts among high quality ideas over the last several days. The distribution day count remains a nonfactor at just one day on each index.
European Focus
On Thursday, the Stoxx 600 ended 2.69% below Tuesday’s close. All the 17 indices we cover are in a Confirmed Uptrend.
China A Shares
The CSI 300 rose 2.1% for the first three trading sessions this week and remains in a Confirmed Uptrend with two distribution days. Support is at the lower edge of the previous gap (~3,627, -4.3%), followed by March’s low (~3,503, -7.6%). Resistance is at the 200-DMA (~3,900, +2.8%). Global stocks gained on hopes the pandemic is peaking, boosting risk appetite in the domestic market. But as damage to economy remains highly uncertain, we advise staying patient. The consistent low trading volume confirms our cautiousness. As we expect the CSI 300 to consolidate sideways at 3,627–3,900 in the near term, we recommend a selective approach, focusing on stocks that have broken out of solid bases or bounced off key support with volume. In addition, as the market enters Q1 2020 earnings season, companies’ performance will become the focus. Pay attention to names with robust Q1 earnings growth (guidance) or that are expected to recover soon.
