The CSI 300 rose 0.8% during the holiday-shortened week on below average volume and remains in a Confirmed Uptrend. The market will be closed all of next week due the upcoming National Day Holiday. Our conviction has increased somewhat due to the index holding above ~3,400 and 2.4% above its 50-DMA. This week, the FTSE Russell announced it will add China A Shares to its key indices starting in 2019, which is positive news for the market. Going forward, we are looking for the Shenzhen Composite Index to break through its 50-DMA and for the CSI 300 to break through 100-DMA resistance at ~3,500 (~2.2%). If a pullback occurs, we look for the CSI 300 to hold support above its 50-DMA (~3,350). We recommend staying patient and focusing on leading stocks with strong fundamentals.
Tag: Confirmed Uptrend
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold above short-term support levels. The Nasdaq has an elevated distribution day count at seven, however, three days expire within four sessions beginning next Thursday. To remain positive, we would like to see the Nasdaq hold above its 50-DMA and avoid further distribution as expiration approaches. Positively, underlying action among growth ideas has been strong this past week. Multiple ideas have begun to emerge from consolidation and move back into new highs. 64 of the 75 (85%) U.S. Focus List ideas are trading above their respective 50-DMA, 49 (65%) are trading within 5% of a new high, and 21 (28%) hit new all-time highs this week. We continue to recommend buying high quality ideas as they find support at key moving averages or as they emerge from sound bases.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 moved back into all-time highs this week, while the
Nasdaq held support at its 50-DMA. The majority of leading ideas also continue to hold individual levels of sup-
port or make new highs, though we have begun to see sector rotation over the past week. Energy, Basic Materi-
al, Consumer Cyclical, and Capital Equipment have come under accumulation, while previously leading sectors,
Technology and Retail, have paused, consolidating sharp gains over the last month. Our recommendation is to
continue holding core positions in high relative strength ideas, while also proactively locking in gains in ideas
that have rallied 20-25% or more above later stage pivot points. We maintain our positive view on the general
market, which will change should we begin to see technical deterioration in leading ideas coupled with addi-
tional distribution in the major averages.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 74 ideas lost 1.4% on average this week, underperforming the S&P 500 (+0.8%) and the Nasdaq
(-0.3%).
Actionable Focus List ideas: Activision Blizzard ( ATVI ), Adobe Systems ( ADBE ), Align Technology ( ALGN ), Auto-
desk ( ADSK ), Calavo Growers ( CVGW ), Centennial Resource Dvlp ( CDEV ), Edwards Lifesciences ( EW ), Envestnet
( ENV ), Fidelity Natl Info Svcs ( FIS ), Home Depot ( HD ), Intuit ( INTU ), Nextera Energy ( NEP ), Nomad Foods
( NOMD ), Nvidia ( NVDA ), Old Dominion Freight Line ( ODFL ), Palo Alto Networks ( PANW ), Paypal ( PYP L), PRA
Health Sciences ( PRAH ), Q2 Holding ( QTWO ), Realpage ( RP ), Splunk ( SPLK ), Vertex Pharmaceuticals ( VRTX ),
Zoetis ( ZTS )
USFL ideas weekly earnings line-up:
Thursday: Open: MKC
Sector
Energy ideas within the U.S. Focus List led this week. FANG regained its 50-DMA, while CLR found support at its
200-DMA. NEP continues to trend along its 50-DMA, while CDEV remains technically intact despite pulling back
from its pivot point on Thursday. Payment processors also continue to act well. MA and V continue to make new
highs, while FLT, PYPL, WP, and GPN remain at or near new highs. Conversely, Technology ideas have pulled
back off extended levels. WDAY, GRUB, SPLK, NOW, RNG, QTWO, ADBE, NVDA, and TYL have pulled back to
their respective 50-DMA, while MPWR and GOOGL have broken below that same level of sup-
port. ADSK and ATVI still look strong technically and remain actionable. Retail ideas are also consolidating sharp gains over the past month. WING, LULU, OLLI, and FIVE remain extended, while HD is still trading within
a pivot. AMZN is trading ~7% off highs and testing support at its 50-DMA.
China A Shares Long
The CSI 300 rose 5.2% for the week, its biggest weekly gain since March 2016. Volume increased but was still below average. The index rose 3.0% on Friday, rising above its 50- DMA on volume 42% higher than average. We upgraded mainland China markets to a Confirmed Uptrend on September 19 after a follow-through day. However, the market remains in bear territory. The Shenzhen Composite Index, which we believe serves as a leading indicator of the overall market, remained below its 50-DMA. To increase our conviction, we are looking for the CSI 300 to hold above ~3,400 and for the Shenzhen Composite Index to climb above its 50-DMA. Leading or improving industry groups that are under accumulation include Consumers, Financials, and Real Estate. With the upcoming Chinese Mid-Autumn Festival and National Day, we recommend staying cautious and keeping positions low in case of any changes in public policy.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 moved back into all-time highs this week, while the Nasdaq held support at its 50-DMA. The majority of leading ideas also continue to hold individual levels of support or make new highs, though we have begun to see sector rotation over the past week. Energy, Basic Material, Consumer Cyclical, and Capital Equipment have come under accumulation, while previously leading sectors, Technology and Retail, have paused, consolidating sharp gains over the last month. Our recommendation is to continue holding core positions in high relative strength ideas, while also proactively locking in gains in ideas that have rallied 20-25% or more above later stage pivot points. We maintain our positive view on the general market, which will change should we begin to see technical deterioration in leading ideas coupled with additional distribution in the major averages.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 held support at its 21-DMA this week while distribution fell to just two days due to expiration. The Nasdaq held its 50-DMA and currently has five distribution days. Both indices will lose an additional distribution day next week. Leadership continues to act well, with new ideas also breaking out from consolidation over the past week. Despite positive price volume action in both the major averages and individual ideas, we recommend reducing risk in stocks that have rallied 20-25% above later stage pivot points. We will change our current positive view on the market should we begin to see technical deterioration in leading ideas coupled with additional distribution in the major averages.
Market View
Market Overview
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back off highs during the first
week of September and continue to digest strong gains from August. Increasing distribution has caused the
Nasdaq to break slightly below its 21-DMA, while the S&P 500 is testing this moving average. The rising 50-
DMA is the next level of support for both indices. The majority of growth ideas have pull back off highs and/or are consolidating above key support levels. Despite the rise in distribution, leadership remains intact. We maintain a bullish outlook as long as indices and leading stocks exhibit constructive price action and hold above key support levels.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 77 ideas lost 1.4% on average this week, underperforming the S&P 500 (-1.1%) and outperforming
the Nasdaq (-2.6%).
By Sector
Retail ideas were up 3% on average this week, led by FIVE, which gapped up +13% on earnings. OLLI also re-
ported better-than-expected earnings and continues to trend higher. WING remains a leader in the restaurant group, while HD is actionable from a flat base consolidation. Within Staples, MKC is quietly trending higher as CVGW is emerging from cup-with-high handle after positive earnings results. A majority of Technology ideas pulled back or are consolidating, however PSTG and BL broke out into new highs and are extended. QTWO isbreaking out from flat base consolidation and remains actionable. Health Care lagged significantly, down 1.5% on average, however most ideas, including IDXX and ALGN, have either pulled back into support or continue to consolidate.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back off highs during the first week of September and continues to digest strong gains from August. Increasing distribution has caused the Nasdaq to break slightly below its 21-DMA, while the S&P500 is testing this moving average. The rising 50-DMA is the next level of support for both indices. The majority of growth ideas have pull back off highs and/or are consolidating above key support levels. Despite the rise in distribution, leadership remains intact. We maintain a bullish outlook as long as indices and leading stocks exhibit constructive price action and hold above key support levels.
Market View
Market Overview
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating near all-time highs after accelerating the last two weeks. Distribution remains low with three days on the Nasdaq and two on the S&P500. Leadership remains intact, with strong price action across multiple groups, including payment processors, med-tech, and software. We maintain a positive outlook on the market.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 77 ideas gained 1.8% on average this week, outperforming the S&P 500 (+0.9%) and slightly lag-
ging the Nasdaq (+2.1%).
By Sector
Ideas across Capital Equipment, Health Care, Financial, and Retail were up more than 2% on average. HEI, within the Capital Equipment sector, gapped up 12% into new highs after better-than-expected earnings results. Payment processors remain one the best industry groups in the Financial sector, led by SQ, MA, and V. LULU gapped up on earnings, while OLLI broke out into new highs ahead of earning results on Wednesday. Health Care ideas, VRTX and ALGN, are actionable after moving into a pivot area on constructive price action. Transportation ideas remain weak, as ZTO pulled back below its 100-DMA.
China A Shares Long
The CSI 300 rose 0.28% for the week on increased but still-below-average volume. We upgraded the market to a Confirmed Uptrend after it had a follow-through day Monday. However, the index had a four-day losing streak after the follow-through day, and both the Shanghai Composite and Shenzhen Composite Index declined for the week. Our conviction remains low as the CSI 300 remains below 50-DMA resistance, which has been consistent. The market is still bearish and the index is still 15.8% below its 200-DMA and 2.3% below its 50-DMA. We anticipate that volatility will continue in the near term, especially as China- U.S. trade tensions have risen. We recommend taking a defensive approach and waiting for additional signs of strength before being aggressive.
