The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq did pick up a distribution day on Tuesday, however, the count still remains low at two and three days, respectively. Leadership also remains healthy with new breakouts across multiple sectors each week. We continue to recommend buying ideas as they begin to form the right side of their respective bases or as they emerge from consolidation.
Tag: Confirmed Uptrend
European Focus Long
The Stoxx 600 was almost flat this week, up 0.06% as of Thursday’s close. The index continues to have four distribution days, with one aging out next week. France and Germany remain Under Pressure with an elevated distribution day count. As of Thursday, nine of the 16 European indices were in a Confirmed Uptrend and five are in a Rally Attempt. Although the Stoxx 600 has been consolidating since January 9, it remains in a Confirmed Uptrend. We see new leadership emerging among Financials, Cyclicals, Capital Goods, and Energy.
Global Sector Commentary
The Dow Jones Industrial Average continues its record for the longest run without a 5% or greater correction. The period of 394 trading days beginning June 27, 2016 is nearly three months longer than the prior record from 1994-1996. While the velocity of gains had been very low for much of the streak, it has accelerated, with the index having gained 15% since the end of September 2017. The total 51% gain during the streak is the third-best rally of all time (with no 5% correction).
Energy/Materials are leading to start the year, up 7-8% apiece. Both still have a lot of room to make up given a wide lag from 2010-2017 versus the market and versus their own historical averages.
Yield plays, including Utility and REITs, are laggards as U.S. bond yields rise. However, in the case of the Utility sector, underperformance versus the S&P 500 is reaching an extreme, at -16% over the trailing six months.
Historically, the Utility sector is not always negatively correlated with yields.
Look for support at lows of the two-year upwardly-trending channel to hold. It is right at that level now.
Market View
Market Overview
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to make new highs with a low number of distribution days. Leadership remains healthy with new breakouts across multiple sectors each week. We continue to recommend buying ideas as they begin to form the right side of their respective bases or as they emerge from consolidation. We would avoid chasing ideas that become too far extended as the major averages are now testing longer term upper channel lines and trading ~5% above their respective 50-DMAs.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 76 ideas (one net addition) gained 2.1% on average this week, outperforming the S&P 500 (1.6%) and the Nasdaq (1.7%).
By Sector
Technology, Health Care, and Financial ideas across the U.S. Focus List led this week. Technology ideas that broke out this week include ATVI, ADBE, RNG, RP, OLED, NVDA, and PAYC. All remain actionable. Within Health Care, ILMN and ABMD became quickly extended following preannounced earnings. VRTX remains actionable as it builds the right side of its base. Financial was led by Banks. SIVB, TCBI, and ZION are all now extended after the move this week, while WAL remains actionable off its 50-DMA.
US Focus Long
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to make new highs with a low number of distribution days. Leadership remains healthy with new breakouts across multiple sectors each week. We continue to recommend buying ideas as they begin to form the right side of their respective bases or as they emerge from consolidation. We would avoid chasing ideas that become too far extended as the major averages are now testing longer term upper channel lines and trading ~5% above their respective 50-DMAs.
European Focus Long
The Stoxx 600 climbed 0.3% for the second week of the year, despite adding two distribution days. The iShares DJ Stoxx 600 (EXSA.DE) has been in a Confirmed Uptrend since last week with four distribution days in total. While the index’s key support is at the 50-DMA, we see the recent breakout above resistance at 39.19 (high of November 11) as very constructive.
Market View
Market Overview
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to make new highs with a low number of distribution days. Multiple sectors are participating in the rally, with the sharpest gains this week coming from Basic Material, Energy, and Technology. Leadership remains healthy with numerous breakouts each session. We maintain our positive view until we see a pickup in distribution that leads to deteriorating tech-nical action in leading ideas and the major averages alike.
Stocks on our U.S. Focus List—Current Sentiment
Our USFL of 75 ideas (one addition) gained 3.7% on average this week, outperforming the S&P 500 (2.6%) and the Nasdaq (3.4%).
By Sector
Technology ideas across the U.S. Focus List led this week. All but one have regained their respective 50-DMAs, led by TEAM, WB, NVDA, SPLK, and ON, which broke into all-time highs. Health Care ideas also came under accumulation. ILMN and VRTX both rallied ahead of a Health Care conference on Monday. VRTX remains actionable as it builds the right side of its current base. Most Financial ideas continue to consolidate December gains, however, the Payments group broke back into new highs led by PYPL, FLT, and VNTV.
US Focus Long
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to make new highs with a low number of distribution days. Multiple sectors are participating in the rally, with the sharpest gains this week coming from Basic Material, Energy, and Technology. Leadership remains healthy with numerous breakouts each session. We maintain our positive view until we see a pickup in distribution that leads to deteriorating technical action in leading ideas and the major averages alike.
European Focus Long
The Stoxx 600 recorded a distribution day Monday, the first trading day of the year. However, the index recovered sharply on Wednesday and Thursday, rallying above its 50- and 200-DMA. As of Thursday, the Stoxx 600 was up 1.16% on a weekly basis and is now approaching highs recorded in early November. This week we moved Austria, Belgium, Norway, and Portugal to Confirmed Uptrend and Spain and Sweden to Rally Attempt.
Global Sector Commentary
- During 2017, markets shook off high distribution day counts several times. Most recently, in mid-December, markets had more than four on average and a dozen or so markets had 6+. Hence why this indicator alone is not enough to change our stance.
- Currently, there is an average of just 2.5 distribution days across all markets in an uptrend.
- Across all geographies currently, we are finding many actionable growth stocks. This number has increased significantly just this week, as more names are breaking out from periods of consolidation and into 52-week highs.
- Further, risk-on sectors, including Consumer Cyclical, Transportation, and Technology, stable growth such as Retail and Health Care, as well as Basic Material and Energy, are all performing well globally.
- Top picks include Alibaba (
), Nvidia (
), Netflix (
), Kering (KER.FR), 3SBio (SBIL.HK), Supergroup (SGP.GB), Harmonic Drive Systems (HARM.JP), Localiza (LOC.BR), JSW Steel (JVS.IN), Avenue Supermarts (AS.IN), BCPG (BCPG.TH), and Muangthai Leasing(MUTH.TH).
