The S&P 500 and Nasdaq rallied for a second straight week, completely erasing Brexit losses.
A solid jobs number on Friday was the catalyst for a further rise in equities, with growth
outperforming defensive ideas for the first time in several weeks. The Brexit selloff can now be
viewed as a massive shakeout since the major averages are once again testing resistance near
new highs. We have moved the market back into a Confirmed Uptrend as both the S&P 500
and Nasdaq are now trading well above support levels in conjunction with healthy action in a
number of growth ideas.
• The market continues to sit just below what has been major resistance for over a year. Q2
earnings kick off next week and will act as the near-term catalyst for multiple ideas and the
general market itself.
Tag: Confirmed Uptrend
US Focus Long
The U.S Indices continued their declines that began last week as Brexit fears increased,
reflective of new poll figures favoring an “out vote”. However, the resiliency of the market
remains impressive, trading 3% off highs and only one distribution day on Monday for the
Nasdaq. The market avoided a significant distribution on Thursday after it staged a strong
upside reversal. The next week is likely to see similar volatility leading up to the Brexit vote on
Thursday. We maintain a Confirmed Uptrend for the indices as the distribution days over the
trailing five weeks is subdued at three each for the S&P 500 and Nasdaq and they continue
to trade constructively in ranges established since April. We would change our view should
distribution days increase and the indices are unable to find support at their moving averages.
Earlier in the week, the Fed announced the decision, largely expected, to leave rates
unchanged. Comments by Yellen were more dovish then previously and bode well for fewer,
if any, interest rate increases for the remainder of the year. Once the Brexit event is decided,
the lack of concern regarding imminent rate increases may be the catalyst to drive the markets
higher.
US Focus Long
The U.S Indices ran into technical resistance this week after testing the highest levels of 2016.
Early in the week, we upgraded the U.S. market condition to Confirmed Uptrend as the
indices continued the broad-based strength that began a few weeks ago. The rally has been led
by the Energy and Material sectors, however, we have recently identified an increasing number
of constructive ideas from the Technology and Retail sectors. As long as the number of ideas
continues to expand in growth-oriented sectors and the distribution day count does not
become elevated again, we will remain patient with the short-term increase in volatility.
The S&P 500 and Nasdaq have four and three distribution days, respectively, over the trailing
five weeks.
US Focus Long
The U.S. Market traded flat this week, still unable to break through upside resistance at 2111
and 2117 on the S&P 500. Despite this, the major averages remain resilient, reversing from
early morning losses in each of the four trading sessions this week. Additionally, distribution
days continue to fall off, dropping to six on the S&P 500 and five on the Nasdaq. This action
is largely constructive, leading us to anticipate a break into higher highs in the coming weeks.
If this occurs in combination with a drop in distribution, the market will be moved back into
a Confirmed Uptrend.
We continue to be encouraged by the expansion of leadership ideas over the past few weeks.
Growth ideas are emerging, with nine names added to the U.S. Focus List over the past two
weeks. We expect to add additional ideas to our list if we see this breakout in the general
market.
US Focus Long
The U.S. Market remains Under Pressure due to an elevated distribution day count. The
S&P 500 now has seven distribution days, while the Nasdaq has six. The positive is that
multiple distribution days are set to fall off next week. If we continue to see positive price
action, specifically a break and hold above 2117 on the S&P 500, along with a decline in
distribution, the market will be moved back into a Confirmed Uptrend.
We are also encouraged by the expansion of leadership ideas over the past week. A few ideas
were added to the U.S. Focus List, and we expect to add additional ideas to our list if we
see a breakout in the general market sometime in the coming weeks. Until then, we still
recommend a slow approach, as we very well could be near the top of what has been a rangebound
market.
US Focus Long
U.S. indices reversed their early week gains, closing down for the fourth straight week on
the Nasdaq and the third straight week on the S&P 500. Both major averages are now
trading below their respective 50-day moving averages. Though each index logged another
distribution day this week, two days also fell off due to time. The number of distribution days
remains elevated however, at seven, for both indices. With the market Under Pressure, we
continue to recommend a cautious approach. The major averages are still up 4-6% since the
February 17 follow-through day, but have lost 3-5% from April highs.
US Focus Long
U.S. indices have continued their march higher after a one-week pause. The S&P 500 is
now trading just 3% off highs, while the Nasdaq has retaken its 200-day moving average.
Constructive action continues, with distribution still a non-factor. Volume has been the
only concern, remaining below average for 16 of the past 17 trading sessions. Growth ideas
continue to build the right side of their respective basing patterns, with many now beginning
to test highs reached late last year. We expect volume to pick up in many of these ideas, as
earnings will now drive market behavior, taking the place of short covering and Fed talk.
We recommend a focus on companies showing good earnings stability and a prior history of
handily beating estimates.
• A pullback after a 14% move off February intraday lows should not be a surprise at this point.
The manner in which this occurs will be critical, though. We prefer to see tight consolidation
around current levels. With Q1 earnings season beginning in less than two weeks, we remain
watchful of any pickup in distribution and breaching of key support levels. The market is now
seven weeks into a Confirmed Uptrend, up 9% on the S&P 500 and 8% on the Nasdaq since
the February 17 follow-through day.
US Focus Long
U.S. indices continued their move higher this week, extending gains for a fourth straight
week. The major averages have maintained this squeeze higher with a tremendous amount of
support from commodity-related equities. The S&P 500 is now trading just above its 200-day
moving average, but will need actual buying, not just short covering, to push this rally back
into new highs. The list of quality ideas showing strong earnings and revenue growth has
continued to consolidate over the last few weeks, but remains thin. We are especially watchful
for ideas emerging from early-stage bases, because ideas with actual top- and bottom-line
growth will be needed for a sustainable rally. The market remains in a Confirmed Uptrend, up
~4% from the follow-through day on February 17, 2016.
US Focus Long
U.S. indices remain in a rally, led by a strong move in the Material and Energy sectors. The
strength in commodities persist as stocks with exposure to steel, oil and gold, are under very
heavy accumulation. In addition, slightly better than expected economic data points over the
last few weeks, including a positive February Jobs report today, could force the Fed’s hand to
raise rates at the mid-March FOMC meeting. Despite the strength in broken sectors coming
off the bottom, we continue to advise patience as we are looking for fundamentally strong
stocks to continue build constructive bases. Multiple indices and sectors face up-resistance at
their respective 200 dma in the coming days/weeks. We are encouraged by the improvement
in the general market but remain very selective of security allocation. The market is in
confirmed uptrend, up 4% since the follow –through day.
US Focus Long
U.S. indices continued to rally higher this week, with the S&P 500 breaking through
resistance at the 50-day moving average. Although the move came on light volume, without
much quality growth leadership, consolidation at these levels could bode well moving
forward. We are now looking for prior resistance at the 50-day to act as support. If the market
calms, it will allow new leadership to develop and emerge within the next few weeks. Patience
remains imperative here, as we look for the expansion in breadth needed to confirm our
conviction in this current move. The S&P 500 and Nasdaq remain in a Confirmed Uptrend,
up 1-2% from the February 17, 2016 follow-through day, with no distribution.
