The U.S. market is in an Uptrend Under Pressure. The S&P 500 reversed from 200-DMA resistance, closing near session lows in lower volume. The next level of support is ~4,278 before February lows. The Nasdaq reversed from 50-DMA resistance, also closing near session lows, but in higher volume. The next level of support is ~13,095. The distribution day count now stands at four each.
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Won Europe Today
Yesterday,
- European markets closed mixed with many indices recording a distribution day. Inflation, earnings, and geopolitical
risks continue to drive the markets. We recommend that investors be very cautious while adding any new risk. - The Stoxx 600 recovered most losses to close down 0.3% on high volume. It recorded its third distribution day. The
index recorded two distribution days in the last five sessions and continues to consolidate above its declining 50-
DMA. Among sectors, Oil & Gas and Mining stocks led the bulls, while Real Estate stocks lagged. - Among other major indices, France’s CAC continues to find support at its April 7 lows after finding supply at its
declining 50-DMA. Germany’s DAX recorded its fourth distribution day. It continues to lag after finding resistance at
15,000 price level. The U.K.’s FTSE 100 is testing support at 7,550 price level. - Among the 17 indices we track in Europe, 11 closed in negative territory, with the Stoxx 600, Denmark, Germany,
Ireland, Portugal, and Italy recording a distribution day each. - Actionable names in the Focus List include Vantage Towers (VTWRX.DE; VTWR:GR), Novo Nordisk(NON.DK;
NOVOB:DC), Aker Bp (AKEP.NO; AKRBP:NO), Ipsos (IPS.FR; IPS:FP), Verbund (VERB.AT; VER:AV), Sonova N
(SOON.CH; SOON:SW), Jeronimo Martins (JMT.PT; JMT:PL), Alcon (ALC.CH; ALC:SW), and Edp Renovaveis
(EDPR.PT; EDPR:PL).
Won Global View
The U.S. market has been shifted to an Uptrend Under Pressure. Indices gapped down on volume higher than the prior session and closed at intra-day lows. The S&P 500 pierced its 50-DMA (4,427) and is testing price support along ~4,400. The Nasdaq, already below its 50-DMA, gapped down 2% and remains vulnerable to further downside pressure. The next level of price support is along ~13,095. The distribution day count increased to four and three, respectively
Won Europe Today
We released our European Weekly Summary yesterday. Click here to access the report. Key points from it include:
The Stoxx 600 remains in a Confirmed Uptrend with two distribution days. The index logged a small gain of ~50bps
last week and continues to trade constructively above its 50-DMA. March 16’s follow-through day remains intact.
Defensive sectors led the gains, with Utility up 3.5%, Health Care up 5.6%, and Food & Beverages up over 2.5% for
the week. Energy and Basic Resources continue to benefit from the inflationary environment and posted positive
gains this week.
New additions last week: Verbio Ver. (Xet) Bioenergie (VBKX.DE; VBK:GR) and Edp Renovaveis (EDPR.PT;
EDPR:PL).
Won Europe Today
On Friday,
- European markets had a strong day with most major indices gaining more than 1%. However, we continue to
remain cautious on the markets and recommend that investors be very selective while adding any new risk. - The Stoxx 600 continues to consolidate above its 50-DMA. Its 100-DMA has crossed below its 200-DMA. Among
sectors, Oil & Gas stocks led the bulls, gaining more than 3%. - Among other major indices, France’s CAC continues to lag after failing to regain its 200-DMA. The index is testing
support at 6,500 price levels. Similarly, Germany’s DAX continues to lag after finding supply at its declining 50-DMA.
The U.K.’s FTSE 100 is facing resistance at its July 2018 highs. - All the 17 major indices that we track in Europe closed in positive territory. Actionable names in our Focus List
include Vantage Towers (VTWRX.DE; VTWR:GR), Aker Bp (AKEP.NO; AKRBP:NO), Ipsos (IPS.FR;
IPS:FP), Verbund (VERB.AT; VER:AV), Sonova N (SOON.CH; SOON:SW), Jeronimo Martins (JMT.PT; JMT:PL),
Alcon (ALC.CH; ALC:SW), and Edp Renovaveis (EDPR.PT; EDPR:PL).
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 pulled back toward its 50-DMA (4,427) before finding support to close off weekly lows. The index is now trading 7% off highs with three distribution days in the last seven sessions. The Nasdaq reversed from 200-DMA resistance (14,726), closing down 3.8% and narrowly below its 50-DMA (13,798). This index is trading 15% off highs with two distribution days in the last four sessions. We will shift the market status to an Uptrend Under Pressure should the S&P 500 also close below its 50-DMA.
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq staged upside reversals finding support around their respective 50-DMA (S&P 500: 4,424; Nasdaq: 13,791) before closing positive and near the highs of the session. We view the 50-DMA as an important level of near-term support for both indices. The distribution day count remains at three and two, respectively.
Won Europe Today
We released our Weekly Global Laggards Report today. Click here to access the report. The stocks highlighted in this
report are laggards relative to their own domestic markets. We recommend that they be under weighted as they may be
vulnerable to further downside risk and underperformance. Clariant (CLN.CH; CLN:SW), Abb (ABBN.CH; ABBN:SW),
Burberry Group (BRBY.GB; BRBY:LN), Accor (AC.FR; AC:FP), Dcc (DCC.GB; DCC:LN), Medibank Private (MPL.AU;
MPL:AU), Sonic Healthcare (SHL.AU; SHL:AU), The Swatch Group (UHRN.CH; UHRN:SW).
Aerospace & Defense: A Resilient Group in a Volatile Market
Attached is a note on Aerospace & Defense from Director of Research Vipin Khare, Associate – Equity Research Pratyush Pradhan, and Analyst – Equity Research Abhijeet Singh.
Key points from this report:
- Aerospace/Defense has held up well in a weak market as investors seek cover in defensive high-quality stocks. It has the highest Group Rank of 30 in the Capital Equipment sector.
- Global military expenditure grew 2.6% y/y in FY20 compared to a GDP decline of 4.4% y/y led by increasing defense-related expenditure in Asia and Europe, driven by modernization of equipment and acquisition of new weapons. Global defense spending is expected to grow ~2.5%y/y in 2022.
- The U.S. is the largest global exporter of arms. However, Asian countries have had an export CAGR of more than 25% in the past five years, resulting in intensifying competition.
- The U.S. Department of Defense (DoD) has requested a budget of $715B for FY22E, implying a CAGR of 3.5% from FY17-22E. Stable demand trends for aircraft, strong growth in space equipment demand due to the launch of the Space force, increasing focus of C4I and the emerging need for cybersecurity, lower allocation toward large drone programs, and the emergence of hypersonic missiles are the key points of discussion.
- Global air travel demand may recover to 85–90% of 2019 levels in 2022. Strong replacement demand is expected over 20 years driving the need for services.
- Key Stocks: LMT, RTX, NOC, BA.GB, AM@F.FR, HEI, BAH, TDY, ULE.GB, IAD.IN, BHE.IN
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped down on volume higher than the prior session and closed near intra-day lows. The S&P 500 breached its 200-DMA and is only 1% above support at its 50-DMA (4,420). The Nasdaq sliced through its 21-DMA and is trading slightly above 50-DMA support (13,784). The distribution day count increased to three and two, respectively.
