The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq faded into the close and finished near session lows
after Tuesday’s above average sell-off. Indices are testing their 100-DMA (S&P 500: 4,343; Nasdaq: 14,472) followed by support at
~4,200 and ~14,200, respectively. The distribution day count remains at four on S&P 500 but increased to six on the Nasdaq.
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U.S. Economic Summary
Q2 GDP expanded 6.7% :
The U.S. economy grew 6.7% in Q2, according to the third estimate, 10bps above the market expectation. The
expansion for the quarter reflected increase in personal consumption expenditures, nonresidential fixed investment,
exports, and state and local government spending.
• Personal spending increased faster than expected:
Personal spending increased 0.8% m/m in August. The increase was mainly due to higher spending on goods as well as
services. Within goods, an increase in nondurable goods was partly offset by a decrease in durable goods. Within
nondurable goods, the increase was led higher spending for food and beverages as well as “other” nondurable goods
(mainly, household supplies as well as recreational items). Within durable goods, the decrease was primarily in motor
vehicles and parts. Within services, the increase was across all categories, led by food and beverages as well as “other”
nondurable goods (mainly, household supplies as well as recreational items).
• The 10-year bond resumed its uptrend after a small correction:
The 10-year yield climbed ~17bps in September and broke above 1.5% for the first time since June during the first two
weeks of October.
O’Neil Capital Equipment Sector Weekly
The U.S. Air Force (USAF) successfully tested Raytheon’s (RTX) hypersonic air-breathing-weapon concept missile. This is the first
successful test flight of a hypersonic missile since 2013. The missile is powered by a Northrop Grumman (NOC) engine. There is no
target date for the integration of these missiles, but further tests are planned for later this year. RTX is consolidating in a stage-one flat
base with a good RS Rating of 76 and an A/D Rating of D+. NOC is also consolidating is a stage-one flat base and has an RS Rating of 58
with an A/D Rating of C.
Won Europe Today
Yesterday,
- European markets had another weak day with all major indices recording distribution days and breaking below their
key moving averages. Leading stocks like ASML.NL; ASML:NA, DSV.DK; DSV:DC, and DSY.FR; DSY:FP are also
breaking down technically, suggesting that the markets might remain choppy for a long period. We recommend that
investors avoid any new risk and book profits in extended names. - The Stoxx 600 recorded its eighth distribution day and broke below its 100-DMA on high volume. Among sectors,
Technology continued to break down losing more than 4% as the U.S. bond yields rise. Markets are indicating signs
of a shift toward value stocks. - Among other major indices, France’s CAC broke below its 100-DMA while Germany’s DAX and the U.K.’s FTSE
100 are trading below their respective 100-DMA. Both CAC and DAX recorded distribution days. - All the 17 indices that we track in Europe closed in negative territory with 15 of them recording distribution days.
Ireland and the Netherlands were downgraded to an Uptrend Under Pressure after they breached their respective
50-DMA. - Actionable names in the Focus List include Ashtead (AHT.GB; AHT:LN), Rentokil Initial (RTO.GB; RTO:LN),
Euronext (ENX.FR; ENX:FP), and B&M European Value Retail (BME.GB; BME:LN).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq gapped down toward last week’s lows in rising
volume, unable to hold above their respective 50-DMA. The 100-DMA (S&P 500: 4,342; Nasdaq: 14,466) is now the next logical level of
support before prior levels of consolidation at ~4,200 and 14,200, respectively, which may coincide with a rising 200-DMA. The distribution
day count is up for the second day in a row, taking the count to four and five, 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 recorded a small gain last week amid volatility after closing in the red for three consecutive weeks.
The index is in an Uptrend Under Pressure with seven distribution days and faces resistance at its 50-DMA. - Of the 17 indices we cover, three are in a Confirmed Uptrend and 14 in an Uptrend Under Pressure. We
downgraded Denmark, Portugal, Luxembourg, and Italy to an Uptrend Under Pressure. The average distribution day
count has increased to six. - On the sectoral front, Energy and Consumer Cyclical gained the most while Transportation stocks were the major
losers. We removed De’Longhi (DLG.IT; DLG:IM) from our Focus List last week.
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq pulled back on volume and are testing support at
their 50-DMA (S&P 500: 4,441; Nasdaq: 14,909). The distribution day count increased to three and four, respectively.
Won Europe Today
On Friday,
- European markets had a very weak day as all major indices either found supply at their 50-DMA or breached below
it. We believe markets will continue to be choppy over the next few sessions as the distribution day count is high.
We recommend not adding any new risk and book profits in extended names. - The Stoxx 600 found supply at its 50-DMA, recording its seventh distribution day. It continues to be in an Uptrend
Under Pressure. Among other major indices, France’s CAC breached below its 50-DMA while Germany’s DAX
broke below its 100-DMA after finding supply at its 50-DMA. The U.K.’s FTSE 100 found resistance at its declining
50-DMA and recorded its eighth distribution day. - Among the 17 indices that we track in Europe, only Luxembourg closed in positive territory. Apart from the U.K. and
the Stoxx 600, the Netherlands also recorded its fifth distribution day. - Rentokil Initial (RTO.GB; RTO:LN) has turned actionable after tracing back to its pivot price level. Other actionable
names in the Focus List include Ashtead (AHT.GB; AHT:LN), Carl Zeiss Meditec (AFXX.DE; AFX:GR), and B&M
European Value Retail (BME.GB; BME:LN).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq broke below their respective 50-DMA (S&P 500:
4,439; Nasdaq: 14,899) last Monday before retracing the entirety of the move to close the week. We will now be looking for both indices to
settle above this moving average or push further higher in the coming days before shifting the market status back to a Confirmed Uptrend.
The distribution day count remains low at two and three, respectively, with no expiration for the next two weeks.
Won Europe Today
Yesterday,
- European markets closed in the green despite weak economic data from the region. Bank of England kept its
monetary policy unchanged and also downgraded the economic growth forecast for the third quarter of this year.
We remain cautious on the markets due to a high distribution day count and as a few major indices are trading
below 50-DMA. - The Stoxx 600 gained 0.92% on higher volume. The index retook its 50-DMA intraday, but closed slightly below it.
The majority of sectors closed in the green. - Major indices like France’s CAC and Germany’s DAX closed in the green for the third consecutive day. France’s
CAC closed above its 50-DMA, while Germany’s DAX is still below its 50-DMA. The U.K.’s FTSE 100 closed in the
red but is trading above its 50-DMA. - All the 17 indices we cover closed in the green, barring Ireland and the U.K. The average distribution day count is at
5.53. - Actionable names in the Focus List include Ashtead (AHT.GB; AHT:LN), Carl Zeiss Meditec (AFXX.DE; AFX:GR),
Beneteau (CHBE.FR; BEN:FP), and B&M European Value Retail (BME.GB; BME:LN).
