The U.S. market remains in a Confirmed Uptrend. The S&P 500 staged an upside reversal off its 10-DMA and closed slightly positive
after a weak open. The Nasdaq closed lower on the session but was able to recover off intra-day lows. The distribution day count stands at
four and three, respectively, with one day expiring on the Nasdaq after the close tomorrow.
Author: Gaghan
O’Neil Capital Equipment Sector Weekly
A $1T bipartisan infrastructure bill was tabled in the U.S. Senate this week. The bill aims to add $550B in new spending to the previously approved $450B. Major
allocations include $110B toward roads, bridges, and major projects; $39B to modernize public transit systems; $40B to repair bridges; $65B for broadband
infrastructure; and $42B for ports and airports. The bill also allocates $7.5B to EVs and related infrastructure.
U.S. Economic Summary
• Q2 GDP expanded 6.5% :The U.S. economy grew 6.5% in Q2, according to the advance estimate, much below consensus of 8.5% gain. 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 1% m/m in June. 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 by pharmaceuticals and gasoline and other energy goods. Within durable
goods, the decrease was primarily in motor vehicles and parts. Within services, the increase was across all categories, led
by food services and accommodations
O’Neil Capital Equipment Sector Weekly
Vertiv Holdings ( VRT ): reported beat-and-raise Q2 FY21 results today before market open. Sales grew 25% y/y and adjusted EPS grew 94% y/y, beating estimates by 3.5% and 29.2%, respectively. The company raised FY21 sales guidance by 2.0% and adjusted EBITDA guidance by 3.6%, but pared adjusted operating margin guidance by 150bps to 11.8–12.2%. The stock is trading close to its 52-week high as it is extended from an ideal entry point. We recommend that investors look for a pullback to its 50-DMA (-5.8%) before accumulating.
Generac Holdings ( GNRC ): reported strong Q2 FY21 results today before market open. Sales grew to $920M (+68% y/y), beating estimates by 6%, while EPS grew to $2.39 (+71% y/y), beating estimates by 3%. The stock is testing resistance along its 21-DMA. It is extended from an ideal entry point. We recommend that investors look for a pullback to its 50-DMA before adding to positions.
Lincoln Electric ( LECO ): Reported better-than-expected Q2 FY21 results before market open yesterday. Sales grew 39% y/y while adjusted EPS grew 109% y/y, beating estimates by 5% and 13%, respectively. The stock bounced back from support along its 21-DMA and closed 1% lower. We recommend that investors add to positions above pivot of $136.04 (+0.2%)
O’Neil Capital Equipment Sector Weekly
- Misumi (MISM.JP; 9962 JP) – $10B market cap; $23M ADV: We added Misumi to our Developed Markets Focus List as it is breaking out of a stage-one cup base and is trading at a 52-week high. It manufactures factory automation and die components and distributes tools, equipment, and consumables through its Variation & On-Stop by New Alliance (VONA) e-commerce platform. The company plans to expand its B2B network globally. Shift to high margin products and efficiencies of scale should help improve operating margins by 200–250bps over the next two years. Click here for detailed note
- TopBuild (BLD) – $6B market cap; $62M ADV: We removed TopBuild from the U.S. Focus List as the stock breached support along its 200-DMA on above average volume. The company has benefited from home improvement trends and strong growth in housing starts in the past three quarters. We expect to revisit the stock on technical improvement. Click here for detailed note
- Daikin Industries (DA@N.JP; 6367 JP) – $53B market cap; $124M ADV: We removed Daikin Industries from our Developed Markets Focus List as thestock breached its 200-DMA and support at the pivot of its previous flat base on twice the average volume. The stock has been weak since its Q4 FY20 (year ended March 2021) results and breached its key moving averages. The stock has gained 17% since its addition over the past year. We will revisitthe stock if the technical profile improves. Click here for detailed note
O’Neil Capital Equipment Sector Weekly
Interroll ( INRN.CH; INRN SW ) – $4B market cap; $4M ADV: We added Interroll, a material-handling equipment manufacturer to our Developed Markets Focus List as the stock broke out of a stage-two cup base on above average volume. Interroll uses a modular platform concept that increases the efficiency of manufacturing and distribution operations by automating functions. Interroll will likely benefit from the demand for efficient, decentralized distribution centers driven by ecommerce. It expects strong results in H1 FY21, driven by strong order growth in H2 FY20.
Airbus ( AIRS.FR; AIR FP ) – $106B market cap; $211M ADV: We added Airbus to our Developed Markets Focus List as the
stock is breaking out of a stage-one flat base on above average volume. It manufactures aircraft and helicopters. Net orders
increased in 2020 and business is expected to benefit from the recovery in global passenger air traffic. The company has also
increased production for the A320 family. Military spending in NATO countries provides stability to the defense and helicopters business segment (30% of total revenue).
Won Europe Today
Yesterday,
- European markets ended the session on a mixed note. The U.S. reported stronger-than-expected weekly jobless claims. We recommend that investors focus on quality names emerging from consolidation on high volume.
- The Stoxx 600 was down 0.12% on higher volume after making a new high the previous day. Basic Resources stocks fell 1.9% to lead the losses.
- Major indices like Germany’s DAX closed in the green, whereas France’s CAC and the U.K.’s FTSE 100 closed in the red. The U.K.’s FTSE 100 recorded a distribution day, taking the total count to four. All three indices remain in a Confirmed Uptrend.
- Of the 17 indices we track, the majority closed in the red, with the U.K. and Portugal losing the most, while Austria led the gains. The U.K, Ireland, and Spain recorded a distribution day each. The average distribution day count stands at 4.06.
- Actionable names in the Focus List include EQT ( EQT.SE; EQT:SS ), Airbus ( AIRS.FR; AIR:FP ) Barco New ( BAR.BE; BAR:BB ), Fevertree Drinks ( FEVR.GB; FEVR:LN ), Intesa Sanpaolo ( ISP.IT; ISP:IM ), Novo Nordisk ( NON.DK; NOVOB:DC ), Carl Zeiss Meditec ( AFXX.DE; AFX:GR ), Cellnex Telecom ( CLNX.ES; CLNX:SM ), and Trigano ( TRI.FR; TRI:FP ).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq pulled back to their 21- and 50-DMA, respectively. Despite the pullback to near-term support, both remain relatively flat over the last two weeks. The distribution day count stands at eight and four, respectively, with one day expiring on the S&P 500 today, and one on each index next week.
Sector action was mixed with defensive sectors and Energy leading with small gains, and Retail, Consumer Discretionary, and Technology lagging, down ~1% each on the session. The best performing industry groups over the past week include multiple Oil & Gas groups, Coal, Metal Ores, Reits, Banks, Auto OEM, Department Stores, and Beverages.
Won Europe Today
Yesterday,
- European markets closed in the green based on strong manufacturing activity data received from the region,
particularly the Eurozone. However, concerns about rising inflation limited the market gains. We recommend that
investors focus on quality names emerging from consolidation. - The Stoxx 600 was up 0.28% and made a new high. Autos gained 1.3% to lead the gainers as almost all sectors
were trading in positive territory. - Major indices like Germany’s DAX, France’s CAC, and the U.K.’s FTSE 100 closed in the green and are trading
above their key moving averages. France’s CAC is trading at an all-time high. All three indices are in a Confirmed
Uptrend. - Of the 17 indices we track, the majority closed in the green, with Finland leading the gains, while Denmark and
Portugal lost the most. We upgraded Finland to a Confirmed Uptrend after it reclaimed its prior high. Currently, 13
indices are in a Confirmed Uptrend and four in an Uptrend Under Pressure. The average distribution day count
stands at 4.24. - Actionable names in the Focus List include Airbus ( AIRS.FR; AIR:FP ), Barco New ( BAR.BE; BAR:BB ), Fevertree
Drinks ( FEVR.GB; FEVR:LN ), Intesa Sanpaolo ( ISP.IT; ISP:IM ), Novo Nordisk ( NON.DK; NOVOB:DC ), Carl Zeiss
Meditec ( AFXX.DE; AFX:GR ), Cellnex Telecom ( CLNX.ES; CLNX:SM ), Trigano ( TRI.FR; TRI:FP ) and EQT
( EQT.SE;EQT:SS ).
Won Global View
The U.S. market remains in an Uptrend Under Pressure. Indices traded quietly for the sixth day, closing in fairly narrow ranges. The S&P 500 was flattish, holding onto its 21-DMA (4,172) and remaining just 1% off all-time highs. The Nasdaq was also roughly flat, remaining solidly above 21- and 50-DMA. It is 4% off highs. Indices have eight and three distribution days, respectively, with one set to expire on the S&P 500 on Friday after the close.
We view the easing of volatility over the past few days as a positive, and note an increase in the number of stocks breaking out. However, this is mainly true in commodity, financial, and industrial groups, and much less-so in secular growth areas of Technology, Retail, and Health Care. We continue to view overhead in several key areas like software, as a risk, as stocks begin to rise into potential resistance levels. We suggest staying selective and buying only in areas with stocks breaking out of constructive bases while waiting for the marketstatus to change back to a Confirmed Uptrend to become more aggressive.
