Australia’s ASX All-Ordinaries Index gained 0.4% this week,
attempting to retake its 10-week moving average after a third week of
gains. It remains in a Rally Attempt.
Author: Neeraj Khanna
Global Focus Emerging Long
Chinese markets were closed for the week for National holiday
Global Focus Frontier Long
Economic Summary
Q2 GDP growth comes above expectations, but the expansion decelerated in H1 2016.
Underwhelming economic growth
In H1 2016, the U.S. economy grew at an average annual rate of 1.1%, even weaker than the already soft
post-recession average of about 2%. Recently, the IMF downgraded the economic growth outlook for the U.S.
to 1.6% in 2016, a decline of 38% year-over-year, due to a decline in consumer spending, slack exports, and
businesses restocking their shelves.
US Focus Long
U.S. indices ended a choppy week slightly higher, managing to hold on to gains over the
last few weeks. The S&P 500 has made little progress since the July 8 follow-through day,
now trading right along its 50-day moving average. The Nasdaq remains the leading index,
currently holding its 21-day moving average, and looking to breakout again next week.
Leadership still looks strong, with many ideas making new highs despite consolidation in the
S&P 500. The market remains in a Confirmed Uptrend, with six distribution days on the
S&P 500 and three on the Nasdaq.
European Focus Long
European markets fell for the third week in the last four, losing 0.6% on
average, but the losses were trimmed late Friday on news that Deutsche
Bank may be close to a settlement with the DOJ. Markets were extremely
volatile this week on news of OPEC’s decision to cut production and
concerns about Deutsche Bank’s liquidity. Norway was the best market,
advancing 0.9%, as the oil-dependent economy would benefit from
increasing oil prices. Denmark continued to underperform, losing 2.9%;
the only country down more than 2%.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index gained 0.1% this week, pausing
after 2+% gains the prior week. The index is testing resistance at its 10-
week moving average after rallying about 4% from the lows of two weeks
ago. It is now in a Rally Attempt.
Global Focus Emerging Long
Chinese markets fell less than 1% this week, consolidating in a range
since late July. There has been no change in trend for several months
and action has continued to be constructive. One distribution day was
recorded on Monday, bringing the total to five and four for the Shenzhen
and Shanghai, respectively. Distribution days could begin to fall off next
week as long as market volatility does not pick-up. Our view remains
unchanged as we are looking to see whether markets can break above
previous highs of approximately 2060 for the Shenzhen and 3140
for the Shanghai. In our view, a strong move above these levels would
be a bullish indicator. Vice versa, a move lower along with increasing
distribution to approximately 2,950 for the Shenzhen and 2,930 for the
Shanghai would be concerning.
Global Focus Frontier Long
US Focus Long
U.S. indices were able to rally for a second straight week as Fed officials decided to keep rates
unchanged on Wednesday. The S&P 500 rallied back up to just below its 50-day moving
average, while the Nasdaq broke into all-time highs. Technical action in both the major
averages and leadership ideas has been very constructive, leading us to believe there are further
gains ahead. Our biggest concern is the elevated number of distribution days on the S&P 500,
though one is set to fall off next Wednesday. With the Nasdaq trading at all-time highs, we
have shifted the U.S. market back into a Confirmed Uptrend.
