The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gained ~3% each for the week, rallying for the fourth straight week and nearing 200-DMA resistance (S&P 500: 4,329; Nasdaq: 13,510). Indices have become short-term extended versus 10- and 21-DMA support (S&P 500: 4,085; Nasdaq: 12,322). The distribution day count now stands at four and five, respectively, with two days expiring on the S&P 500 and one on the Nasdaq next week.
Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
O’Neil Health Care Weekly
XLV pulled back 72 bps last week after finding resistance at its 200-DMA ($132.21). The index faces resistance at
that level up to ~$134. Support remains the 50-DMA ($128.84) before the $124-$125 range. The relative strength
line continues to trend lower over the trailing one-month, still warranting a reduction in sector weight.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 traded relatively flat this week, consolidating sharp July gains constructively above all near-term moving averages. This index still faces resistance at 4,177, or June highs. The Nasdaq traded higher for a third straight week with now no clear resistance until a falling 200-DMA (13,570). The sharply rising 10- and 21-DMA (S&P 500: 4,015; Nasdaq: 12,039) will act as near-term support for both indices. The distribution day count stands at five and three, respectively, with no expiration next week. There will however be three days expiring on the S&P 500 the following week.
O’Neil Health Care Weekly
XLV rallied ~2% last week, narrowly clearing above 200-DMA ($132.10) resistance. The index now faces resistance at ~$134 with the low end of support at a now rising 50-DMA ($128.66). Its RS line made a lower low this week, warranting a slight reduction in sector weight.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq rallied strongly for a second straight week, pushing
narrowly above 100-DMA (S&P 500: 4,122; Nasdaq: 12,349) resistance Friday. Though the Nasdaq has also cleared
above June highs (12,320), the S&P 500 still faces resistance at that level (4,177). The 10- and 21-DMA (S&P 500: 3,943;
Nasdaq: 11,715) have now crossed above the 50-DMA to act as the next near-term level of support. The distribution day
count remains at five each with one day expiring on the S&P 500 and two on the Nasdaq next week.
O’Neil Health Care Weekly
XLV traded relatively flat last week, sharply underperforming the broader market following strong outperformance initially
off June lows. On an absolute basis, there are no changes. The index faces heavy 200-DMA resistance, with near-term
support remaining at the 50-DMA followed by the $124-$125 range. Though its relative strength line (vs S&P 500) has
fallen, the overall uptrend remains intact, still warranting an equal to overweight sector position. A further lag this week
would warrant a reduction in risk.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq regained and are consolidating above their 50-
DMAs (S&P 500: 3,918; Nasdaq: 11,497) for the first time since March. Look for near term support at the sharply rising
10-and-21 DMA followed by the 50-DMA. The distribution day count stands at four each.
O’Neil Health Care Weekly
XLV jumped 2.4% Friday, retracing early week losses despite remaining below primary resistance at the 200-DMA
($131.92). Should the index pullback, look for support at the 50-DMA ($128.34), followed by last week’s lows of $125.23.
Health Care continues to display a rising relative strength line versus the broader market, warranting an overweight
position.
Market View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq rallied Friday to partially retrace
early week losses and regain their respective 10- and 21-DMA. Despite the move, both indices remain below primary
resistance at the rolling 50-DMA (S&P 500: 3,937; Nasdaq: 11,535). The distribution day count increased to four and two,
respectively.
O’Neil Health Care Weekly
XLV gained 82 bps, rising for a third straight week, but directly into 200-DMA ($131.97) resistance Friday. We expect the
index to now consolidate a large three-week move around current levels. Look for a pullback to be contained at the 50-
DMA ($128.57), where multiple short-term moving averages are converging. A break and sustained close below this level
could lead to further downside with support between $124-$125. Overall, Health Care continues to show strong relative
strength versus the broader market and therefore warranting an overweight position.
