In light of the heightened economic uncertainty, our analyst team has compiled in the attached report a multi-sector list of companies that we believe can perform well through market cycles. These companies benefit from secular growth trends, are leaders in their respective industries, and have business models that we expect to be resilient through a challenging period for the econom
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.
Small- and Mid-Cap Secular Growth
In light of the heightened economic uncertainty, our analyst team has compiled in the attached report a multi-sector list of companies that we believe can perform well through market cycles. These companies benefit from secular growth trends, are leaders in their respective industries, and have business models that we expect to be resilient through a challenging period for the economy.
Market View
U.S. Market
The U.S. market remains in a Downtrend. The S&P 500 and Nasdaq rallied strongly Friday, holding above
Thursday’s low (S&P 500: 2,478; Nasdaq: 7,194) to close the week. We are now looking for this low to hold
through Tuesday before a potential follow-through day as early as Wednesday (day four). There is no clear level
of support above December 2018 lows of 2,346 (-13.5%), should Thursday’s lows be undercut.
All sectors severely declined through Thursday before rallying sharply higher on Friday. Consumer Cyclical,
Basic Material, and Energy fell more than 20% before bouncing Friday. All 197 industry groups closed down for
the week with a median decline of 15%. Industry groups with RS lines at or near new highs include Cleaning
Products, Discount Retail, Super Markets, Managed Care, Pharmaceuticals, and Food. S&P 500 stocks are trading a median of 29% off highs and a median of 17% below their respective 200-DMA.
Market View
U.S. Market
The U.S. market remains in a Rally Attempt. The S&P 500 and Nasdaq have now held above the February 28
intraday low (S&P 500: 2,855; Nasdaq: 8,264) for six sessions, despite heavy selling to close the week. Monday
will mark day seven of the attempted rally with a follow-through day still needed to move to Confirmed Uptrend.
If these lows are undercut, however, the market status shifts back to a Downtrend and we again look for indices
to establish and hold above another new low.
Lagging sectors and industry groups broke through last week’s lows, while defensive-oriented sectors including
Utility, Consumer Staple, and Health Care held up best. The best performing groups over the last week include
Building Products/Services, Utilities, Food, Mining, Managed Care, and Telecom. The worst performing groups
included Oil & Gas, Leisure, Gaming, Lodging, Banks, and Airlines.
U.S. Market Update + High Relative Strength Global Growth Ideas
Attached is the accompanying report to tomorrow’s U.S. Market Update + High Relative Strength Global Growth Ideas webinar from Executive Director, Research Analyst Raj Gupta. He will review the current state of the U.S. market, using historical precedent to discuss potential scenarios that could occur in the coming days and weeks. He, along with other analysts, will also review high relative strength ideas on our Focus List across a number of sectors. You can listen to the webinar in the Research Library on PANARAY® or on our website any time after 11am ET, Thursday, March 5.
Market View
U.S. Market
The U.S. market is in a Downtrend. The S&P 500 and Nasdaq have broken below all major moving average
support levels this week. The next level of price support is ~2,822 on the S&P 500 and 8,243 on the Nasdaq.
During a market correction, we do not try to catch the exact bottom simply by looking at where support could
be. We first allow the market to establish a new low, and hold above that low for three sessions – this is what we
refer to as a Rally Attempt. Day 1 of an attempted rally begins when a major index closes up from the previous
session or closes in the upper half of an intraday trading range. Neither volume nor the size of the gain matters.
The only thing that matters is that the attempted rally stays alive. For the attempted rally to remain intact, the intraday low on Day 1 cannot be undercut. On Day 4 or later of the attempted rally, at least one of the key market
indexes must deliver a strong gain in volume up from the previous day. We prefer to see at least 1.7%, but the
bigger the better. That big gain in rising volume is the follow-through day, which confirms that a new uptrend is
underway.
Market View
U.S. Market
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back to their respective 21-DMA
after making new all-time highs earlier in the week. Distribution did rise over the last several sessions, though
one day will expire on both indices next week. We will likely shift the market status back to an Uptrend Under
Pressure should indices close below the 21-DMA in the coming days. The next level of support below the 21-
DMA is the 50-DMA (S&P 500: 3,274, -1.9%; Nasdaq: 9,228, -3.8%).
Nine of 11 sectors, 110 of 197 industry groups, and 56% of S&P 500 stocks are trading above their respective
50-DMA.Technology and Consumer Cyclical pulled back sharply Friday, falling 2.3% and 1.6%, respectively.
Health Care, Consumer Staple, and Utility closed relatively flat on the session. The best performing industry
groups over the last several sessions include Mining ( PAAS ), Reits ( DLR ), Utilities ( PNW ), Building Products/Services ( DOOR ), Home Builders ( LGIH ), and Pharmaceuticals ( ABBV ). The worst performing groups include Semiconductors ( COHR ), Software (ZS ), Toys ( HAS ), Travel Booking ( BKNG ), and Oil & Gas ( DVN ).
Market View
U.S. Market
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to trend into higher highs,
above all major moving averages. Near-term support remains the rising 10- and 21-DMA. Distribution stands at
three days each with one day expiring on the Nasdaq next week.
Nine of 11 sectors, 117 of 197 industry groups, and 66% of S&P 500 stocks are trading above their respective
50-DMA. Eight sectors rose 1% or more this week, led by Retail, Utility, Technology and Consumer Cyclical
which rallied ~2% each. The best performing industry groups over the last several sessions include Solar (RUN),
Telecom (TMUS), Wholesale Drugs (MCK), Managed Care (UNH), Semiconductors (NVDA), and Software (AYX).
The worst performing groups include Coal (CNX), Oil & Gas (MRO), Auto Parts (GT), and Computer Networking
(ANET).
Market View
U.S. Market
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq remain near all-time highs and above all
major moving average support, despite Friday’s pullback. Distribution now stands at three days each after multiple days expired this week.
Nine of 11 sectors, 101 of 197 industry groups, and 62% of S&P 500 stocks are trading above their respective
50-DMA. This is up from just four of 11 sectors, 75 of 197 industry groups, and 46% of S&P 500 stocks last
week. Despite choppy action across leading groups this week, all held support and remain technically intact.
Technology and Health Care led, rising ~4% each, while Energy and Utility lagged, trading relatively flat over
the week. Top performing industry groups included Telecom (TMUS), Semiconductors (ASML), Wholesale Drugs
(CAH), Trucks (ODFL), and Solar (ENPH). The worst performing industry groups included Toys (HAS), Mining
(KL), and Oil & Gas (SU).
Market View
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq traded sharply lower Friday, closing
back below their respective 21-DMA. Distribution increased to five and four days, respectively. Two distribution
days will expire on the S&P 500 and one on the Nasdaq next week. The sharply rising 50-DMA (S&P 500:
3,211; Nasdaq: 8,940) is the next level of support on both indices.
Market breadth has significantly narrowed over the last two weeks. Four of 11 sectors, 75 of 197 industry
groups, and 46% of S&P 500 stocks are trading above their respective 50-DMA. This is down from all 11 sec-
tors, 173 of 197 industry groups, and 82% of S&P 500 stocks two weeks ago. Outside of Software, the best per-
forming groups over the last week are all defensive. Utilities, REIT, Insurance, and Miners are all holding up well,
while Software continues to hold up near highs on the back of positive earnings results. Health Care has pulled
back sharply over the last two weeks with multiple previously leading groups coming under severe selling pres-
sure, including Managed Care and Biotech. Other weakening groups include Oil & Gas, Data Storage, Travel
Booking, and Semiconductors.
