U.S. indices closed down nearly 2%, as sharp gains earlier in the week were completely erased after Brexit. The market was setting up for a breakout with multiple growth ideas beginning to surface before the selloff on Fri-day. These ideas have all pulled back into their respective basing patterns, similar to what we are seeing in the major averages. Range bound action continues as we now look towards the 200-day moving average for sup-port on the S&P 500. We did pick up a distribution day on Friday, but overall, the count remains fairly low, with just three on the S&P 500 and four on the Nasdaq. The market has now been moved to Under Pressure due to this very concerning sharp price break back below the 50-day moving average.
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.
Market View
U.S. indices continued the declines that began last week as Brexit fears increased, reflective of new poll figures favoring an “out vote.” However, the resiliency of the market remains impressive, trading 3% off highs and with only one distribution day on Monday for the Nasdaq. The market avoided a significant distribution on Thursday after it staged a strong upside reversal. The next week is likely to see similar volatility leading up to the Brexit vote on Thursday. We maintain a Confirmed Uptrend for the indices, as the distribution day count over the trail-ing five weeks is subdued at three each for the S&P 500 and Nasdaq and they continue to trade constructively in ranges established since April. We would change our view should distribution days increase and if the indices are unable to find support at their moving averages.
Market View
The U.S Indices ran into technical resistance this week after testing the highest levels of 2016. Early in the week, we upgraded the U.S. market condition to Confirmed Uptrend as the indices continued the broad-based strength that began a few weeks ago. The rally has been led by the Energy and Material sectors, however, we have recently identified an increasing number of constructive ideas from the Technology and Retail sectors. As long as the number of ideas continues to expand in growth-oriented sectors and the distribution day count does not become elevated again, we will remain patient with the short-term increase in volatility.
Market View
The U.S. Market traded flat this week, still unable to break through upside resistance at 2111 and 2117 on the S&P 500. Despite this, the major averages remain resilient, reversing from early morning losses in each of the four trading sessions this week. Additionally, distribution days continue to fall off, dropping to six on the S&P 500 and five on the Nasdaq. This action is largely constructive, leading us to anticipate a break into higher highs in the coming weeks. If this occurs in combination with a drop in distribution, the market will be moved back into a Confirmed Uptrend.
IPO Rewind
Market View
The U.S. Market remains Under Pressure due to an elevated distribution day count. The S&P 500 now has seven distribution days, while the Nasdaq has six. The positive is that multiple distribution days are set to fall off next week. If we continue to see positive price action, specifically a break and hold above 2117 on the S&P 500, along with a decline in distribution, the market will be moved back into a Confirmed Uptrend.
Market View
The U.S. Market remains Under Pressure due to an elevated distribution day count. The S&P 500 and Nasdaq both have eight distribution days. Though the market remains caught in a range, our indicators are showing a higher probability for a further decline. This gives us reason to be cautious, generally avoiding buying in the near-term until we see distribution fall and the major averages re-take key support levels.
Market View
U.S. indices reversed their early week gains, closing down for the fourth straight week on the Nasdaq and the third straight week on the S&P 500. Both major averages are now trading below their respective 50-day moving averages. Though each index logged another distribution day this week, two days also fell off due to time. The number of distribution days remains elevated however, at seven, for both indices. With the market Under Pres-sure, we continue to recommend a cautious approach. The major averages are still up 4-6% since the February 17 follow-through day, but have lost 3-5% from April highs.
Market View
U.S. indices continued to fall this week, led again by the Nasdaq, which has now declined for three straight weeks. Distribution has also risen to elevated levels. There are now eight distribution days on both the S&P 500 and the Nasdaq, enough for us to shift both indices to Under Pressure. The S&P 500 is now testing its first level of support at the 50-day moving average, while the Nasdaq is trading 2% below that level.
Market View
U.S. indices pulled back this week, led by a big sell-off in the Nasdaq despite very strong earnings results from both Facebook and Amazon. The Nasdaq fell more than 2%, undercutting both its 50- and 200-day moving averages in heavy volume. The Russell and S&P 500 fared better, both still holding above their key moving av-erages. Distribution, however, did pick up in all the indicies, with the Nasdaq and S&P 500 showing five and six days, respectively. We become concerned when this number rises above seven over a five- to six-week period, and at that point, would change the market’s status to Under Pressure.
