A slew of disappointing earnings from multiple mega-cap bellwethers led to some divergence in the major U.S. averages. The S&P 500 ended the week up half a percent, while the Nasdaq fell 0.6%. Alphabet, Visa, Mi-crosoft, and Starbucks all underwhelmed, resulting in a 1.5% decline for the Nasdaq 100 on Friday. Earnings are now beginning to play a critical role in the overall action of the indices. Currently, we remain above support levels and are still holding trend.
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 rose nearly 2% this week on the back of better-than-anticipated earnings results from the big money center banks. After consolidating for about a month, the market was able to move higher on slightly better vol-ume than we have seen over the past month. The S&P 500 is now attempting to make a higher high, despite this largely negative macro backdrop.
Market View
U.S. indices declined this week but continue to consolidate along key moving averages. Nine of 11 O’Neil sec-tors declined. The only net positive gains were in Energy and Healthcare, driven by strength in crude and bio-techs. In addition, Consumer Cyclicals remains an area to monitor as the breath of quality names in housing-related groups have increased. The market is looking forward to earnings season next week despite the weak outlook. For S&P 500 companies, Q1 Sales and EPS are expected to increase by a median of 1.2% and 1.9% year-over-year, respectively.
IPO Watch
Market View
U.S. indices have continued their march higher after a one-week pause. The S&P 500 is now trading just 3% off highs, while the Nasdaq has retaken its 200-day moving average. Constructive action continues, with distribu-tion still a non-factor. Volume has been the only concern, remaining below average for 16 of the past 17 trad-ing sessions. Growth ideas continue to build the right side of their respective basing patterns, with many now beginning to test highs reached late last year. We expect volume to pick up in many of these ideas, as earnings will now drive market behavior, taking the place of short covering and Fed talk. We recommend a focus on companies showing good earnings stability and a prior history of handily beating estimates.
Market View
U.S. indices have continued their march higher after a one-week pause. The S&P 500 is now trading just 3% off highs, while the Nasdaq has retaken its 200-day moving average. Constructive action continues, with distribu-tion still a non-factor. Volume has been the only concern, remaining below average for 16 of the past 17 trad-ing sessions. Growth ideas continue to build the right side of their respective basing patterns, with many now beginning to test highs reached late last year. We expect volume to pick up in many of these ideas, as earnings will now drive market behavior, taking the place of short covering and Fed talk. We recommend a focus on companies showing good earnings stability and a prior history of handily beating estimates.
Market View
U.S. indices have continued their sharp move higher, now extending gains for a fifth straight week. We saw a similar six straight weeks of gains from late September to early November 2015. Leadership, however, differs entirely when comparing the two rallies. We were led by big cap tech then, compared with defensives, commodi-ties, and cyclicals now. A mean reversion has occurred among value-oriented ideas, in addition to the short squeeze in commodity-related sectors.
Market View
U.S. indices continued their move higher this week, extending gains for a fourth straight week. The major aver-ages have maintained this squeeze higher with a tremendous amount of support from commodity-related equi-ties. The S&P 500 is now trading just above its 200-day moving average, but it will need actual buying, not just short covering, to push this rally back into new highs. The list of quality ideas showing strong earnings and reve-nue growth has continued to consolidate over the last few weeks, but remains thin. We are especially watchful for ideas emerging from early-stage bases, because ideas with actual top- and bottom-line growth will be need-ed for a sustainable rally. The market remains in a Confirmed Uptrend, up ~4% from the follow-through day on February 17, 2016.
Market View
U.S. indices remain in a rally, led by a strong move in the Material and Energy sectors. The strength in commod-ities persists; stocks with exposure to steel, oil, and gold are under very heavy accumulation. In addition, slightly better-than-expected economic data over the last few weeks, including a positive February Jobs report today, could force the Fed’s hand to raise rates at the mid-March FOMC meeting. Despite the strength in broken sec-tors coming off the bottom, we continue to call for patience while fundamentally strong stocks continue building constructive bases. Multiple indices and sectors may face upward resistance at their respective 200 dma in the coming days/weeks. We are encouraged by the improvement in the general market but remain very selective of security allocation. The market is in a Confirmed Uptrend, up 4% since the follow-through day.
Market View
U.S. indices continued to rally higher this week, with the S&P 500 breaking through resistance at the 50-day moving average. Although the move came on light volume, without much quality growth leadership, consolida-tion at these levels could bode well moving forward. We are now looking for prior resistance at the 50-day to act as support. If the market calms, it will allow new leadership to develop and emerge within the next few weeks. Patience remains imperative here, as we look for the expansion in breadth needed to confirm our convic-tion in this current move. The S&P 500 and Nasdaq remain in a Confirmed Uptrend, up 1-2% from the February 17, 2016 follow-through day, with no distribution.
