The U.S. market will remain in a Confirmed Uptrend to close out 2016. The S&P 500 will lose two distribution days next week, while the Nasdaq will lose three. Additionally, sector rotation remains positive as lagging sectors that have depressed the market over the last few years are now leading, while defensives remain weak. Leadership, though pulling back slightly over the last week, continues to hold up well, consolidating in light volume. We remain constructive on the market and will be looking for a bounce off support levels in the coming weeks.
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
The U.S. market remains in a Confirmed Uptrend, constructively consolidating recent gains. The S&P 500 is currently finding resistance just below its upper channel line, while support along the 21-day moving average catches up to current prices. With the Nasdaq 100 slightly outperforming the other indices this week, we believe new leadership ideas from growth sectors may begin to emerge, while Banks, Transports, Materials, and Capital Equipment consolidate
Market View
U.S. indices decisively broke into all-time highs this week as leading sectors (Banks, Cap Equipment, Transportation, Materials) were joined by a recovery in Technology, and year-to-date high breakouts in Energy and Cyclicals. Though a pullback is looming, the distribution day count remains low and leadership continues to trade constructively. We view the 21-day moving average as a key short-term level of support on the S&P 500 that should hold given the current strength of the market.
Market View
The U.S. market remains in a Confirmed Uptrend, despite significant divergence between the S&P 500 and Nasdaq. Accumulation across value has supported the S&P 500, which remains less than 1% off highs. Con-versely, continued weakness across growth, specifically Technology, has led to an intraweek 50-day moving av-erage break by the Nasdaq. Ideas that have led since the election continue to do well. We recommend focusing on high relative strength ideas within Banks, Capital Equipment, Transportation, Energy, and pockets of Retail as they continue to lead.
Market View
The U.S. market remains in a Confirmed Uptrend, continuing to grind higher on light volume. Breadth has wid-ened with Retail now beginning to gain momentum into year-end. Meanwhile, Banks, Capital Equipment, Mate-rials, and Transportation have held their leading positions, which has resulted in a breakout across all the major averages. Though a pullback seems likely given 15 straight positive sessions on the Russell, new leadership ide-as continue to surface while distribution remains low. Consequently, we remain bullish on the U.S. market.
Market View
The U.S. market shifted into a Rally Attempt this week. The S&P 500 and Nasdaq are both now five days off their most recent bottom, however, a rotation out of Technology has weighed on the Nasdaq. The S&P 500 and Rus-sell are benefitting from the surge in Financials and now, once again, testing resistance near all-time highs. We are looking for a breakout above 2180 on the S&P 500 as well as new quality leadership ideas to take the place of long term large cap Technology winners. This would be enough to shift the market back into a Confirmed Uptrend.
IPO Rewind
Market View
The U.S. market shifted into a Downtrend on Tuesday, following an eighth distribution day that resulted in a price break below short-term support. The S&P 500 is now testing its 200-day moving average for the first time since Brexit, while the Nasdaq is nearing support at 5000. We continue to advise a cautious approach until we see support come into the market. We need to see a Rally Attempt develop and then a new follow-through day to suggest a change in trend.
Market View
The market remains Under Pressure as the indices were met with distribution and unable to regain their respec-tive 50-day moving averages. Many stocks, in particular growth-oriented stocks, came under heavy selling pres-sure after failing to exceed earnings expectations. With distribution days accelerating to seven on both the Nasdaq and S&P 500, our outlook remains cautious. We will upgrade our market outlook once we see distribu-tion subside, indices regain key resistance levels, and leadership re-emerge.
Market View
U.S. indices broke lower this week, picking up distribution along the way. Though both the S&P 500 and Nasdaq are still trading within a range, many ideas have begun the process of forming new bases as we head into Q3 earnings season. The S&P 500 also broke below near-term price support and the Nasdaq undercut its 50-day moving average. Therefore, the market has been moved to Uptrend Under Pressure until we see support come into both the major averages and leadership ideas alike.
