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.
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 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.
Market View
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.
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.
