Consumer Staples (XLP): The index has reclaimed its 21-DMA and is climbing towards its 200-DMA though volumes
are low. RS line however has been resilient but A/D Rating remains very weak in the last few weeks
Author: Tristan d'Aboville
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
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European majors closed in the green after multiple lower closes in earlier weeks. The majors, after being overextended to the downside, have found some support and made a technical bounce to their respective short-term moving averages. Data released over the week showed some slowdown in the economy, yet the market rebounded in the last two sessions amid a global rally.
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We continue to recommend a cautious approach to adding risk. Major indices are overextended to the downside and a technical bounce is expected back to their short-term moving averages or prior resistance levels. There are many levels of overhead resistance for the majors. We recommend remaining defensive with a focus on high relative strength ideas that are part of leading and or improving industry.
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Defensive and overextended sectors to the downside led the rally last week, while Energy continued to lag. On our rotation chart, Energy is starting to show a pause in its short-term momentum (over four weeks), while Retail and Financial are starting to show signs of improvement in the short-term momentum.
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European Focus List Update:
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Actionable names in the Focus List include Greek Organisation of Football Prognostics (OPAP.GR, OPAP:GA), Man Group (EMG.GB, EMG:LN), Terna Energy (TEN.GR; TENERGY:GA), GSK (GSK.GB, GSK:LN), EDP Renovaveis (EDPR.PT; EDPR:PL), Novo Nordisk (NON.DK; NOVOB:DC), and Astrazeneca (AZN.GB, AZN:LN)
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New additions last week: None
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Removal last week: None
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The sector is trading significantly below its key support levels, 37% off highs as the
inflationary environment is adversely affecting the discretionary spending power. The RS line continues to be weak, and
the next support is ~8% below at $124.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
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It was yet another bearish week for the European Markets, making it three in a row. Interest rate hikes from central banks to curtail inflation and the concerns of an economic slowdown weighed heavily on the market, with major indices breaking below key support levels. The Stoxx 600 was shifted to a Downtrend on Monday post-market hours after the index closed below its May 9 lows. This is now the fourth failed follow-through day (FTD) since the market has been in a correction since January.
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We continue to recommend a cautious approach to adding risk. Major indices continue to make lower lows and lower highs and, in the process, have breached key short-term support levels. We recommend a high cash position, but, if one must commit capital, remain defensive with a focus on high relative strength ideas that are part of leading and or improving industry.
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All sectors were in the red last week, with Energy leading the fall and Consumer Staple held up the best among sectors. On our rotation chart, Retail and Financials are starting to show signs of improvement in the short-term momentum.
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European Focus List Update:
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The index is deteriorating below its key support levels, as the inflation levels remain elevated.
Investors are sharply withdrawing money from the sector as discretionary spending power is expected to be weak. The
next support is ~5% at $130 levels.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 has shifted to a Downtrend after closing below its May 9 lows. This is now the fourth failed follow-through day (FTD) since the market has been in correction since January, with the key resistance level at its declining 100-DMA. Next immediate support is at 405 (March 7 lows), followed by ~380 (8% downside). Along with the Stoxx 600, the market status of Ireland, the Netherlands, Spain, and Luxembourg were downgraded to a Downtrend.
- We continue to recommend a cautious approach to adding risk. Indices continue to make lower lows and lower highs, unable to sustain a close above any short-term moving average. We recommend a high cash position, but, if one must commit capital, remain defensive with a focus on high relative strength ideas that are part of leading and or improving industry.
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The index is consolidating below its key support levels, trading 28% off highs. The market is
concerned about reduced discretionary spending power due to an impending economic slowdown. We recommend
investors to trim names breaking below logical support levels.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
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It was a volatile yet flattish week on a close-to-close basis for the European Markets. The Stoxx 600 is in a Confirmed Uptrend after having a follow-through day (FTD) on May 24. The majors initially climbed higher but continued to face selling pressure during the latter part of the week. The concerns regarding high inflation, economic health, and war remain in the backdrop. We recommend adding names breaking out of bases, with a focus on relative strength. Reduce risk in ideas breaking below logical levels of support.
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Sectors were mixed last week, with beaten-down sectors such as Retail and Consumer Cyclical leading the gains. On our rotation chart, Utility and Energy showed improving short-term momentum (over four weeks). Technology, Consumer Cyclical, and Retail stocks continue to show weak trends in short-term momentum (over four weeks).
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European Focus List Update:
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Actionable names in the Focus List include Greek Organisation of Football Prognostics (OPAP.GR, OPAP:GA), Man Group (EMG.GB, EMG:LN), Terna Energy (TEN.GR; TENERGY:GA), Ipsos (IPS.FR, IPS:FP), Compass Group (CPG.GB, CPG:LN), Rwe (Xet) (RWEX.DE; RWE:GR), EDP Renovaveis (EDRP.PT, EDPR:PL), and Novo Nordisk (NON.DK, NOVOB:DC).
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New additions last week: None
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The ETF found some support at ~$136 and advanced ~8.7% last week. It has retaken its 21-
DMA and is currently trading 29% off highs with poor technicals. RS line is in a downtrend but currently has started to
trend higher with an RS Rating of 38, Up/Down Volume ratio of 0.9, and an A/D Rating of D+. We recommend that
investors remain cautious and trim stocks breaking below key moving averages.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
Key points:
- It was a bullish week for European Markets. The Stoxx 600 is in a Confirmed Uptrend after a follow-through day on Friday. The index broke out of its ~440 range, where it was consolidating since early May. Economic data and the Fed’s commentary provided some support to the market amid the ongoing inflationary pressures, economic health, and war. We recommend adding names, breaking out of bases with high relative strength. Reduce risk in ideas breaking below logical levels of support.
- Among the 11 O’Neil sectors, only Utility and Transportation recorded losses. Other nine sectors ended the week with a positive return. Beaten Retail and Consumer Cyclical bounced off strongly this week, gaining 5.1% and 4.3%, respectively. Our rotation chart is showing signs of rising short-term momentum (over four weeks) among Retail and Financials. Also, short-term momentum among leading (over 26-weeks) Transportation and Energy is not abating. However, momentum in Health Care and Basic Resources is fading.
- European Focus List Update: