O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY): The ETF found some support at ~$136.4 and declined ~6% last week. It is currently trading
34% off highs with poor technicals. RS line is declining with an RS Rating of 31, Up/Down Volume ratio of 1.0, and A/D
Rating of D-. We recommend 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.

 

  • Market status: The Stoxx 600 was shifted to a Rally Attempt last Tuesday. The index has held above May 9th lows for more than three days. A follow-through day (+1.7% in volume above the prior day) above these lows will lead us to upgrade the market back to a Confirmed Uptrend. While several markets, including France, Germany, Spain, Austria, and Finland, had a FTD and thus were moved to a Confirmed Uptrend, we continue to recommend taking a patient approach to add risk as the breadth remains very narrow. And given the severe correction across growth stocks, few ideas are currently in a position to buy.

 

  • Sector rotation: Our rotation chart shows short-term momentum (over four weeks) continuing to improve in Transportation, Staple, Utility, and Energy.

 

  • European Focus List Update:
  • Actionable names in the Focus List include Solaria (SEM.ES), GlaxoSmithKline (GSK.GB), Ipsos (IPS.FR), Compass Group (CPG.GB), and Rwe (Xet) (RWEX.DE).
  • New additions last week: Rwe (Xet) (RWEX.DE)
  • Removals last week: Sonova N (SOON.CH) and Jeronimo Martins (JMT.PT)

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

· The Stoxx 600 was shifted to a Rally Attempt on Tuesday. The index has held above last week’s lows for more than three days. While the index did not stage a follow-through day (FTD) so far, price progression since May 9 lows has been very constructive with momentum rising toward growth sectors (Transportation, Retail, Technology, and Consumer Cyclical).

· While several markets, including France, Germany, Spain, Austria, and Finland, had a FTD yesterday and thus were moved to a Confirmed Uptrend, we continue to recommend taking a patient approach to add risk as the breadth remains very narrow. And given the severe correction across growth stocks, few ideas are currently in a position to buy.

· Rising short-term momentum continues to be concentrated in defensive sectors (Staple and Utility). 

· Focus List Update: Verbio Ver. (Xet) Bioenergie (VBKX.DE) and Verbund (VERB.AT) were removed last week.

· Actionable names in the Focus List include Aker Bp (AKEP.NO; AKRBP:NO), GlaxoSmithKline (GSK.GB, GSK:LN), Ipsos (IPS.FR, IPS:FP), Novo Nordisk (NON.DK, NOVOD:DC), and Compass Group (CPG.GB, CPG:LN).

Tobacco: Inflation Shelter

Attached is a note on Tobacco from Director, Research Analyst Tristan d’Aboville and William O’Neil India Analysts Bhaskar Maheshwari, Indrajith JC, and Tapan Asgaonkar.

 

Amid the general market correction, the defensive Consumer Staples sector has gained relative momentum as investors are fleeing towards safety. Strength in staples has been led particularly by tobacco stocks. The O’Neil Tobacco industry group (G2100) now ranks 21 vs. 98, 10 weeks ago. We believe there are good reasons why the outperformance of tobacco is at an early stage, assuming that high inflation persists. Tobacco offers a unique combination of quality, a high return to shareholder and a compelling valuation.

 

Combining O’Neil quantitative metrics and fundamental analysis, we prefer Philip Morris International (PM; $160B Mcap; $600M ADV) and British American Tobacco (BTI; $93.5B market cap; $177.9M ADV).

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 was moved to a Downtrend last week after the index breached its March 16 low. Among the 17 indices we cover, seven are in an Uptrend Under Pressure, one in a Confirmed Uptrend and the remaining nine in a Downtrend. The average distribution day count is elevated at 5.5.

 

  • Hence, we recommend cautious view on the overall market. The number of buyable ideas is still limited as most stocks are still trading in their base. With leadership still narrow, focus on relative strength remains the core strategy in the current environment. Reduce risk in ideas breaking below logical levels of support.

 

  • All sectors were in the red last week with the exception of Energy. On our rotation chart, Transportation, Consumer Staple, Utility, and Energy showed relative improving short-term momentum (over four weeks). Financial, Retail, and Consumer Cyclical stocks continue to show weak trends in short-term momentum (over four weeks).

 

  • European Focus List Update:
    • Actionable names in the Focus List include Vantage Towers (VTWRX.DE; VTWR:GR), Aker Bp (AKEP.NO; AKRBP:NO), GlaxoSmithKline (GSK.GB, GSK:LN), Elisa (ELIS.FI, ELISA.FH), Ipsos (IPS.FR, IPS:FP), and Novo Nordisk (NON.DK, NOVOD:DC).
    • New additions last week: None
    • Removals last week: Lonza Group (LONN.CH), Salmar (SALM.NO), and AMG Advd.Metallurgical Group (AMG.NL).

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The Stoxx 600 is in an Uptrend Under Pressure with six distribution days. Last week, the index broke below its range of 451–464, where it had been consolidating since mid-March as concerns about the global economy and Fed monetary policy weighed heavily on risk sentiment despite corporate earnings support.  
  • We maintain a cautious view on the overall market. The number of buyable ideas is still limited as most stocks are still trading in their base. With leadership still narrow, focus on relative strength remains the core strategy in the current environment. Reduce risk in ideas breaking below logical levels of support.
  • Sectors were mixed last week, with Transportation leading the gains. On our rotation chart, Health Care, Transportation, Consumer Staple, and Utility showed improving short-term momentum (over four weeks). Financial, Retail, and consumer cyclical stocks continue to show weak trends in short-term momentum (over four weeks).
  • European Focus List Update:
Actionable names in the Focus List include Vantage Towers (VTWRX.DE; VTWR:GR), Aker Bp (AKEP.NO; AKRBP:NO), Verbund (VERB.AT, VER:AV), EDP Renovaveis (EDPR.PT; EDPR:PL), Compass Group (CPG.GB, CPG:LN), Greek Organisation of Football Prognostics (OPAP.GB; OPAP:GA), GlaxoSmithKline (GSK.GB, GSK:LN), Amg. Advd. Metallurgical Group (AMG.NL, AMGUSD:EO), and Elisa (ELIS.FI, ELISA.FH).
New additions last week: GlaxoSmithKline (GSK.GB) and Elisa (ELIS.FI).

O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY): The index continues to trade in a tight consolidation around its support levels following
hawkish comments from the Fed Governor. A clear market direction could be determined once the index either breaks
above the $190 level or breaches below the $170 level. Recommend investors to be patient and hold names with strong
fundamental profiles.