European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

 

  • The Stoxx 600 remains in a Confirmed Uptrend with four distribution days. It is currently sitting at its short-term support at the 50-DMA, trading 3% off highs. Among the 17 indices we cover, the majority remains in a Confirmed Uptrend with an average distribution day count below 4. Denmark was however moved to a Downtrend while Germany and Switzerland were downgraded to an Uptrend Under Pressure.
  • Last week, value stocks (+1.6%) led by Banks, Basic Material, and Energy outperformed growth stocks (-3.6%) by a large margin. The rotation toward value now seems extended on a three-month rolling price performance, suggesting a short-term pause in the value trade. In the past 12 months, however, the same chart still shows room for value to outperform growth over the long term. Our rotation chart shows improving short-term momentum among Transportation, Utilities, Basic Material, and Financial, but deteriorating in Technology, Health Care, and Retail stocks.
  • European Focus List Update: We added Rvrc Holding (RVRH.SE) and Jeronimo Martins (JMT.PT). We removed Eurofins Scientific (EUF.FR), Puma (Xet) (PUMX.DE), Partners Group Holding (PGHN.CH), Dechra Pharmaceuticals (DPH.GB), Vitrolife (VITR.SE), Rentokil Initial (RTO.GB), Sartorius Pref. (Xet) (SRT3X.DE), and Interroll (INRN.CH).

O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY). The index breached its 50-DMA support level and will test the base price of $189.9. Its next
support is the 200-DMA (6% downiside). The RS line is declining with an RS Rating of 82. The index has the worst
possible A/D Rating of E (Money outflow). We recommend trimming positions in names breaking below key support
levels and be selective in adding risk to the sector.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • European markets had a bumpy first week of trading on fears of more aggressive policy tightening by the Fed and the rapid spread of the omicron variant. The Stoxx 600 lost 20bps last week, but remains in a Confirmed Uptrend with three distribution days and immediate support at its 50-DMA. We recommend a patient approach to adding risk and reducing exposure in ideas breaking below logical levels of support. Continue to focus on quality ideas showing strong near-term relative strength and trading above their respective 50-DMA.
  • The trend toward value (+2.9%) compared with growth (-3.0%) accelerated last week, with leaderships emerging among Financials, Basic Material, Auto, and Travel & Leisure stocks.
    • The iShares DJ Stoxx 600 Banks (EXV1.DE) is breaking out of a 41-day consolidation base and trading at a 52-week high with several ideas, BNP Paribas (BNP.FR), Lloyd (LLOY.GB), Deutsche Bank (DBKXX.DE), and Societe Generale (SGE.FR), breaking out of sound consolidation bases.
    • The iShares Stoxx Europe 600 Automobiles & Parts (EXV5.DE) is breaking out of a 31-day flat base. Actionable ideas include BMW (BMWX.DE) and Cie Automotives (AFR.ES).

O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY): The index regained it 50-DMA last week and looks poised to breakout of a 7-week long flat
base. Be patient; allow the index to break out consolidate above its 50-DMA before adding risk.
Consumer Staples (XLP): The index is trading constructively above its 21-DMA after breaking out of a stage-one
consolidation base. Technical ratings have improved significantly in recent weeks indicating money inflow into the index.

European Weekly Summary

  • Last week, European markets were bullish with thin trading volume amid positive news around vaccines’ effectiveness.
  • Although the Stoxx 600 is now trading just 0.3% off its November 17 high, we continue to recommend a targeted approach as there is still a lack of breadth in the market. The index remains in an Uptrend Under Pressure with four distribution days.
  • On our rotation chart, defensive sectors, Basic Material, Consumer Staple, and Utility, are showing improving short-term momentum (over four weeks).
  • European Focus List Update: Last week, we added Alcon (Swx) Ord Shs (ALC.CH) and removed none. The list currently consists of 42 stocks, overweighted toward Capital Equipment and Health Care.
  • Actionable names in the Focus List include Beneteau (CHF.FR), Coface (COFA.FR), Halma (HLMA.GB), Sartorius (SRT3X.DE), YouGov (YOU.GB), and Teleperformance (ROFR.FR).

European Weekly Summary

  • Last week, Europe’s main equities benchmark was bullish amid positive news about vaccines’ effectiveness and early evidence of the new strain being comparatively mild. Although the Stoxx 600 broke above its 50-DMA, it continues to trade in a consolidation base within the 460–490 range and has immediate support at its 50-DMA. The index remains in an Uptrend Under Pressure with five distribution days.
  • We recommend a patient approach to adding risk: reduce exposure in ideas breaking below logical levels of support and continue to focus on quality ideas showing strong near-term relative strength and trading above their respective 50-DMA.
  • Transportation led the markets last week, but short-term momentum over four weeks remains positive among Basic Material, Consumer Staple, and Utility. Cyclical, Financial, and Energy stocks continue to show weak trends in short-term momentum (over four weeks).
  • European Focus List Update: We added Verbund ( VER.AT ) and removed Adyen ( ADYE.NL ). The list currently consists of 41 stocks, overweighted toward Capital Equipment and Health Care. Actionable names in the Focus List include Schneider Electric ( QT@F.FR ), Teleperformance ( ROFR.FR ), Verbund ( VER.AT ), and Sartorius ( SRT3X.DE ).

O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY) The index has rebounded after taking support at its rising 100-DMA and is trading 7% off highs.
RS line is declining with an RS Rating of 85 and A/D Rating E. We recommend a patient approach and letting the index
stabilize above the 50-DMA support level before adding risk.
Consumer Staples (XLP): The index has traced back to pivot price levels on relatively low volumes after breaking out of
stage-one consolidation. RS line has also started to trend upward with significant improvement in technical ratings as
investors rush towards safety amid concerns regarding omicron, interest rate hikes etc

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 retreated 35bps last week due to concerns about the spread of the Omicron variant along with the pullback in monetary stimulus. The index remains in an Uptrend Under Pressure with five distribution days. Its 200-DMA remains the key support level to watch.
  • We remain extremely cautious: continue to focus on high quality, high relative strength ideas, while avoiding or reducing risk in lagging ideas trading below logical support.
  • Defensive sectors led the market last week. On our rotation chart, Basic Material, Consumer Staple, Utility, and Capital Equipment showed improving short-term momentum (over four weeks). Transportation remains the weak spot of the market. Cyclical, Financial, and Energy stocks continue to show weak trends in short-term momentum (over four weeks).

O’Neil Consumer/Retail Weekly

Consumer Cyclical ( XLY ) The index has breached its key level of support and has been under selling pressure in the
past few days. We recommend investors booking profits in extended names.

Consumer Staples ( XLP ): The index broke out from a flat base and is reaching new highs. The sector is outperforming
with increasing volatility in the market. We recommend investors to add names breaking out in good volume.

Retail ( XRT ): The retail ETF declined more than 5% this week and is currently trading below its 50- and 200-DMA. We
recommend investors to trim stocks that are 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.

 

  • The Stoxx 600 regained some ground last week, but remains in an Uptrend Under Pressure with four distribution days. The index now trades 3% off highs and is just 0.5% above its immediate support at 50-DMA. Currently, we remain cautious as we would like to see more market breadth. Continue to focus on high-quality, high-relative-strength ideas while avoiding or reducing risk in lagging ideas trading below logical support.
  • Consumer Staple led the market last week, while all other sectors managed to close in the green. Our rotation chart shows short-term momentum (over four weeks) continuing to improve in Capital Equipment and turning positive among Basic Material, Utility, and Consumer Staple. Transportation remains the weak spot of the market.