The U.S. market has been downgraded to a Downtrend. The S&P 500 and Nasdaq gapped down below their respective 50-DMA and closed in the lower half of the session’s range. Yesterday’s decline (-3%) was the worst for the year as indices fell 6% off highs in just six sessions. The next level of support is the 200-DMA (S&P 500: 2,790; Nasdaq: 7,552).
Author: Veera Manju
Won Europe Today
Yesterday, European markets closed in the red, amid the U.S.-China trade dispute and investors preferring safe-havens over equity due to the uncertainty. Commodities-linked stocks suffered the most as China’s currency fell to a record low. France’s CAC and Germany’s DAX were down 2.19% and 1.80%, respectively, on lower volume. The U.K.’s FTSE 100 fell 2.47%, on higher volume.
- The Stoxx 600 dropped 2.31%, with lower volume.
- Sectors that lost the most include Financial Services, Construction & Materials, and Travel & Leisure.
- All countries closed in negative territory.
- The U.K. and Finland added one distribution day each after losing 2.47% and 1.15%, respectively, on higher volume.
- We changed the market status of Norway, Austria, Belgium, and Luxembourg to an Uptrend Under Pressure after they breached their key support levels.
Won Europe Today
On Friday, European markets closed in the red and had their worst day of the year following U.S. President Donald Trump’s announcement that he would impose 10% tariff on an additional $300B of Chinese exports from September. Mining, Automobile, and Technology sectors were affected the most. Germany’s DAX, France’s CAC 40, and the U.K.’s FTSE 100 were down 3.1%, 3.57%, and 2.34% respectively, all on higher volume.
- The Stoxx 600 closed 2.46% lower, on higher volume. All major sectors closed in the red.
- All countries closed in negative territory.
- All countries except Ireland added a distribution day.
- We changed the market status of France, the U.K., Switzerland, Italy, and the Netherlands to an Uptrend Under Pressure after they breached their key support levels.
- We changed the market status of Ireland, Portugal, and Spain to a Downtrend after they breached their key support levels.
Won Global View
The U.S. market is in an Uptrend Under Pressure. The S&P500 and Nasdaq pulled back sharply (-3%) last week after hitting resistance at all-time highs. The distribution day count is elevated with seven and five on the S&P 500 and Nasdaq, respectively. Indices are testing support at the 50-DMA as the Nasdaq and S&P 500 are sitting on this key moving average
Won Global View
The U.S. market is in an Uptrend Under Pressure.Indices reversed off session highs and closed near the bottom of the range. The Nasdaq picked up a distribution day in the process, increasing the distribution count to five and seven on the Nasdaq and S&P 500, respectively. The next level of support is the rising 50-DMA (S&P 500: 2,926 (-0.9%); Nasdaq: 7,966 (-1.9%)).
Won Europe Today
We released our weekly Global Laggards report yesterday (please click here to access the report). The stocks highlighted in this report are laggards relative to their own domestic markets. We recommend that they be underweighted as they may be vulnerable to further downside risk and underperformance. European names highlighted this week include Kion(KGXX.DE; KGX:GR) and Salvatore Ferragamo (SFER.IT; SFER:IM).
Won Europe Today
We released our European Weekly summary yesterday (please click here to access the report)
Key points
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The Stoxx 600 is in an Uptrend Under Pressure, with six distribution days. The distribution day cluster has been the main concern since the index was moved to an Uptrend Under Pressure on July 18. The index breached its 21-DMA on heavy volume on July 30. The 50-DMA is the next key support. Should the pullback persist, the next support would be June’s low near the 200-DMA.
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As weakness in the market has increased, short-term momentum of defensive sectors, namely Staples, Health Care, and Technology, has improved over the past four weeks. On the other hand, Capital Goods’ short-term momentum has continued to deteriorate.
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Among focus list stocks Leonardo (LDO.IT; LDO:IM), Safran (SGM.FR; SAF:FP), Airbus (AIRS.FR; AIR:FP), Edenred (EDEN.FR; EDEN:FP), Puma (PUMX.DE; PUM:GR), Richemont (CFR.CH; CFR:SW), Kerry Group (KRZ.IE; KYG:ID), Elekta (ELKB.SE; EKTAB:SS), Lonza (LONN.CH; LONN:SW), Cellnex Telecom (CLNX.ES; CLNX:SM), Dsv (DSV.DK; DSV:DC), and Neoen (NEOP.FR; NEOEN:FP) are actionable.
Won Global View
The U.S. market has been moved to an Uptrend Under Pressure. The S&P 500 and Nasdaq closed below their respective 21-DMA, picking up a seventh and fourth distribution day, respectively. Though both were able to close off intraday lows, the overall move was out of character, breaking trend in heavy volume. Should the pullback persist, look for the sharply rising 50-DMA to now act as support (S&P500: 2,924 (-1.9%); Nasdaq: 7,960 (-2.7%)).
Economic Summary
Q2 GDP growth advance estimate at 2.1%.
The U.S. economy grew by 2.1% (annualized) in Q2 according to the advance estimates. This compares to consensus
of 1.8% and Q1 growth of 3.1%. Personal consumption expenditure, federal government spending and state and local
government spending contributed positively while Nonresidential and residential fixed investment, imports posted
negative contribution.
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq were able to reverse off intraday lows to close in the upper half of yesterday’s session and back above their respective 10-DMA. Still, the S&P 500 was unable to avoid distribution as day-over-day volume increased. The count now stands at six days on the S&P 500 and three on the Nasdaq. Overall, the trend higher remains intact as both indices continue to trade above near-term support levels. Further, the Russell 2000 rallied more than 1% and is now testing resistance at ~1,600.
