The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq gapped up for the second straight day and both are again testing resistance at their respective 50-DMA. This level has failed twice in the last seven sessions warranting a cautious approach until both are able to close and hold above it.
Author: Veera Manju
Won Europe Today
Yesterday,
European markets closed in the green on news that Germany might be considering stimulus measures to boost its economy. Interest rate reform by China and some encouraging comments by U.S. President Trump on the trade war also contributed to the positive sentiment.
U.S. yields displayed signs of rebound after gaining 5.7bps, easing recession fears and helping the Stoxx 600 gain 1.14%. All sectors closed in positive territory, with Basic Resources, Automobiles, and Construction & Parts leading the gains. Banks, however, traded flat.
- Among other major indices, France’s CAC, Germany’s DAX, and the U.K.’s FTSE gained 1.34%, 1.32%, and 1.02%, respectively, on lower volume.
- Denmark was the only country to close in negative territory, owing to losses in the Consumption sector.
Won Global View
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw below 50-DMA resistance. Though the Nasdaq did stage a day-six follow-through last Tuesday, gains were immediately wiped out Wednesday with instant distribution. Further, few quality ideas have been set up technically to buy with the majority chopping around within consolidation. Our primary expectation is that the August 5 lows (S&P 500: 2,822; Nasdaq: 7,662) are undercut and we eventually test the 200-DMA. This would result in the market status being moved back to a Downtrend. We would change our current cautious outlook should indices rally strongly, close, and importantly hold above their respective 50-DMA. Should that occur, we would move the market status back to a Confirmed Uptrend.
Won Europe Today
We released our European Weekly summary on Friday. (please click here to access the report).
- Key points of this report: 1. A majority of markets in Europe are in a Downtrend. Relatively outperforming sectors are Staples and Health Care. 2. We removed two names last week (as of Thursday) from our Focus List (O’Neil recommendations): Telecom Plus (TEP.GB) and Dunelm (DNLM.GB). 3. Through our bearish view, we recommend that investors who need to be invested focus on stocks with defensive characteristics such as a rising Relative Strength line that is reaching new highs.
Won Global View
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq closed relatively flat yesterday, unable to rebound from Wednesday’s severe decline. Both, however, are still trading above August 5 intraday lows (S&P 500: 2,822; Nasdaq: 7,662), keeping Tuesday’s follow-through day intact. Our primary expectation is that these lows will be undercut, and we will eventually test the 200-DMA. We would change our current cautious outlook should indices rally strongly, close, and importantly hold above their respective 50-DMA.
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 Erste Group Bank (ERS.AT; EBS:AV), Michelin (MCL.FR; ML:FP), Acs Activ.Constr.Y Serv (ACS.ES; ACS:SM), Skf.B(SKFB.SE; KFB:SS), and Kiering(KER.FR; KER:FP).
Won Global View
The U.S. market has been moved to an Uptrend Under Pressure. Tuesday’s follow-through day is quickly at risk of failing after undercutting this week’s lows yesterday. Both the S&P 500 and Nasdaq again failed to regain their respective 50-DMA, reversing off that level and picking up instant distribution. This action is indicative of prior failed follow-through days. We will move the market status back into a Downtrend and reset the count should the August 5 lows (S&P 500: 2,822; Nasdaq: 7,662) be undercut. Conversely, if we reverse yet again, and clear back above the 50-DMA, we will move the market status back to a Confirmed Uptrend.
Won Europe Today
Yesterday, European markets closed in the red, slipping to a six-month low, after inversion in the U.S. yield curve. France’s CAC and Germany’s DAX were down 2.08% and 2.19%, respectively, on lower volume. The U.K.’s FTSE 100 lost 1.42%, on higher volume.
- The Stoxx 600 lost 1.73%, with higher volume.
- Sectors that lost the most include Banks, Construction & Materials, and trade-sensitive Automobile & Parts.
- All major countries closed in negative territory.
- We added a distribution day to Switzerland after it fell 1.57% with higher volume.
- We moved the U.K., Finland, Norway, the Netherlands, and Luxembourg to a Downtrend after they failed their rally attempt by breaching their prior lows.
Won Global View
The U.S. market has been upgraded to a Confirmed Uptrend.The Nasdaq staged a day-six follow-through, rising 1.9% on volume greater than Monday’s. The S&P 500 rose 1.5% also on higher day-over-day volume. Despite the follow-through day, the overall market continues to whipsaw with few ideas set up technically to buy. Therefore, we still advise a patient approach allowing the market to prove itself over the next several sessions before increasing risk in a meaningful way. We would still like to see both indices close and hold above their respective 50-DMA (S&P 500: 2,943; Nasdaq: 8,022), which they failed to do last week and again yesterday. More importantly, we need to see ideas emerge from consolidation in heavy volume, which did not occur yesterday despite strong price action. Tighter action at the index level should allow additional ideas to emerge in the coming days if this follow-through day proves to be successful.
Won Europe Today
Yesterday,
- European markets closed in the green, reversing earlier losses, as a de-escalation of the U.S.-China trade spat boosted sectors including mining, auto, and technology stocks. The Trump administration said it will delay the 10% tariff on some Chinese products until mid-December.
- In Italy, opposition parties voted down an immediate no-confidence motion that was demanded by Deputy Prime Minister Matteo Salvini.
- The Stoxx 600 index closed 0.6% higher, erasing a loss of as much as 0.9% earlier in the day, with 14 of 19 Stoxx 600 sectors rising. The index remains in a Downtrend. We do not recommend adding capital to European markets until a follow-through day occurs.
- Among other major indices, France’s CAC, Germany’s DAX, and the U.K.’s FTSE were up 0.99%, 0.60%, and 0.33%, respectively, on higher volume.
- None of the countries that we track closed in negative territory. However, there were market status changes for six countries. Germany, Ireland, Sweden, Austria, and Belgium were moved to a Downtrend after they breached intraday lows yesterday. Luxembourg was upgraded to a Confirmed Uptrend after a follow-through day yesterday.
