The U.S. market was downgraded to Uptrend Under Pressure Thursday after the Nasdaq closed below its 50-DMA and picked up a sixth distribution day. Leadership ideas across Technology are still basing, though many have undercut short-term support levels and will need more time before they present ideal pivot points. We recommend a more cautious approach, waiting for indexes to firm and for distribution to expire before initiating new positions.
Author: Vinaya Kumar
European Focus Long
The Stoxx Europe 600 index showed significant weakness this week and Thursday’s close was heading for a weekly loss of 1.80%. The index gained two distribution days this week and was breaking below support levels after the close on Thursday. We changed its status to Confirmed Downtrend from Uptrend Under Pressure. Thursday’s selloff saw several other status downgrades: Germany, Sweden, Denmark, Finland, and Portugal to Uptrend Under Pressure and France, Spain, Belgium, and the Netherlands to Confirmed Downtrend. Out of 16 indices in developed Europe, only two remain in a Confirmed Uptrend, Ireland and Austria. However, they are also close to their respective support levels.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index fell 1.7% this week and Australia’s ASX All-Ordinaries Index gained 0.2%, rising to onemonth highs through Thursday before falling 1.6% back below its 10-WMA on Friday. The index remains Under Pressure with five distribution days in the past five weeks. Support is about 1.2% lower at its 40-WMA, while resistance continues to be its 10-WMA (+1.1%).
Global Focus Emerging Long
Mainland Chinese markets gained for the second consecutive week as both the Shenzhen and Shanghai continue to trade above their respective 50-DMA. Both indices remain in a Confirmed Uptrend with low distribution day counts of two each in the trailing five weeks. We continue to view the 50-DMA as a key area of support should markets trade down in the coming weeks, although action since the MSCI inclusion has been mostly positive. The next level of resistance for the Shenzhen could be the 200- DMA which is 4% above current levels.
Global Focus Frontier Long
US Focus Long
The U.S. market remains in a Confirmed Uptrend. The S&P 500 continues to hold above its 21-DMA, while the Nasdaq is holding above its 50-DMA. Distribution remains low, though there will be no expiration for over two weeks. Our U.S. Focus list has risen to 66 ideas, the highest number in over two years as leadership continues to expand.
European Focus Long
The Stoxx Europe 600 index traded relatively flat this week, with a loss of 0.02% through Thursday. The index continues to trade below its 50- DMA and, at this stage, we continue to believe that an Uptrend Under Pressure is appropriate. Also this week, Italy and Luxembourg saw a status downgrade to Uptrend Under Pressure from the earlier Confirmed Uptrend.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index lost 0.9%, falling from 10-WMA resistance. The index failed to build on a strong bounce from its 40-WMA last week, instead picking up back-to-back distribution days early in the week. The index is Under Pressure, 4% off 52-week highs, and has five distribution days in the past five weeks.
Global Focus Emerging Long
Mainland Chinese markets retook their respective 50-DMA, moving slightly higher this week, continuing strength after a shift back into a Confirmed Uptrend two weeks ago. The Shenzhen Composite picked up one distribution day, however, has just two over the past five weeks. If it is able to continue holding above the 50-DMA, the next level of resistance is the 200-DMA (1,977), which is still about 6% higher from weekly closing levels.
