The U.S. market remains in a Confirmed Uptrend. The S&P 500 held its 21-DMA Friday avoiding distribution. The Nasdaq, however, picked up its third distribution day after multiple Technology ideas came under severe selling pressure. We will be looking for the Nasdaq and for individual Tech ideas to hold above Friday’s lows next week. Further downside in the Nasdaq will result in the index testing its 50-DMA at ~6057. We will remain positive on the market as long as the major averages and the majority of leadership ideas hold above their respective 50-DMAs.
Author: Vinaya Kumar
European Focus Long
Solid gains across European markets on Friday helped them avoid closing lower for the week. On average the markets were flat. The central banks of France, Germany, and Italy raised their growth expectations for their respective countries for 2017 and 2018, igniting the rally. In addition, the fall in the pound following the U.K. elections caused the country to increase 1% on Friday, limiting the week’s loss to 0.3%. Switzerland lost 2.2% for the week and we changed its status to Under Pressure as it broke through the 50-DMA.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index lost 1.8%, closing just above 40-WMA support. The index is Under Pressure with four distribution days, and will likely be moved into a Downtrend if it breaks the long-term moving average next week. Energy and Financial sectors are weighing on the market, while smaller sectors including Consumer Cyclical and Health Care remain standouts.
Global Focus Emerging Long
Mainland Chinese markets had a follow-through day as the Shenzhen rose over 2% on Wednesday on heavy volume. The index is trading above the first level of resistance at the 21-DMA. Next level of resistance is the 50-DMA, 2% above current levels or near 1,900. The Shanghai also had a good week and is testing both the 50-DMA and 200-DMA. In the coming week we will be looking to monitor the Shenzhen closely as it makes it way to the 50-DMA. We believe a break above the 50-DMA would be a more significant sign of a change in trend.
Global Focus Frontier Long
US Focus Long
The U.S. market has been moved back into a Confirmed Uptrend. The S&P 500 broke into new highs Thursday after consolidating since March 1. Volume has been below average likely due to the holiday weekend, however, price action has been strong and leadership continues to act very well. Distribution also fell this week to just two days on the S&P 500. We will be looking for the rising 21-DMA to act as a shorter-term level of support should the market pull back.
European Focus Long
European markets rebounded 0.4% on average after two consecutive weeks of losses. Encouraging economic news and a strong rally in the U.S. propelled markets higher. The U.K. gained 1% to reach a new high as it continued to shed distribution days, now down to only two. France (+0.2%) and Germany (-0.3%) underperformed but remain in a Confirmed Uptrend and are consolidating near 52-week highs. Luxembourg (+2.5%) was the best performing market and was moved to a Confirmed Uptrend after a follow-through day.
US Focus Long
The U.S. market was downgraded to Uptrend Under Pressure after Wednesday’s broad based sell-off, which caused indices to slice through their respective 50-DMA. However, leadership ideas, particularly across Technology, have bounced back in strong fashion. Going forward, we would like to see the S&P 500 and Russell regain and hold above their 50-DMA while stocks consolidate into areas of price or moving average support. If this can happen while distribution remains low, we will likely move the U.S. market back into a Confirmed Uptrend in the near future.
European Focus Long
A strong Friday rally helped trim losses for the week; nevertheless, European markets closed 0.5% lower on average. Distribution days were abundant on Wednesday and Thursday, but none of the markets were moved from a Confirmed Uptrend. Four markets closed higher, including the U.K. (+0.5%), while Germany (-1%) and France (-1.5%) underperformed but continue to trade well above their moving averages.
US Focus Long
The U.S. market is in a Confirmed Uptrend as indices continue to consolidate in a tight range above support levels. Signs of institutional selling (distribution days) remains muted with four on the S&P 500 and two on the Nasdaq, with an additional day set to expire on each index next week. With growth ideas in favor, and many accelerating higher, we highly recommend to not chase ideas but rather wait for stocks to consolidate or pull back into areas of support. We maintain our positive outlook on the U.S. market.
