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.
Author: Vinaya Kumar
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.
European Focus Long
European markets consolidated recent weeks’ gains, declining 0.4% on average. However, the major markets continue to trade quite constructively and the U.K. was shifted to a Confirmed Uptrend from Under Pressure. The U.K. was the best performing market, gaining 1.9% for the week. The other key markets of Germany (+0.4%) and France (-0.5%) continue to trade well above support at their 50-DMAs and both remain in a Confirmed Uptrend.
US Focus Long
The market remains in a Confirmed Uptrend. U.S. indices are consolidating gains over the last few weeks, still holding above support levels and avoiding distribution. There are currently four distribution days on the S&P 500 and three on the Nasdaq, with each set to lose an aditional day next week. The majority of leadership ideas continue to act well, with most moving higher post earnings. Therefore, we remain constructive on the general market until we see concerning technical action among leadership ideas and the major averages alike.
European Focus Long
With the French election outcome and the U.S. Fed decision to leave interest rates unchanged, European markets rallied strongly for the short trading week. Markets were up almost 3% on average, led by gains of more than 4% from Belgium, Italy, Portugal, and Ireland. France (+3.1%) and Germany (+2.2%) reached new 52- week highs and are trading well above their 50-DMAs. The U.K. (+1.3%) continues to lag, trading below its 50-DMA, and remains Under Pressure.
US Focus Long
The market was moved back into a Confirmed Uptrend on Monday after the S&P 500 broke above its downward trending upper channel line and the Nasdaq broke onto all-time highs. Distribution fell to five days on the S&P and two on the Nasdaq, however no expiration will occur next week. Leadership continues to act well, with multiple USFL ideas breaking out into new highs on strong earnings results. After such a strong move, consolidation should be expected. We are looking for the S&P 500 to hold its 50-DMA should this occur.
European Focus Long
The Stoxx Europe 600 is headed for a strong gain of 2.31% this week, despite the pullback Thursday and Friday. Investors rejoiced at the outcome of the first round of the French presidential election. Centrist Emmanuel Macron is the favorite in the second round against the hard right’s Marine LePen. Macron is seen as positive for the eurozone, whereas LePen has expressed intentions to take France out of the EU. The second round is May 7.
US Focus Long
The U.S. market was downgraded to Uptrend Under Pressure on Tuesday due to a heavy volume downside reversal that closed below the 21-DMA. Despite the downgrade, leadership outside of Banks has acted well, with multiple ideas bouncing back into new highs. We will be looking for the major averages to avoid further distribution, settle above support levels, and for Banks to move back above their respective 50-DMAs in the coming days. This will likely result in the market being moved back into a Confirmed Uptrend.
