Key Points:
U.S.
- The 2/14 follow-through day in the U.S. market is holding for now, but the market condition was downgraded to Uptrend Under Pressure given three straight distribution days on the Nasdaq. While there are still actionable names, we advise slowing new purchases and reducing exposure to any stock breaking below key support levels.
- March is a good seasonal period for the market on average, but Technology/Nasdaq usually underperform.
- Retail is easily the best sector on average in March. However, given it already has a large lead over the trailing six-months, it will be interesting to see if its historical pattern holds.
- Given the volatility, focus on outperforming stocks in strong industries. Of our 74 Focus List names, 58 are in the top-25 performing Major Industries (of 88) on a YTD basis.
- Actionable names from one of these top groups are TEAM, IDXX, and PLNT.
Global Markets
- Developed markets are very weak, especially through Europe, where only Norway is in an Uptrend. Outperformers are Australia/New Zealand, which is typical during corrective phases.
o Actionable names include Aristocrat Leisure ( ALL.AU; ALL:AU ), Cochlear ( COH.AU; COH:AU ), and Fisher & Paykel Healthcare ( FPHZ.NZ; FPH:NZ ).
- Emerging is more constructive, with a clear majority still in an Uptrend. However, half of these are Under Pressure and average distribution day counts are very elevated (5 over the trailing five weeks).
- The best markets based on price action (1-3% from highs) are Brazil, Thailand, Indonesia, Malaysia, Turkey, and Egypt. Also Frontier markets like Vietnam, Kenya, Kuwait, and Morocco are holding up surprisingly well.
- Themes prevalent across EM/FM markets are outperformance of Financials (especially Money Centers across many markets, and Real Estate Dev/Consumer Finance companies in a handful of markets); and Airlines (especially low-cost carriers).
