The U.S. market is in an Uptrend Under Pressure. The Nasdaq broke its 50-DMA on Thursday, a level that had been holding as support for the last several months. Distribution increased and leading ideas pulled sharply back off highs with several breaking down technically and subsequently being removed from the U.S. Focus List. With the 100-DMA also undercut on Friday, the next level of support on the Nasdaq is now the July 30 low at ~7,600, before the 200-DMA. This poor technical action across the major averages and leading ideas alike warrants a cautious approach until market conditions stabilize and price action tightens up. Therefore, our recommendation is to reduce risk by trimming ideas that have broken below moving average and/or price support, while also locking in gains in ideas that have become well extended from prior pivot points.
Symbol: ALRM
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold above short-term sup-
port levels. The Nasdaq has an elevated distribution day count at seven, however, three days expire within four
sessions beginning next Thursday. To remain positive, we would like to see the Nasdaq hold above its 50-DMA
and avoid further distribution as expiration approaches. Underlying action among growth ideas has been strong
this past week. Multiple ideas have begun to emerge from consolidation and move back into new highs. Sixty-
four of the 75 (85%) U.S. Focus List ideas are trading above their respective 50-DMA, 49 (65%) are trading with-
in 5% of a new high, and 21 (28%) hit new all-time highs this week. We continue to recommend buying high
quality ideas as they find support at key moving averages or as they emerge from sound bases.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 75 ideas gained 1.8% on average this week, outperforming the S&P 500 (-0.5%) and the Nasdaq
( +0.7% ).
Actionable Focus List ideas: Abiomed ( ABMD ), Activision Blizzard ( ATVI ), Adobe Systems ( ADBE ), Align Technolo-
gy ( ALGN ), Autodesk ( ADSK ), Canada Goose ( GOOS ), CarGurus ( CARG ), Centennial Resource Dvlp ( CDEV ),
Continental Resources ( CLR ), Diamondback Energy ( FANG ), Envestnet ( ENV ), Fidelity Natl Info Svcs ( FIS ),
Fleetcor Technologies ( FLT ), Home Depot ( HD ), Intuit ( INTU ), Nextera Energy ( NEP ), Nomad Foods ( NOMD ),
Nvidia ( NVDA ), Old Dominion Freight Line ( ODFL ), Palo Alto Networks ( PANW ), Planet Fitness ( PLNT ), PRA
Health Sciences ( PRAH ), Realpage ( RP ), Splunk ( SPLK ), Vertex Pharmaceuticals ( VRTX ), Xilinx ( XLNX ), Yelp ( YELP ),
Zoetis ( ZTS )
Sector
Health Care ideas within the U.S. Focus List led this week. All nine ideas are trading within 3% of an all-time
high, with five reaching a new high this week. EW broke out earlier in the week and is now extended from an
ideal pivot, while VRTX is just slightly extended after breaking out this week. ABMD remains actionable and is
now testing new highs. Energy ideas fared well for a second straight week. CLR, CDEV, and FANG are all ap-
proaching new highs with all three still actionable. Technology ideas also did well this week. NVDA turned ac-
tionable after finding support at its 50-DMA, RP moved back into new highs after finding support at its 21-DMA,
and ATVI broke out of a cup pattern. Multiple other ideas, including TEAM, VEEV, MTCH, ALRM, AMD,
and PAYC, remain extended, but are holding near-term levels of support.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold above short-term support levels. The Nasdaq has an elevated distribution day count at seven, however, three days expire within four sessions beginning next Thursday. To remain positive, we would like to see the Nasdaq hold above its 50-DMA and avoid further distribution as expiration approaches. Positively, underlying action among growth ideas has been strong this past week. Multiple ideas have begun to emerge from consolidation and move back into new highs. 64 of the 75 (85%) U.S. Focus List ideas are trading above their respective 50-DMA, 49 (65%) are trading within 5% of a new high, and 21 (28%) hit new all-time highs this week. We continue to recommend buying high quality ideas as they find support at key moving averages or as they emerge from sound bases.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 moved back into all-time highs this week, while the Nasdaq held support at its 50-DMA. The majority of leading ideas also continue to hold individual levels of support or make new highs, though we have begun to see sector rotation over the past week. Energy, Basic Material, Consumer Cyclical, and Capital Equipment have come under accumulation, while previously leading sectors, Technology and Retail, have paused, consolidating sharp gains over the last month. Our recommendation is to continue holding core positions in high relative strength ideas, while also proactively locking in gains in ideas that have rallied 20-25% or more above later stage pivot points. We maintain our positive view on the general market, which will change should we begin to see technical deterioration in leading ideas coupled with additional distribution in the major averages.
Global Technology Sector—Software
Highlights from the report:
The North American Software Index ( IGV ) is up 31% year-to-date and remains among the leading groups in 2018. Constituents of the IGV are trading at a median 6.4x EV/S ( FY 2019 ) and have reported another better-than-expected quarter, highlighted by Q2 FY 2018 revenue and EPS growth of 15% and 27%, respectively, better than the entire S&P 500 (8%/21%) and the S&P 500 Technology sector (9%/23%). The attached report accompanies Cornelio’s webinar on Thursday, September 20 in which he gauges the health of the software uptrend and highlights his top software picks.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 held support at its 21-DMA this week while distribution fell to just two days due to expiration. The Nasdaq held its 50-DMA and currently has five distribution days. Both indices will lose an additional distribution day next week. Leadership continues to act well, with new ideas also breaking out from consolidation over the past week. Despite positive price volume action in both the major averages and individual ideas, we recommend reducing risk in stocks that have rallied 20-25% above later stage pivot points. We will change our current positive view on the market should we begin to see technical deterioration in leading ideas coupled with additional distribution in the major averages.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back off highs during the first week of September and continues to digest strong gains from August. Increasing distribution has caused the Nasdaq to break slightly below its 21-DMA, while the S&P500 is testing this moving average. The rising 50-DMA is the next level of support for both indices. The majority of growth ideas have pull back off highs and/or are consolidating above key support levels. Despite the rise in distribution, leadership remains intact. We maintain a bullish outlook as long as indices and leading stocks exhibit constructive price action and hold above key support levels.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating near all-time highs after accelerating the last two weeks. Distribution remains low with three days on the Nasdaq and two on the S&P 500. Leadership remains intact, with strong price action across multiple groups, including payment processors, med-tech, and software. We maintain a positive outlook on the market.
US Focus Long
The U.S. market is in a Confirmed Uptrend. Indices are at all-time highs. Distribution is low with only three days on the S&P 500 and Nasdaq, with one day expiring on each index next week. Leadership remains constructive, with multiple groups and stocks breaking out into new highs. We maintain a positive outlook on the market and recommend buying or adding high quality stocks emerge from sound bases
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq held support along their respective 50-DMA this week. Distribution remains relatively low at four days on the S&P 500 and three on the Nasdaq, with one expiring on the S&P 500 next week. Leadership remains mixed. There are a select few ideas that continue to trade at or near highs, however the majority remain rangebound, consolidating over the last several weeks. To remain positive, we need to see the 50-DMA continue to hold as near-term support over the next few sessions.
