The U.S. market is in a Confirmed Uptrend. Though distribution rose this week to two and five days on the S&P 500 and Nasdaq, respectively, each index continues to hold short-term support at the 21-DMA. Leadership also remains healthy with 80% of the U.S. Focus List still trading above the 50-DMA and 60% within 5% of a new high. We will become more cautious should we see a further rise in distribution that takes the major averages below their respective 21-DMAs.
Symbol: ALRM
Market View
Market Overview
The U.S. market is in a Confirmed Uptrend. Indices tacked on small gains this week and continue to trend high-er along their 21-DMAs as distribution remains low. Earnings season has been strong for the USFL with the ma-jority of ideas reporting better-than-expected results. We remain positive on the general market as we head into the final weeks of earnings season.
Stocks on our U.S. Focus List—Current Sentiment
Our USFL of 71 ideas (no net change) gained 0.9% on average this week, outperforming the S&P 500 (0.2%) and relatively in-line with the Nasdaq (0.9%).
By Sector
Earnings season continues to very good for USFL stocks, with many gapping up on better-than-expected results. Under the radar, TNET, gapped-up +15% after reporting an EPS surprise of over 124%. OLED, WING, and sur-prisingly EL jumped higher after exceeding expectations. Although FB and BABA pulled back slightly, both re-main buyable after reporting outstanding quarterly results. ADBE gapped up three weeks ago and continues to hit new highs, while TEAM is trading in a tight range and poised to follow in a similar fashion.
US Focus Long
The U.S. market is in a Confirmed Uptrend. Indices tacked on small gains this week and continue to trend higher along their 21-DMAs as distribution remains low. Earnings season has been strong for the USFL with the majority of ideas reporting better-than-expected results. We remain positive on the general market as we head into the final weeks of earnings season.
Global Technology Sector
Software
Strong Outlook for Enterprise Cloud
Following strength in Q1 and Q2, growth across cloud companies has persisted as fundamental trends remains intact halfway through Q3 earnings season. We continue to see accelerated adoption of cloud services across major industries (HCM, ERP, CRM) and impressive earnings reports/outlook from bellwethers MSFT. Despite significant price appreciation YTD, cloud-related names are not expensive. Currently, S&P 500 software companies trade at 6x (median) 2018 sales, while KPIs (e.g., recurring revenue, retention rates, etc.) support the secular shift from legacy/on-premises software to the cloud. Standout ideas from our Global Focus List include:
• ServiceNow is ahead of its long-term goal of penetrating 50% of the Global 2000 constituents by 2020. Achieving this long-term goal would
translate into revenues of $4B (four-year CAGR of 31%) and operating margin expansion from 16% to ~30%. On October 25, reported better-than-expected Q3 results and that it had 41% (815) of the Global 2000 as customers. The stock is trending along it 21-DMA.
• Adobe Systems reports on December 14, but it raised its FY18 guidance above consensus expectations after its recent Analyst Day. The catalyst behind the strong guidance was due in part to a price increase for Creative Cloud products (60% of revenue) and expansion of its TAM to more than $83B by 2020. In FY18 sees revenue and adjusted growth of 21% and 30%, respectively, as annualized recurring revenue (ARR) for Digital Media increases to +$1B. It is very difficult to find this level of growth among bellwethers. The stock gapped up on the announcement and is poised to trend higher.
• Autodesk is the market leader for computer aided design (CAD) with more than 30% market share in the global architecture engineering and construction (AEC) industry. in the middle of a transition from a license to SaaS model that is reminiscent of 2013 transition. Due to acceleration in its ARR over the last six quarters (+80%),should achieve revenue of $3.2B, EPS of $3, and FCF of more than $1B by 2020. The stock is due to report results by the end of the month; however, it is currently breaking out from a consolidation and remains buyable.
Market View
Market Overview
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq moved back into new highs Friday after finding support around their respective 21-DMAs. Distribution days remain low with one on the S&P 500 and three on the Nasdaq. Leadership also remains strong with the majority of ideas continuing into new highs post earnings results. We remain positive on the general market.
Stocks on our U.S. Focus List—Current Sentiment
Our USFL of 71 ideas (two net additions) gained 0.9% on average this week, outperforming the S&P 500 (0.2%) and in-line with the Nasdaq (1.1%).
By Sector
Strength across the USFL came primarily from Technology for a second straight week. GOOGL, GRUB, and LOGM all broke out post earnings. MPWR and CY also moved into all-time highs following earnings. Converse-ly, Health Care came under heavy pressure due to Biotechs selling off after their respective earnings results. ALXN and BIVV both reported numbers ahead of consensus, but still sold off below their respective 50-DMAs. VRTX also put in a big beat-and-raise quarter, but also sold off before recovering on Friday. On the opposite
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq moved back into new highs Friday after finding support around their respective 21-DMAs. Distribution days remain low with one on the S&P 500 and three on the Nasdaq. Leadership also remains strong with the majority of ideas continuing into new highs post earnings results. We remain positive on the general market.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to show resilient action, staging upside reversals on Thursday and continuing into all-time highs to close the week. The Nasdaq did pick up one distribution day, but the count still remains very low at just one day on the S&P 500 and two on the Nasdaq. Leadership has been very strong, with multiple U.S. Focus List ideas gapping up into all-time highs post earnings. We remain positive on the general market.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to trade at all-time highs with only one distribution day each. Leadership continues to broaden with five of 11 O’Neil sectors hitting a new high this week. We remain positive on the general market.
Market View
The U.S. market is in a Confirmed Uptrend. One of only two distribution days on the S&P 500 and Nasdaq wi expire at the close Monday. Leading ideas across all sectors continue to act well with multiple names hitting ne highs, breaking out of new bases, or bouncing off support levels. We remain positive on the general market. Stocks on our U.S. Focus List—Current Sentiment Our USFL of 69 ideas (two net weekly additions) gained 1.8% on average this week, outperforming the S&P 500 (1.2%) and the Nasdaq (1.5%).
By Sector
The rally continues to broaden with multiple sectors hitting new highs over the past week. Strength across the USFL came primarily from Software-related companies. ADSK, ALRM, NOW, PAYC, RHT, RNG, SSNC, and TTWO all hit fresh highs, while LOGM, RP, TYL, and WDAY all regained their respective 50-DMAs. Financials also led with ESNT, FRC, MS, PYPL, and SCHW all hitting new highs.
US Focus Long
The U.S. market is in a Confirmed Uptrend. One of only two distribution days on the S&P 500 and Nasdaq will expire at the close Monday. Leading ideas across all sectors continue to act well with multiple names hitting new highs, breaking out of new bases, or bouncing off support levels. We remain positive on the general market.
