The U.S. market is in a Downtrend. We will remain cautious until the S&P 500 or Nasdaq stages a follow-through day.
Scenario analysis:
Shallow correction of 8–10%. Undercut the 200-DMA before finding a bottom. Historical examples: 6/2014, 12/2014.
Deeper correction of 10% or more. Since 1970: Median days before low: 63. Median % off highs: 11%.
Watch List ideas: ALTR, AVLR, HAE, SMAR, TNDM
Early-stage bases.
Strong RS lines as market corrects.
Strong/steady revenue growth.
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped up yesterday and closed positively at the highs of the session. The S&P 500 cleared above March 21’s intraday high of 2,860, while the Nasdaq still faces resistance at ~7,850. Both indices are trending higher off 21-DMA support with six distribution days each. Though this count remains elevated, four distribution days will expire over six days beginning tomorrow.
The U.S. market remains in a Confirmed Uptrend.The S&P 500 and Nasdaq held their respective 21-DMA last week, consolidating gains. The 50-DMA is now moving above the 200-DMA and will act as another layer of support should the market pull back. There are currently six distribution days on each index, though four will expire within six sessions beginning Wednesday.
An inverted three-month (13-week) to 10-year yield curve has been a good predictor of recessions (about
12 months out).
Inversion does not always lead to weak market performance but does so on average.
o In all cases where the curve inverted on a weekly basis since 1962, average 4/8/13/26/52-week
forward performance for the S&P 500 is negative.
Cyclicals and Utility tend to be weak, while Material has performed the best.
Interestingly, Utility is currently the best performer over one year, while Material is the worst. A
mean reversion could be approaching.
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq held their respective 21-DMA this
week, consolidating gains. The 50-DMA is now moving above the 200-DMA and will act as another layer of
support should the market pull back. There are currently six distribution days on each index, though four will
expire within six sessions beginning next Wednesday.
Leading ideas are consolidating constructively, with few major technical breakdowns. We will look for secondary
entry points in leading ideas over the next several weeks. Generally, bases take five to seven weeks to complete
and should occur above near-term support levels, including the 50-DMA, the 100-DMA, or prior pivot points.
We recommend a selective and patient approach as the market consolidates. We would like to see distribution
subside and the right-hand side of bases begin to form over the next few weeks before recommending any
meaningful increase in risk.
Sectors: Over the last five sessions, Transportation, Capital Equipment, Consumer Cyclical, and Retail are
leading, while Technology and Utility are lagging. Technology remains a long-term leading sector despite the
recent pullback, and is still trading above 21-DMA support.
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq traded relatively flat yesterday in light volume, still holding above 21-DMA support. The 50-DMA is set to move above the 200-DMA for both indices in the coming days. Distribution remains at six days each, with four expiring over six sessions beginning next Wednesday.
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back yesterday, each picking up a sixth distribution day. Both indices closed off sessions lows and above 21-DMA support. The distribution day count is elevated, but four days will expire within six sessions beginning next Wednesday.
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq closed in the middle of their respective intraday ranges yesterday, remaining above 21-DMA support with five distribution days each. Four distribution days will expire within six sessions beginning next Wednesday. The 50-DMA is rising sharply and will likely move above the 200-DMA to act as another level of support within the next week.
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq were able to close off session lows and above their
respective 21-DMA yesterday. Distribution remains at five days each with no expiration until next Wednesday.
The U.S. market remains in a Confirmed Uptrend. Following strong gains last Thursday, the S&P 500 and Nasdaq pulled back sharply into support on Friday, closing at the lows of the session with each picking up a fifth distribution day. The S&P 500 is now testing 21-DMA support, which is rising to the 2,800 level. The Nasdaq is now trading just 60bps above its 21-DMA after falling 2.5% on Friday and erasing five straight days of positive gains.
Strategy View
Presently, U.S. equity markets remain in a Confirmed Uptrend. The indices’ progress since the December 24,
2018 low is nothing short of amazing, with all major indices up at least 18% as of March 21. All but the Russell
2000 are above both their 50- and 200-DMA.
One of the more remarkable aspects of the current rally is that most asset classes have made positive moves in
unison; U.S. bonds, U.S. stocks, oil, and metals have all risen. Every single one of our 11 sectors has posted
strong returns as well.
In addition, the spread between the best-performing sector, Technology (+20.7%), and the worst, Consumer
Staple (+9.6%), is 1,010bps. Technology’s gain is only 6% greater than the average, while Staples lags the
average by approximately 4%.
On a relative basis, Utility is still the best performer over the trailing one-year, and recently reached a historical
extreme of +20% versus the S&P 500. In fact, it may be near a relative peak, especially if the worst of the 10-
year yield slide is over. Materials are by far the worst over the trailing one-year, lagging Utility by nearly 30%.
This could be at a trough, but this sector likely needs improvement in the economy to revert.
Elsewhere, Technology is slightly outperforming the S&P 500 over the trailing one-year but is trending positively
(particularly in semis and software), while Retail still holds a large lead, but continues its relative deceleration.
Lastly, Energy’s relative trend is improving, but it still has some distance to make up before it becomes a leader.
So far, this rally has rewarded investors regardless of the sectors in which they are invested. Going forward, we
expect performance to be much more dispersive, and the importance of selecting the correct sectors to invest in
will be much higher.
As mentioned in our Global Sector Commentary on February 22, once breadth (as measured by the percentage
of NYSE stocks above their 30-week average) moves higher than 75%, further market gains tend to be met with
a narrowing of breadth. As a result, we expect larger divergences for the remainder of the year.
