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.
Symbol: GRUB
Global Technology/Cyclical Sector
Some highlights from the report:
U.S.
Still Bearish on most Old Media groups, neutral on U.S. Media-Diversified
More on Disney’s OTT strategy, Hulu
NFLX removal – Rising Competition in 2019
Revisiting FB Removal and Timeline
Prefer GOOGL over FB
Thoughts on SNAP and TWTR
GRUB leading U.S. market share
New FL addition: MTCH
Stocks of Interest: YELP and ROKU
EMEA
APAC
Chinese internet stocks far from actionable
Removed from FL: WUBA, ENJP.JP, and WB
Strategy View
Key Points:
Yield curves (either 10-year versus 2-year, or 10-year versus 3-month) are very accurate at predicting recessions (blue shaded regions).
Both curves being inverted is the likely signal. 10-year versus 30-year is still 90bps away, even though 10-year versus two-year is just 20bps away.
Steepness is acceptable for economy, corporate profit cycle, forward market gains for now. If the Fed signals a pause, they may be able to keep it from inverting. But if current trend of sideways 10-year yield and steady 2-year/3-month yield gains continues as Fed hikes continue, then it will invert.
All clear signal for the market currently. Long-term leading sectors Retail, Tech, and Healthcare are re-accelerating, and industrials are picking up strength. Many more actionable growth names (buyable–green), while a few are extended and can be trimmed (light red).
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
Global Sector Commentary
Key points:
- Growth and specifically Technology returned with a bang this week. Seven USFL adds in a week is the most since June 2017. Of our ten adds in two weeks, eight are from Tech.
- Many international growth stocks also had a strong week and, although markets are not close to being as strong as those in the U.S., signals from leaders were good this week. Below are the best weekly performers across our three lists.
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.
US Focus Long
The U.S. market is in a Confirmed Uptrend. Despite the pullback on Friday, the majority of growth ideas held up well, with multiple recent IPOs also breaking out into new highs. Further, small-cap indices, including the S&P 600 and Russell 2000, also held up well relative to the other major averages, indicating a further rotation into U.S.-based ideas. Overall, despite choppy market conditions, we maintain our positive view as the major averages remain above moving average support with a low number of distribution days
US Focus Long
The U.S. market is in an Uptrend Under Pressure. The S&P 500 is still holding its 21-DMA, while the Nasdaq remains above its 50-DMA. Distribution also remains relatively low at two days on the S&P 500 and three on the Nasdaq. Leadership, however, remains a concern as the market continues to rotate into previously lagging industry groups. Though we have seen an improvement in quality growth over the last few sessions, most ideas are still trading within consolidation and have yet to show enough improvement to begin buying. Therefore, we continue to recommend a selective approach focusing on ideas with the best relative strength while reducing exposure to names that have broken and stayed below near-term levels of support.
US Focus Long
The U.S. market is in a Confirmed Uptrend. We will move the market back to Under Pressure should we see the Nasdaq close below its 50-DMA next week. We are concerned with the action of leading ideas, which came under severe selling pressure on Friday, resulting in the Nasdaq closing below its 21-DMA. Multiple names either pulled back sharply to their respective 50-DMA or broke below that level post-earnings results. Earnings will continue to play a big role next week, with another 25% of the U.S. Focus List reporting. We recommend a patient approach in the near term, waiting to see support come back into the market over the next few sessions.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq traded relatively flat this week, consoli-
dating the last two weeks of gains. The S&P 500 now has four distribution days with two expiring next week,
while the Nasdaq has six distribution days with three expiring next week. Leading ideas continue to show con-
structive action with multiple ideas hitting new highs despite sideways trade in the major averages. Earnings will
continue to play a big role over the next few weeks, driving market direction. Thirty-percent of the U.S. Focus List
reports next week, followed by 25% the week after. We maintain our positive view on the general market due to
a declining distribution day count and good technical action in the major averages and leading ideas alike.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 68 ideas gained 0.9% on average this week, outperforming the S&P 500 (+0.02%) and the
Nasdaq (-0.07%).
Actionable Focus List ideas: Activision Blizzard ( ATVI ), Arista Networks ( ANET ), Calavo Growers ( CVGW ), Dia-
mondback Energy ( FANG ), Fleetcor Technologies ( FLT ), Global Payments ( GPN ), Home Depot ( HD ), RingCentral
( RNG ), SS&C Technologies ( SSNC ), Unitedhealth ( UNH ), Worldpay ( WP )
USFL ideas weekly earnings line-up:
Monday: Close: GOOGL, ZION
Wednesday: Open: FLIR, GRUB, MKTX, NEP; Close: ALGN, MPWR, NOW, PYPL, V, VRTX
Thursday: Open: ABMD, MA, TAL; Close: AMZN, EW, SIVB, TEAM
Friday: Open: TYL
By Sector
Health Care ideas on the U.S. Focus List led this week. IDXX, ILMN, ALGN, PRAH, EW, and VRTX are all trading
at or near new highs. UNH pulled back post earnings, but found support at its 50-DMA. Banks also did well this
week, though most just held the lower end of support levels and are now attempting to build the right side of
new bases. TCBI and WAL reacted positively to earnings, while ZION and SIVB both report next week. After two
solid weeks of gains, Software ideas held up well with a handful moving back into new highs. ATVI, RNG, and
SSNC provided new buy points after breaking out of new bases, while RP and PAYC both regained their respec-
tive 50-DMA. Conversely, Energy ideas have lagged over the last few sessions. FANG remains above its 50-
DMA, however, WRD and CLR are now trading more than 10% off highs and around their respective 100-DMA.
