The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq traded relatively flat this week, consolidating 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 constructive 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. 30% 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.
Symbol: GRUB
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 is now trading just 2% off highs, while the Nasdaq made a new all-time high after finding strong support at the 50-DMA last week. Distribution stands at five days on the S&P 500 and four on the Nasdaq, with one day expiring on the S&P 500 at the close next Wednesday. Leading ideas showed very strong price action this week, with more than 25% of the U.S. Focus List hitting a new all-time high. We recommend buying high relative strength ideas across leading and/or improving industry groups at risk-optimal entry points.
US Focus Long
The U.S. market is in an Uptrend Under Pressure. We are encouraged by strong price action and the decline in distribution this week, but would like to see confirmation next week with bigger volume before we move the market back into a Confirmed Uptrend. Distribution now stands at four days on the S&P 500 and five on the Nasdaq, with one day set to expire on the Nasdaq next Thursday. We are also encouraged by the action of leading ideas over the last few sessions. Though the majority of leadership continues to consolidate, multiple ideas have been able to hold and move higher off short-term levels of support over the past week. Our recommendation will be to buy high relative strength ideas at ideal pivot points should we see the major averages hold these gains early next week and move higher on more convincing volume.
US Focus Long
The U.S. market is in an Uptrend Under Pressure. Te S&P 500 and Nasdaq are both holding support above their respective 50-DMA after a sharp pullback earlier in the week. We are now looking for this level of support to hold for the next few sessions before we recommend increasing risk in the market. Distribution also remains elevated at six days on the S&P 500 and seven on the Nasdaq. Next week, however, two distribution days expire on each index which would take the count back down to a more comfortable level. Lastly, we are still monitoring the action of leading ideas which have come sharply off recent highs. We will be looking for new ideas to emerge, while prior leadership consolidates. Our recommendation is still to remain patient here with a focus on high relative strength ideas bucking the general market pullback.
US Focus Long
The U.S. market remains in a Confirmed Uptrend. The S&P 500 is holding support at 2743, while the Nasdaq remains just 1% off all-time highs. Distribution is elevated, however one day did expire at the close Friday to take the count back down to six on the S&P 500. Another distribution day is also set to expire at the close Tuesday. Leadership is mixed with the majority still holding up well. Software ideas, however, did take a hit this week, pulling back off extended levels and likely set to consolidate gains over the next several weeks. Going forward, we will be looking for the market to avoid further distribution and for the of majority leading ideas to continue holding above short-term levels of support.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 is hitting resistance just below 2800, while the Nasdaq continues to trade near all-time highs. Distribution remains elevated, however multiple days expire on both indices next week. Despite the lag in the S&P 500, leading ideas continue to show constructive action. Multiple names across several sectors and market cap are making higher highs after breaking out over the last month. Therefore, we continue to recommend buying ideas at risk optimal levels until we see more concerning technical action. We will remain positive on the general market until we see a further pick up in distribution that results in the major averages breaking below shorter-term moving average support.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 broke out of a four-week trading range this week and is now set to test resistance at ~2,800, while the Nasdaq broke into a new all-time high. Distribution stands at five days on each index with no expiration next week. Leadership, despite a big pullback on Thursday, remains healthy as the majority continues to hold above prior pivots or key moving-average support. We maintain our positive view on the general market and continue to recommend buying high quality ideas at exact pivot points or areas of support, and avoid chasing ideas that become too far extended from risk-optimal entry points.
Stocks on our U.S. Focus List: Current Sentiment
By Sector
Retail ideas on the U.S. Focus List led this week. FIVE gapped up more than 20% on earnings following a similar move from LULU last week. OLLI and HOME also reported good quarters and both moved back into new highs. HD continues to con-structively form the right side of a new base and remains actionable. WING, AMZN, and BABA are also trading at or near new highs. Financial ideas also rallied this week, with Regional Banks TCBI, ZION, and WAL at new pivot points and Pay-ment Processors MA, V, and SQ all hitting new highs. PYPL and GPN both remain actionable as they approach prior highs. Conversely, Technology ideas, after leading over the last two weeks, pulled back on Thursday. MKSI gapped down below its 200-DMA, while software ideas RP, NOW, RNG, TYL, VEEV, and TEAM pulled back off recent new highs but remain intact as they hold above 50-DMA support.
New Ideas or Deletions
No changes were made to the U.S. Focus List this week.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 broke out of a four-week trading range this week and is now set to test resistance at ~2,800, while the Nasdaq broke into a new all-time high. Distribution stands at five days on each index with no expiration next week. Leadership, despite a big pullback on Thursday, remains healthy as the majority continues to hold above prior pivots or key moving-average support. We maintain our positive view on the general market and continue to recommend buying high quality ideas at exact pivot points or areas of support, and avoid chasing ideas that become too far extended from risk-optimal entry points.
Strategy View
Key Points:
Q1 2018 Earnings Review
- S&P 500 companies: Median +9% sales and +22% EPS growth. Second-best revenue surprise (+1.7%) in eight quarters and best EPS surprise (+4.9%) in six years.
- Best growth in Energy, Cap, Tech, Retail sectors.
- S&P 600 companies: Median +9% sales and +17% EPS growth.
- Best growth in Energy, Cap, HC, Transports.
- USFL earnings: 27 of 72 with sales/EPS growth acceleration. All but nine beat on revenues and all but six beat on EPS.
- 20 stocks with sales/EPS acceleration, sales/EPS beat, and positive reaction to earnings. Of these, BABA, CRM, SCHW, TCBI, UNH, VEEV are actionable now.
2019 Earnings Deceleration
- With big 2018 jump, 2019 S&P earnings to decelerate (~+18% to ~+10%), a risk to be aware of next year.
- Since 1960, 14 instances of similar deceleration (see below).
- Average 7% annual gain in decelerating year, versus 14% year before.
- Four years of negative returns in 14 periods (1974, 1977, 1994, 2000).
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 remains range-bound above its 50-DMA, while the Nasdaq is now approaching a new all-time high. Distribution remains elevated, however multiple days expire next week. Leadership remains healthy with many ideas hitting new highs across multiple sectors. We maintain our positive view on the general market as long as the S&P 500 remains above its 50-DMA.
Stocks on our U.S. Focus List: Current Sentiment
By Sector
Technology ideas on the U.S. Focus List led for a second straight week. Multiple names found support at their 50-DMA including GRUB, PSTG, GOOGL, NVDA, NOW, ON, and SPLK. Other ideas continue trade at new highs including TEAM, ADBE, CRM, MPWR, and TYL. Internet-Retail has also been very strong with both AMZN and BABA breaking back into new highs. Health Care ideas continue to trend higher with ABMD, ALGN, ILMN, and IDXX all reaching new highs, and EW breaking above resistance on Friday and turning actionable. Financial ideas are mixed. Payments continue to act well with PYPL, SQ, MA, and V all trading at or near new highs, while Banks remain under pressure. MS is now trading below its 200-DMA, while ZION, WAL, and TCBI are all at-tempting to hold support along their respective 50-DMA.
New Ideas or Deletions
No changes were made to the U.S. Focus List this week.
