The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq cleared above a longer-term range of resistance on Friday. The next level of resistance is ~2,864 on the S&P 500 and ~7,873 on the Nasdaq, where both indices originally broke below their respective 50-DMA last October. Distribution stands at five days on the S&P 500 and four on the Nasdaq, with one additional day expiring on the S&P 500 at the close Thursday.
Symbol: KLED.SE
Weekly European Sector Review
Key points:
- Leadership continues to emerge in Europe, indicating a persistent favorable trend. Leading sectors this week include Financials and Technology. The iShares DJ Stoxx 600 ( EXSA.DE ) remains in a Confirmed Uptrend with five distribution days.
- Actionable ideas from our Focus List in these two sectors include Adyen ( ADYE.NL ), Dassault Systemes ( DSY.FR ), and Nemetschek ( NEMX.DE ).
- We added ASML ( ASML.NL ) back to the Focus List (Long Ideas) this week. Credit Agricole
( CRDR.FR ) was added to our European list of Shorts.
WON Europe Today
Yesterday, all European markets, except Norway, closed in the green, ahead of a key vote in the U.K. that will decide the fate of the Brexit deal. The Banking sector also enabled European markets end on a positive note.
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The Stoxx 600 climbed 0.78%, turning positive after recording a 0.98% loss over the last week. The index is gaining above its 200-DMA and remains in a Confirmed Uptrend.
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Germany’s DAX rose 0.75%, prompted by an increase in share prices of Deutsche Bank (DBKX.DE; DBK:GR) and Commerzbank (CBKX.DE; CBK:GR) amid the possibility of a merger. France’s CAC 40 increased 0.66%, still struggling to bounce from the 40-WMA resistance, while the U.K.’s FTSE 100 was up 0.37% but continues to trade below the 40-WMA.
European Weekly Summary
Key Points
- The iShares DJ Stoxx 600 is in a Confirmed Uptrend since January 4 (follow-through day), with only one distribution day. The index is currently testing its 100-DMA and any break through this resistance would be another positive signal this short-term momentum will persist.
- In this report, we detail our cautiously optimistic view on European markets and recommend gradually increasing exposure to the region as the market trades constructively above key supports. Our bottom-up approach leans toward defensive sectors Staples and Health Care, and indicates it is too early to jump aggressively on Cyclicals (Autos and Luxury stocks). The top picks from our Focus List include Davide Campari ( CPR.IT ), Diageo ( DGE.GB ). Carl Zeiss Meditec ( AFXX.DE ), and Vitrolife ( VITR.SE ).
- In addition to our Focus List, we also list Stocks of Interest, which have solid O’Neil Ratings and Rankings and are trading near pivot. The list includes former European Focus List names, Redrow ( RDW.GB ), Wolters Kluver ( WSG.NL ), and Halma ( HLMA.GB ).
- Lastly, we updated our list of shorts ideas after we removed Essity ( ESSI.BE ) and now look at new potential short candidates (pages six and seven).
WON Europe Today
Most markets across Europe, including the Stoxx 600, France, and the U.K., had a distribution day. The pan-European Stoxx 600 slid 0.36%, with heavy volume. The U.K.’s FTSE 100 led the losses with a 0.99% drop, followed by France’s CAC 40 and Germany’s DAX, which fell 0.42% and 0.41%, respectively.
