Over the last five sessions:
Leading: Finance – Property REIT, Finance – Mortgage REIT, Insurance – Acc & Health
Lagging: Finance – Investment Bank/Brokers, Insurance – Brokers
Symbol: LEON.CH.
European Weekly Summary
Key points:
Europe: no end in sight: The chance of seeing the Ishares Dj Stoxx 600 breach its Monday Dec 10 low is very high. Such action would send the index back in a Downtrend.
Cash is king – Real Estate remains the best relative out performer. Top defensive plays: Around town ( AT1X.DE ) and Catena ( CATE.SE ).
Still relatively bullish on Nordic fish farmers. In the long run, low supply coupled with strong demand from emerging countries will continue supporting the price of Atlantic salmon. Buy Marine Harvest( MHG.NO )
European Weekly Summary
Key Points
I – Europe Falling Back to a Downtrend
The IShares Dj Stoxx 600 (in a Downtrend – See Page 5) breached its oneyear low yesterday and is now in unchartered territory. This is the second time this year that its follow‐through day failed. We see the 30.70 low of June 2016 acting as the next level of support.
Heavy distribution on Thursday followed a rout in U.S. futures after Canadian authorities arrested Huawei’s CFO at the request of the U.S., delivering a blow to the ongoing peace talks in the China‐U.S. trade war.
The yield curve inversion of the five‐ and three‐year treasury notes that occurred Monday for the first time in more than a decade added to investors’ worries.
In the wake of Ishares Dj Stoxx 600 weakness, we downgraded France, Germany, Norway, Sweden, Austria, Portugal, Spain and Luxembourg to a Downtrend. A majority of the 17 markets we cover are now in a Downtrend.
II – Defensives Continue to be the Best Bet Right Now
Amid extreme volatility with multiple variables like Italy’s debt crisis, a slowdown in the U.K. housing market, Brexit, etc., defensive stocks continue to relatively outperform the market. Of stocks with improving Relative Strength Ratings (over the past four weeks) and decent fundamental (SMR>50) that are under accumulation (A/D Rating >0), a majority are from:
1. Utility‐Electric Power, which includes Iberdrola (
), Terna (
), REN (
), and Focus List name Telecom Plus (TEP.GB – see Page 3). The latter continues to display strong technical characteristics and is actionable after breaking out of a 36‐week cup last week.
2. Staples: Among others, included are Unilever (ULVR.GB), Nestle (
), and Diageo (
). From our Focus List, Davide Campari (CPR.IT – See Page 4) is holding well, trading above its 50‐DMA.
3. Telecom: Swisscom (
) and Proximus (
).
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 0.5% this week. It was
down nearly 2% through Wednesday, but recovered strongly in the
last two days of trading. It shifted back into a confirmed uptrend two
weeks ago after a 2.4% gain on December 19th and has held the gains
since. It ended this week just above its 40-week, its first close above the
level since early November 2014.
