Australia’s ASX All-Ordinaries Index gained 0.03% this week. It added one distribution day, increasing the total to four. The index is trading 3.5% above its 40-WMA and 1% off its 52-week high. It remains in a Confirmed Uptrend.
Symbol: NXT.AU
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index gained 0.2% this week. The index is trading 3.6% above its 40-WMA and 1% off its 52-week high. It is in a Confirmed Uptrend.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index gained 0.4% this week. The index is trading 3.9% above its 40-WMA and 1% off its 52-week high. It is in a Confirmed Uptrend.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index fell 1.1% this week. The index is trading 3.2% above its 40-WMA and 2% off its 52-week high. It is in a Confirmed Uptrend.
Market View
The U.S. market is in a Confirmed Uptrend. Though distribution rose this week to two and five days on the S&P 500 and Nasdaq, respectively, each index continues to hold short-term support at the 21-DMA. Leadership also remains healthy with 80% of the U.S. Focus List still trading above the 50-DMA and 60% within 5% of a new high. We will become more cautious should we see a further rise in distribution that takes the major averages below their respective 21-DMAs. Stocks on our U.S. Focus List—Current Sentiment Our USFL of 73 ideas (two net additions) was flat this week, outperforming the S&P 500 (-0.2%) and the Nasdaq (-0.2%). By Sector Despite the pullback in Technology this week, most Technology ideas on the U.S. Focus List responded well to earnings. WB, OLED, TTWO, CY, RNG, and NVDA all moved into new highs. Conversely, ALRM, TYL, and ZAYO broke their respective 50-DMAs. Outside of Technology, MNST and PLNT both moved into new highs post earnings. Health Care continues to be under pressure. PRAH broke its 50-DMA following poor earnings results from peers. VRTX also continues to live below its 50-DMA due to a weakening biotech industry group. Only 8% of our U.S. Focus List is made up of Health Care ideas after multiple ideas have been removed the last few weeks.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index increased 1.20% this week. The index is trading 5.0% above its 40-WMA and is at 52-week highs. It is in a Confirmed Uptrend.
APAC Weekly Summary
APAC markets are strong and our sentiment remains bullish. Although all markets are still in Confirmed Uptrend, on Friday we downgraded Mainland China to Uptrend Under Pressure (discussed below). This does not change our overall sentiment on APAC markets though. The upward trend remains intact and the MSCI Asia is again testing new 52-week highs. Since late September, the Accumulation/Distribution trend has largely been bullish.
Market View
Market Overview
The U.S. market is in a Confirmed Uptrend. Indices tacked on small gains this week and continue to trend high-er along their 21-DMAs as distribution remains low. Earnings season has been strong for the USFL with the ma-jority of ideas reporting better-than-expected results. We remain positive on the general market as we head into the final weeks of earnings season.
Stocks on our U.S. Focus List—Current Sentiment
Our USFL of 71 ideas (no net change) gained 0.9% on average this week, outperforming the S&P 500 (0.2%) and relatively in-line with the Nasdaq (0.9%).
By Sector
Earnings season continues to very good for USFL stocks, with many gapping up on better-than-expected results. Under the radar, TNET, gapped-up +15% after reporting an EPS surprise of over 124%. OLED, WING, and sur-prisingly EL jumped higher after exceeding expectations. Although FB and BABA pulled back slightly, both re-main buyable after reporting outstanding quarterly results. ADBE gapped up three weeks ago and continues to hit new highs, while TEAM is trading in a tight range and poised to follow in a similar fashion.
Global Focus Developed Long
Australia’s ASX All-Ordinaries Index increased 1.02% this week. It is trading 3.27% above its 200-DMA and is at 52-week highs. The index is in a Confirmed Uptrend.
Global Technology Sector
Software
Strong Outlook for Enterprise Cloud
Following strength in Q1 and Q2, growth across cloud companies has persisted as fundamental trends remains intact halfway through Q3 earnings season. We continue to see accelerated adoption of cloud services across major industries (HCM, ERP, CRM) and impressive earnings reports/outlook from bellwethers MSFT. Despite significant price appreciation YTD, cloud-related names are not expensive. Currently, S&P 500 software companies trade at 6x (median) 2018 sales, while KPIs (e.g., recurring revenue, retention rates, etc.) support the secular shift from legacy/on-premises software to the cloud. Standout ideas from our Global Focus List include:
• ServiceNow is ahead of its long-term goal of penetrating 50% of the Global 2000 constituents by 2020. Achieving this long-term goal would
translate into revenues of $4B (four-year CAGR of 31%) and operating margin expansion from 16% to ~30%. On October 25, reported better-than-expected Q3 results and that it had 41% (815) of the Global 2000 as customers. The stock is trending along it 21-DMA.
• Adobe Systems reports on December 14, but it raised its FY18 guidance above consensus expectations after its recent Analyst Day. The catalyst behind the strong guidance was due in part to a price increase for Creative Cloud products (60% of revenue) and expansion of its TAM to more than $83B by 2020. In FY18 sees revenue and adjusted growth of 21% and 30%, respectively, as annualized recurring revenue (ARR) for Digital Media increases to +$1B. It is very difficult to find this level of growth among bellwethers. The stock gapped up on the announcement and is poised to trend higher.
• Autodesk is the market leader for computer aided design (CAD) with more than 30% market share in the global architecture engineering and construction (AEC) industry. in the middle of a transition from a license to SaaS model that is reminiscent of 2013 transition. Due to acceleration in its ARR over the last six quarters (+80%),should achieve revenue of $3.2B, EPS of $3, and FCF of more than $1B by 2020. The stock is due to report results by the end of the month; however, it is currently breaking out from a consolidation and remains buyable.
