U.S. indices ran right into resistance this week, reversing their big gains from last Friday. There continues to be multiple signs of weakness from a sector level all the way down to individual ideas. Lagging sectors are bounc-ing, defensive sectors are leading, and constructive growth ideas are being heavily sold. Facebook and Alphabet both reported solid earnings, and both stocks have begun to trade sharply lower—confirming the weakness in the market. Quality growth is beginning to break multiyear trends.
Symbol: TTS
Market View
U.S. indices traded sharply higher in muted holiday volume this week, recovering from Friday’s heavy selloff. The gains largely came from Energy and Basic Materials, which have been trading at multiyear lows. Though it will be positive for the overall market if these sectors flatten out, a sustainable rally will need the support of fundamentally sound leadership and not just a dead-cat bounce from broken down sectors.
US Focus Long
U.S. indices traded sharply higher in muted holiday volume this week, recovering from
Friday’s heavy sell-off. The gains largely came from Energy and Basic Materials, which have
been trading at multiyear lows. Though it will be positive for the overall market if these
sectors flatten out, a sustainable rally will need the support of fundamentally sound leadership
and not just a dead-cat bounce from broken down sectors.
The current narrow group of leadership from the U.S. Focus List remains in consolidation,
while the major averages continue to bounce around in increased volatility. Range-bound
trade continues, with support for the S&P 500 at ~2000 and resistance at ~2116. We remain
patient here, continuing to watch for the emergence of new leadership. The market is now
nine days off its most recent bottom (12/14) and remains in a Rally Attempt.
US Focus Long
U.S. indices traded relatively flat during the holiday shortened week, still trading about 1-2%
off highs. The market does remain constructive, with good support at the 50 day moving
average for both the S&P 500 and Nasdaq. Upside resistance stands at 2100 and 2116 for the
S&P 500, levels that are likely to be tested in the coming weeks.
• Leadership continues to act well, with many ideas from the U.S. Focus list extended from a
proper entry. Again, any breakout from year long range bound trade in the major averages will
lead to additional ideas. Until then, we continue to recommend focusing on the current list,
buying those ideas as they emerge from consolidation. The market remains in a Confirmed
Uptrend, up 5-7% from the October 5th follow-through day.
Market View
U.S. indices were able to shake off last week’s pressure, finding strong 50-day moving average support and
now looking to break through the highs from earlier this month. Resistance for the S&P 500 lies at 2116, while
the Nasdaq faces resistance at 5163. Leadership, though narrow in numbers, is acting very strong, leading us to
believe the major averages could test these resistance levels next week.
US Focus Long
U.S. indices were able to shake off last week’s pressure, finding strong 50-day moving average
support and now looking to break through the highs from earlier this month. Resistance for
the S&P 500 lies at 2116, while the Nasdaq faces resistance at 5163. Leadership, though
narrow in numbers, is acting very strong, leading us to believe the major averages could test
these resistance levels next week.
• As stated previously, we continue to recommend holding or adding to our ideas as they find
support and move higher off areas of consolidation. We do expect new ideas to be added to
the U.S. Focus List if the indices are able to breakout from what has been range bound action
for much of the year. On Wednesday, the market was moved back into a Confirmed Uptrend,
as both the S&P 500 and Nasdaq retook their respective 200-day moving averages.
US Focus Long
U.S. indices put in their sixth straight week of gains, supported by strong moves in Energy,
Financials, and encouragingly, small-cap ideas. Both the S&P 500 and Nasdaq are now sitting
just 1-2% off all time highs, while the Russell is still about 8% off previous highs. Continued
positive action in small- and mid-cap names would widen the breadth of the rally and give us
even more confidence in further gains ahead.
• Though the actions of the leading averages are not showing any signs of weakness, the July highs
would be a logical area of resistance. We are looking for the indices to consolidate around these
levels, allowing leadership ideas to take a breather and potentially work themselves higher into
year-end. We continue to recommend sticking to what has been working, specifically large-cap
growth from the U.S. Focus List, as these ideas continue to act well and have the potential to turn
into very large gains. We remain watchful of new small- and mid-cap growth ideas, and will add
to our list accordingly.
• The S&P 500 and Nasdaq remain in a Confirmed Uptrend, up 5-7% from the October 5th
follow-through day, still with a very small amount of distribution.
