Tag: Confirmed Uptrend

Market View

Posted on by Raj Gupta

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending into higher highs with
support off their respective 10- and 21-DMA. Distribution stands at six days on the S&P 500 and four on the

Nasdaq, with one day set to expire on both indices next Tuesday. To remain positive, we would like to see near-
term support levels continue to hold and distribution begin to subside.

Leadership is broadening. The majority of leading ideas and industry groups are holding logical levels of sup-
port or hitting higher highs, while previously lagging industry groups have rallied sharply off lows. Technology,

Transportation, and Consumer Cyclical rallied more than 2% each this week, while three other sectors including
Financial rallied more than 1%. Utility and Energy are the only two sectors lagging, both trading right around
their respective 50-DMA. 74 of 197 (37%) O’Neil Industry Groups are trading within 5% of a 52-week high with
160 groups (81%) trading above the 50-DMA. 46 industry groups rallied by more than 3% this week.
The overall backdrop remains positive, despite the elevated distribution day count on the S&P 500. Continue to
add to leading ideas as they rally off moving average support or emerge from secondary entry points. Lock in
partial gains in ideas that have become too far extended from later stage bases and logical levels of support.
Continue to avoid lagging ideas trading below their respective 50- and/or 200-DMA.

China A Shares

Posted on by Sandeeep N

The CSI 300 increased 1.3% for the week on lower volume and remains in a Confirmed Uptrend with three distribution days. Trading on the Nasdaq-style board enhanced activity in the technology sector and improved market sentiment and risk appetite. The market as a whole rebounded this week but volume remained low, indicating wait-and-see sentiment. The CSI 300 is 2.7% above its 100-DMA and 3.2% above its 50-DMA. Next support is at ~3,800 and ~3,700 and resistance is at ~3,900. China and the U.S. will have high-level face-to-face trade talks in Shanghai on July 30 and 31 for the first time since talks broke down in May, but no major breakthroughs are expected. In the near term, market focus shifted to the U.S. Federal Reserve meeting and domestic policy direction (the results of the July politburo). We believe that the index will continue sideways in a narrow range, and we suggest that investors focus on leading stocks that have broken out of patterns or key support levels on heavy volume.

US Focus

Posted on by Sandeeep N

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending into higher highs with support off their respective 10- and 21-DMA. Distribution stands at six days on the S&P 500 and four on the Nasdaq, with one day set to expire on both indices next Tuesday.

Market View

Posted on by Raj Gupta

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold near all-time
highs, consolidating the last two weeks of gains over the last several sessions. Distribution did rise to five days on
the S&P 500 (three in the last four sessions) and four on the Nasdaq, though one day is set to expire on the

Nasdaq at the end of next week. There will also be further expiration on both indices the week after next. Near-
term support remains the rising 21-DMA (S&P 500: 2,968; Nasdaq: 8,104).

Ten of 11 O’Neil sectors remain clearly above the 50-DMA, while Energy is trading right around that level after
falling ~3% this week. Breadth remains strong with ~80% of S&P 500 stocks above the 50-DMA and ~45%
trading within 5% of a 52-week high. Leading ideas continue to act well, with the majority holding trend despite
this week’s pullback.

China A Shares

Posted on by Sandeeep N

The CSI 300 fell 0.02% for the week on slightly increased but still-below-average volume. The market remains in a Confirmed Uptrend with two distribution days. Recently released macro data was not as expected, and there is still the possibility of U.S.-China trade war tensions, leading to a strong wait-and-see market sentiment and continuous volatility. Interest rate cuts by several countries’ central banks boosted global capital markets. The CSI 300 is still weak, oscillating around ~3,800. We are looking for the index to hold support above the 100-DMA, near 3,796. Failure to hold this level would raise concern. The next support is the 50-DMA or the gap below (~3,715). Given that the market is waiting for the opening of Nasdaq-style tech board next Monday, we expect it to continue sideways. We advise investors to stay patient and focus on leading stocks that are trading constructively with a high probability of excellent Q2 earnings results.

US Focus

Posted on by Sandeeep N

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold near all-time highs, consolidating the last two weeks of gains over the last several sessions. Distribution did rise to five days on the S&P 500 (three in the last four sessions) and four on the Nasdaq, though one day is set to expire on the Nasdaq at the end of next week. There will also be further expiration on both indices the week after next. Near-term support remains the rising 21- DMA (S&P 500: 2,968; Nasdaq: 8,104).

European Focus

Posted on by Sandeeep N

On Thursday, the Stoxx 600 closed 0.01% below last Friday’s close and was downgraded to an Uptrend Under Pressure after it undercut its 21-DMA despite not adding a distribution day. During the week, we also downgraded Denmark, Finland, and Sweden to an Uptrend Under Pressure. Of the 17 indices we cover, 11 are in a Confirmed Uptrend, five are in an Uptrend Under Pressure, and one is in a Rally Attempt.

Market View

Posted on by Raj Gupta

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending constructively higher
with just two and three distribution days, respectively. Near-term support remains the 10- and 21-DMA on both
indices.

Multiple sectors and industry groups are participating in this rally. All 11 O’Neil sectors remain above their re-
spective 50-DMA, led this week by Retail, Energy, Transportation, and Technology which all rose at least 1%

each. 84% of S&P 500 stocks are trading above the 50-DMA and 45% are trading within 5% of a new 52-week
high.
Current upward progress has been better than historical successful follow-through days. After five weeks since
the June 7 follow-through day, the S&P 500 has rallied 4.9% and the Nasdaq 6.5%. In the 18 instances since
1970 where the first follow-through day after a downtrend led to new highs, the median one-month gain was
3.1% and the median two-month gain was 5%.

US Focus

Posted on by Sandeeep N

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending constructively higher with just two and three distribution days, respectively. Near-term support remains the 10- and 21-DMA on both indices.

Market View

Posted on by Raj Gupta

Strategy

S&P 500 Earnings

Median S&P 500 sales and EPS are both forecast to grow 4% y/y, which would tie Q1 2019 for the slowest sales growth since Q4 2016 and would be the slowest earnings growth since Q1 2016.

However, we expect a normal beat of 3–4%. The bigger key will be to see if the trend in downward revisions after earnings comes to an end. Forward earnings have been consistently revised lower since September 2018.

Into the beginning of the season, the VIX is low, at 13, and investment advisors are slanted bullish, at 53%, although not an extreme level (60%+).

Given a falling 10-year bond yield (historically inverse relationship with market P/E ratio), the market multiple should expand. Unless forward earnings are much worse than expected, this could fuel a push further into all-time highs.