The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq closed slightly lower this week, but both continue to hold trend above all major moving averages. The 21- DMA has risen above the 50-DMA on both indices, now acting as our primary level of support. Resistance is all-time highs on the S&P 500 at 2,964, while resistance on the Nasdaq is the June 20 intraday high of 8,088. Distribution remains low at one day on the S&P 500 and two on the Nasdaq.
Tag: Confirmed Uptrend
Market View
Strategy View
The Global Index (VT) is back above the 50-DMA for the first time in six weeks.
Market conditions are skewed positive. The 50-50 market direction indicator turned positive two weeks ago and
now more than 75% of global markets are in a Confirmed Uptrend. Generally higher conviction at 70%+.
• While the U.S. and mostly other small markets ( Australia/N.Z., Greece, Poland, Russia ) were the leaders
through last week, we had several major upgrades this week. On the DM side, there were follow-through
days in the U.K., Japan, and Hong Kong, among several others; and on the EM side, there were follow-
through days in Brazil and Taiwan.
The U.S. market had a typical pullback after a larger-than-normal leg higher through April. The first follow-
through day is working (historical success rate of ~55% on the first try after pullback from highs).
• Number of U.S. Focus List stocks back well above long-term average of 50, at 64 currently.
Number of weekly breakouts in the U.S., developed, and emerging all back to normal or above normal levels.
Global themes with most breadth in leadership:
• U.S.: payments/financial services, software, med-tech, aerospace/defense
• Developed ex-U.S.: chemicals, financial services, software, aerospace/defense, food/beverages, med-
tech
• Emerging ex-China: banks, consumer loans, real estate development, telecom, apparel/consumer, min-
ing
• China: banks, food/food service/alcohol, medical service, construction equipment
• Frontier: banks, telecom, cement, retail
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 made a new all-time high this week, while the Nasdaq regained its 50-DMA and is now trading less than 2% off all-time highs. The 21-DMA on both indices is set to cross above the 50-DMA and will take over as our primary level of near-term support next week. The distribution day count remains at zero.
European Focus
On Thursday, the Stoxx 600 closed 2% above last Friday’s close and is in a Confirmed Uptrend. During the week, we moved the Stoxx 600, the U.K., Italy, Portugal, Spain, and Belgium to a Confirmed Uptrend from a Rally Attempt. Of the 17 indices we cover, 11 are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and two are in a Rally Attempt.
Market View
Strategy View
We are more positive given that a majority of global markets are back in an Uptrend, but would like to see the proportion rise to 70%+ for more confidence.
Global indices (Total World-VT, Nasdaq-0NDQC, iShares Developed-EFA, iShares Emerging-EEM, CSI 300-0CHSS300) have all bounced, but are still just in the middle of two-month ranges, at best, and volume to the upside on the recent bounce has been generally lackluster.
For the time being, focus on stocks that are part of broader working themes (we used groups with outsized proportion of stocks within 5–10% of highs to determine working themes), including:
Global utilities, segments of software in developed markets (U.S., France, Australia), payments/financial services globally, U.S. aerospace and defense, U.S./Europe med-tech, APAC real estate development, emerging market banks, emerging market telecoms, and China financials, food/food services, and medical services. Areas of consistent weakness include global autos/parts and steel, and developed market banks.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to
consolidate gains, trading relatively flat over the last several sessions. We have yet to see meaningful
price progression since last week’s follow-through day that would give us more conviction in the
current rally. Further, we would like to see the Nasdaq regain its 50-DMA which continues to act
as resistance.
Market View
Strategy View
Normal down wave of just over 7% for the S&P 500. The quick retake of the 200-DMA is similar to the setup in
December 2012.
Friday’s follow-through day gives us some confidence, given the continuing corporate profit cycle and reasonable stock valuations, but we remain wary of tariff impacts and signs of lower forward growth expectations coming from the 10-year to three-month yield curve inversion.
The first follow-through day working (new highs) has happened in 18 of 32 past corrections of
9% or more on the S&P 500. Because we were down just 7%, the precedent is not exact in the
current case, but the concept remains similar.
If we retrace and close down 9% or more from highs, this leaves two more scenarios:
First follow-through day fails, but second works (new highs). This has happened in 8 of 32 corrections.
Multiple follow-through days fail and market forms lower highs and lower lows, resulting in a
bear (6 of 32 corrections).
US Focus
The U.S. market has been upgraded to a Confirmed Uptrend. The Nasdaq staged a day four follow-through, rising 1.66% on volume greater than that of Thursday. The S&P 500 rose 1.1% and back above its 50-DMA, though on lower day over day volume. The next level of resistance is ~2,892 on the S&P 500 and the 50-DMA on the Nasdaq (7,856)
Market View
Strategy View
As U.S. indices continue to trade near all-time highs, we will take a look at some of the similarities and differences of stocks
that are near highs versus those further off highs.
We looked at 13 metrics within our data library and found medians of those metrics and looked at ranges of % off 52-week highs for each. In each column, green is the highest value while red is the lowest (except for EPS Stability Factor, where low-er is more favorable). The results are quite clear in that stocks nearer to highs are larger and have better EPS Ranks, EPS growth in the current quarter and estimates for 2019, better EPS stability, higher P/T margins and ROE, higher P/E ratios, and lower dividend payout ratios. Sales growth does not seem to be as big of a differentiating factor, nor does 2020 EPS growth estimates.
China A Shares
China’s market remains in a Confirmed Uptrend with three distribution days. The CSI 300 took
a pause for the short trading week and will reopen Monday. In the coming weeks, we are paying
close attention to the clustering of distribution days and whether the index continues to hold
above its 50-DMA (~3,800). Failure to do so would warrant a downgrade to an Uptrend Under
Pressure.
