The major indices accumulated two more days of institutional selling, as the S&P 500 and
Nasdaq declined by 1.5% and 3.1%, respectively. The Health Care sector, primarily drugrelated
industries, led the market lower, which put pressure on many of the sector’s leaders
from the prior uptrend. Indices and many stocks on the U.S. Focus List are trading at or near
their moving averages and testing prior support levels.
• The current market status is Under Pressure, with five distribution days on the S&P 500 and
four on the Nasdaq. Indices are back to about 10% off highs, after giving back gains from the
prior two weeks.
Tag: distribution days
US Focus Long
• The market gave back most of this week’s gains, after the Fed left interest rates unchanged,
and concerns over low domestic inflation and a global economic slowdown prevailed.
The uncertainty has presented another challenge for the young rally: the S&P 500 has
accumulated two distribution days, and the Nasdaq is facing upside resistance at its moving
averages. The conviction the market is looking for mostly likely won’t be revealed until
earning season or the next fed meeting, both of which are at least a month away.
• The majority of stocks across the U.S. Focus List have maintained a healthy condition,
confirmed by high Relative Strength Ratings and Accumulation/ Distribution Ratings of B or
higher. The market status remains in an Uptrend.
US Focus Long
U.S. indices rallied over 2% on Tuesday, on volume greater than the previous day, signaling
a Day 9 follow-through day. There are multiple things we are looking for subsequent to
this new rally confirmation. The most important thing is newly actionable ideas from
fundamentally sound companies. Currently, the majority of big price moves have been
coming from beaten down sectors that still need quite a bit of work before becoming
actionable again. Most critical is to see ideas that participated during the last cycle firm up
and retake resistance levels, while new ideas also begin to emerge.
• Thus far, the majority of ideas are still chopping around below their respective 10-week
moving averages. If the major indices are able to hold their August 26, Day 1 lows, allowing
leadership to consolidate and break higher, we will become more confident in this new
rally. If, however, multiple distribution days begin to pile up, it is highly likely that this
follow-through day will fail. New ideas added to the U.S. Focus List will act as a sign of our
confidence that this new rally will gain steam. The market’s status has been changed back to a
Confirmed Uptrend.
US Focus Long
U.S. indices pulled back about 2% this week, dropping four days in a row due to a handful
of poor earnings results. The S&P 500 also printed three straight distribution days, as the
index ran into heavy resistance near new high ground. Despite the pullback in the general
market, leadership, especially from our U.S. Focus List, remained strong. Growth ideas have
continued to outperform, with many breaking into new highs. We continue to recommend
buying growth at proper pivots and avoiding lagging ideas. The market remains in a
Confirmed Uptrend.
