U.S. indices broke all support levels in heavy volume this week. Large cap leadership that was
propping up the market has now pulled back, while lagging sectors undercut their previous
lows. The range-bound market has picked a direction, aided by a severe drop in oil and a
10-15% drop in the Chinese market. With the market now trading ~10% off its highs,
we advise a defensive approach, avoiding any buys until a new Rally Attempt begins and a
follow-through day occurs. We moved the market back into a correction on Monday, after it
undercut December 14 lows.
Tag: Rally Attempt
US Focus Long
U.S indices traded in volatile action throughout the week, ultimately erasing much of their
earlier gains and closing relatively flat. Range-bound action continues, as the majority of
leadership ideas hold up well, while energy and basic materials continue to drag down the
major averages. There remain multiple alpha-generating ideas within the U.S. Focus List that
we recommend holding as long they continue to trade constructively above levels of support.
If the energy sector (WS002), which makes up roughly 7-8% of the S&P 500, is able to at
least trade flat, the action of the market and these leadership ideas will likely improve.
• We recommend a very selective process, as the overall market has still not picked a direction.
The U.S market is now five days off its most recent bottom and back into a Rally Attempt.
We are still looking for a significant break through resistance at 2116 on the S&P 500 backed
by the emergence of fundamentally strong growth ideas.
US Focus Long
U.S. indices dropped sharply early in the week, before rebounding to close slightly negative.
The September 8th follow-through day, which provided no new ideas to the U.S. Focus List,
quickly failed as indices re-tested their August closing lows. The indices are now finding
short-term support at their prior lows, with heavy resistance along their respective 10-Week
moving averages. We are now in the second rally attempt of this current correction, awaiting a
new follow-through day as well as new ideas. We continue to advise caution until we see this
combination occur.
• S&P 500 and Nasdaq indices are 9-11% off 52-week highs, while the small-cap Russell 2000
index is weaker, at 15% off 52-week highs.
US Focus Long
The U.S. market continues to chop around with high volatility. Leadership ideas are forming
new bases, with the majority trading below resistance at their respective 10-week or even
40-week moving averages. This justifies a defensive approach that avoids any new buys at
the moment. The indices remain above last Wednesday’s low, so we are monitoring for new
leadership ideas to emerge, especially ones that did not participate in the prior uptrend. A new
follow-through day, combined with multiple actionable ideas, would give us confidence that
this correction is over. Now we are on Day 8 of a Rally Attempt, with no actionable ideas.
US Focus Long
U.S. indices traded with extreme volatility this week, breaking down to levels not seen since
last year before snapping back later in the week. On Monday, the S&P 500 traded nearly
13% off all-time highs, while the Nasdaq traded 18% off highs. Many leadership ideas broke
down and are now trading below key moving averages even after the dead cat bounce in the
general market. We expect this volatility to continue. We recommend a defensive approach,
lightening up on positions until the market firms and a new follow-through day materializes.
We do not expect a V-shaped recovery, but remain objective to the possibility if the averages
and leading ideas alike show constructive action again. Day 1 of a new rally attempt began on
Wednesday. This rally attempt will remain, until either we undercut Wednesday’s lows, or a
new follow-through day occurs.
