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Not too bullish, not too bearish
Despite several indexes recently touching new 52+ week highs, broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) remain near logical resistance, and indicators continue to send mixed signals. As a result we are hesitant to get too bullish or bearish. Instead we want to focus on Sector/Group/industry themes where we bottoming price and RS, or attractive pullback opportunities within established price and RS uptrends. Below we highlight some of these themes along with indicators that support our overall constructive -- yet tempered -- outlook.
Short Shots is a collection of technically vulnerable charts culled from the Negative Inflecting and Toppy columns within our Weekly Compass report or from various technical screening processes. The charts contained in this report have developed concerning technical patterns that suggest further price deterioration is likely. For these reasons Short Shots can also be a great source of ideas for investors interested in short-selling candidates.
• Homebuilders continue to be leadership. (ex. MTH, PHM, and MHO)
• A number of Transportation Sector names are staging price and RS reversals, or remain leadership. (ex. XPO, JBLU, UAL, SKYW, AAL, DAL, UNP, JBHT, KNX, ODFL, LSTR, and SAIA)
• Many Materials Sector names appear to be staging price and RS reversals. (ex. DOW, VVV, LYB, MLM, VMC, USCR, EMN, and CMC. )
The S&P 500 continues its march higher, however the troops have been unable to keep up with the generals and with this is an ounce of concern. Sending the generals into battle often ends up with no more leaders. Our view of the markets is to deploy a barbell approach of growth and safety. While growth continues to outperform, it does so without the small-caps. Meanwhile utilities and staples continue to march just behind the growth areas of the market, and have been unable to reach new RS highs since the December decline. In this report we detail our investment thesis and outlook for U.S. equi...
• A number of Banks and Thrifts are developing price and/or RS reversals. (ex. BHLB, OFG, STL, CHFC, CPF, GWB, PPBI, HOPE, MTB,CBSH)
• Money management/Capital markets and Insurance names remain leadership in the Financial Sector. (ex. AMP, NAVI, PMT, JEF, JRVR, and MCY.
As market participants attempt to digest the Trump/Xi G20 meeting and resulting trade cease-fire, the S&P 500 remains below logical resistance at 2,964. While a breakout would not be surprising, we believe additional consolidation is the more likely scenario.
• Cyclicals unable to hit new price highs. Helping lead us to believe the market may not be ready to break out is the fact that several key cyclical areas of the market are either making lower highs or remain below resistance. Until we see some breakouts or improvements within cyclical areas we believe additional consolidation is likely....
• A number of Energy related names are reversing price and RS downtrends. (ex. DRQ, OII, AROC, and CKH)
• A few banks and asset managers are inflecting positively or within uptrends. (ex. C, BRKL, VLY, FCF, LM, and INTL)
• The healthcare Sector has a number of names inflecting bullishly (ex. CUTR, CMD, IART, CCRN, CRVL, MGLN, PGNX, ANIK, ILMN, IQV, and ANIP)
• Homebuilding stocks remain constructive with many bouncing off of support and RS remains constructive. (ex. KBH, MHO, MDC, MTH, NVR)
• Automotive Dealerships continue to develop positively and remains leadership in the Consumer Discretionary Sector. (GPI, KMX, AN)
• A number of Semiconductors and Suppliers remain leadership (ex. ICHR, NANO, RTEC, AEIS, PDFS, FSLR, XLNX, and OLED)
USD weakness a tailwind for int'l markets
With markets showing signs of weakening at logical resistance as outlined in last week's Int'l Compass - we recommend being selective in new purchases. At the same time we are seeing a number of indicators that are giving signals conducive to higher equity prices, meaning global equities may be gearing up for an eventual breakout topside resistance. Below we highlight some attractive and actionable themes along with indicators that support our overall constructive outlook.
• USD (DXY) breaking down; Euro, CAD breaking out. Throughout all of 2019 we h...
For investors looking for bottom-fishing candidates; stocks that are breaking downtrends, exhibiting ascending reaction lows, and showing stabilizing relative strength.
U.S. dollar breaking down; Gold breaking out
The S&P 500 is consolidating under 2,954 - logical resistance - as market participants are in wait-and-see mode for incremental trade news ahead of the Trump/Xi G20 meeting later this week. While a breakout is certainly possible, we believe additional consolidation is the more likely scenario. Below we highlight a mix of positive and negative developments which lead us to this conclusion along with updates on other big picture trends.
• U.S. dollar (DXY) breaking down, Treasury yields remain suppressed. Dovish Fed comments opened the door for rate...
• The U.S. dollar is breaking its 16-month uptrend and is declining through its 200-day moving average and Gold is breaking to 6-year price highs. RS appears to be staging a reversal at a support level. (ex. GC00, GDX)
• A number of Healthcare Sector names are breaking out or staging reversals. (ex. ITGR, CHE, XRAY, OMCL, MOH, WCG, ARWR, INCY, GILD, VRTX, IQV, MEDP, and CTLT)
The return of the gold trade -- Buy the miners
• Gold prices. Gold is breaking above major resistance in the $1,360-$1,370 range following a 6-year basing pattern. Additionally, volume is confirming the breakout. We believe this breakout marks the return of the gold trade; gold's basing pattern implies a minimum price target of $1,650 -- roughly 20% upside from current levels.
• U.S. dollar. Over the past month we have highlighted what we believe to be a rising wedge pattern on the U.S. dollar index (DXY), a pattern we believe will result in a breakdown below support at the 200-day moving av...
• Gold is staging a massive breakout above the $1360 level. Major H&S bottoms can be seen across the group (ex, NEM, RGLD)
• Energy related names are attempting to carve out reversals. We prefer the names that held up well during the Crude oil decline. (ex. HLX, PUMP, FTI, CKH, PSX)
• A number of Biotech names are breaking out of bases and reflect RS leadership. (ex. OMCL, RGEN, INCY, and ANIP)
Global equities nearing potential resistance
Helped by support from global central banks and improving trade headlines, critical support levels have held for major global indexes and therefore our outlook remains constructive. At the same time, just because these indexes are not breaking down does not mean they are headed higher. Rather, we believe global equities remain in a state of purgatory and consolidation is likely to continue as several major indexes approach logical resistance... see charts below and page 2. With global equity markets generally moving sideways, we want to stick with ...
Gold at a critical juncture
We remain neutral on U.S. equities as the S&P 500 continues its sideways consolidation pattern between support at 2,720-2,730 and resistance at the all-time highs of 2,954. On the bright side, most technical indicators that were deteriorating throughout the month of May are now stabilizing - however they are not actually improving. Below we go into further detail, and also highlight the potential return of the gold trade.
• Gold at a critical juncture. Gold prices have been generally consolidating for six years, and have been consistently unable to break above the...
In this product we rank the most positive and negative domestic stocks, filter the symbols by market-cap and trading volume, and then divide the companies into sectors and groups. We then manually look through charts leadership/changes, bottoms-up/top-down ideas, short-term patterns that may have long-term significance, etc. We believe you will find this product valuable as significant price and relative moves begin in the daily charts.
Market purgatory continues
Despite the generally positive developments highlighted below, our outlook remains neutral and we see the S&P 500 remaining rangebound between support at 2,720-2,730 and resistance at the all-time highs of 2,954. We continue to believe an eventual breakout or breakdown is likely to be the deciding factor as to where the market is headed next.
• U.S. dollar. The U.S. dollar has weakened and is testing critical support. We continue to believe further weakening has the potential to save global risk assets by providing a tailwind for EM/foreign equities and the commodi...
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