A review of the Autonomies
Eoin Treacy's view With approximately a quarter of S&P500 companies reporting earnings this
week, the focus of attention is on the stock market. More particularly some
notable earnings misses have put the uptrend which has been in evidence since
early June under pressure. Investors appear to be weighing up the competing
influences of ever more quantitative easing versus further evidence of economic
slowdown and the result has been a greater degree of variability in stock performance.
(Also see David's piece “ The air is thinner up here ” on October
I last reviewed the Autonomies on August 13th when the underperformance of companies such as McDonalds and Starbucks was been counter balanced by breakouts by healthcare, breweries and industrially oriented shares. I thought now would be an opportune time to revisit the sector.
Apple, Google, Samsung Electronics, IBM, Qualcomm, Cisco Systems, Biogen, SAB Miller, Pernod Ricard, Coca Cola, Pepsi Co, Air Liquide, Praxair, Linde, Siemens, and General Electric have all pulled back and are in the region of their respective 200-day MAs. If their medium-term uptrends are to remain consistent, they will need to find support in this region.
Microsoft, Microchip Technology, Intel, McDonalds, Remy Cointreau, Starbucks, Mead Johnson, Nike, LAM Research, Christian Dior, Royal Dutch Shell, Emerson Electric and Tesco have dropped below their respective 200-day MAs and exhibit a greater degree of uptrend deterioration. Clear upward dynamics will be required to check their declines and sustained moves back above their MAs will be needed to begin to restore investor confidence.
Novo Nordisk, Fresenius SE, Fresenius Medical, Johnson & Johnson, Eli Lilly, Sanofi, Merck and Pfizer have been among some of the most impressive performers over the last few months but are becoming increasingly overextended relative to their 200-day MAs. Eli Lilly in particular is susceptible to mean reversion.
In the drinks sector, Diageo and Anheuser-Busch remain in relatively consistent uptrends while Heineken is susceptible to some additional mean reversion.
Nestle, Unilever, Mondelez International, Heinz, Procter & Gamble, Colgate Palmolive, Kimberly Clark, Reckitt Benckiser, Hengan International, Uni-Charm, Estee Lauder, Intertek Group, Visa, Mastercard and Exxon Mobil remain in close proximity to their respective peaks and breaks in their progressions of higher reaction lows would be required to question medium-term scope for additional upside. Wal-Mart in particular is susceptible to mean reversion.
Bristol Myer Squibb, Yum Brands, Herbalife, NuSkin Enterprises, LVMH, Compagnie Financiere Richemont, BHP Billiton and Rio Tinto all found support in the region of their MAs over the last month and sustained moves below their recent lows would be required to question potential for continued higher to lateral ranging.
There has definitely been some deterioration on aggregate over the last few weeks. If Wall Street's weakness persists, the potential for mean reversion among some of the better performers is an increasingly more potent risk. However, the relative strength of a large portion of the above shares continues to demonstrate that well capitalised companies with exposure to the global economy have a competitive advantage despite the more uncertain macro environment.