A review of the Autonomies
Comment of the Day

November 30 2012

Commentary by Eoin Treacy

A review of the Autonomies

Eoin Treacy's view The post election sell-off has given way to a more level-headed appraisal of opportunities as investors weigh the likelihood of a compromise against the fact that a considerable number of assets have retreated to potential areas of support with an increasing number bouncing rather emphatically. Nevertheless, volatility remains a considerably possibility ahead of the 2013.

While US taxes may or may not rise at the end of the year, the rest of the world will continue on as normal. European stock markets in particular have rebounded to test their respective highs which may be viewed as a testament to the perception of value in those markets as the prospect of a Euro break-up recedes and additional liquidity provision by the ECB remains open ended. At this juncture I thought it would be opportune to revisit the Autonomies.

I last reviewed the Autonomies on November 7th and used an equally weighted proxy index I created on Bloomberg in order to monitor the aggregate performance of the basket. This Index can be found in the Chart Library by searching for Autonomies or via its listing in the Global Stock Indices, Funds, ITs & ETFs section. (Please note that because this is the representation of a basket created through the Bloomberg portfolio system, it does not update automatically. I will manually run the macro to load the price history once a week and this will then be reflected in the Chart Library). Earlier this month, the Index had returned to test the region of the upper side of the underlying trading range and the region of the 200-day MA. It has since bounced and a sustained move below the MA would now be required to begin to question medium-term upside potential

A considerable number of the Autonomies have found support in the region of their MAs over the last month. Disney, Google, Qualcomm, Novo Nordisk, Fresenius SE, Johnson & Johnson, Siemens, Eli Lilly, Biogen, Merck, Pfizer, Anheuser-Busch, SAB Miller, Remy Cointreau, Pernod Ricard, Coca Cola, Pepsi, Nestle, Mondelez International (formerly Kraft), Proctor & Gamble, Colgate Palmolive, Kimberly Clark, Estee Lauder, LVMH, Wal-Mart, Air Liquide, Linde, Exxon Mobil, Siemens, General Electric and Emerson Electric all share this characteristic and would need to sustain moves below their recent lows to question medium-term upside potential.

Samsung Electronics, Sanofi, Diageo, Heineken, Unilever, Heinz, Reckitt Benckiser, Prada, Compagnie Financiere Richemont, Christian Dior, Intertek Group, Visa and Mastercard have all posted new highs in the last week and while some such as Diageo are becoming increasingly overextended relative to their MAs, clear downward dynamics would be required to check momentum.

Apple, IBM, Cisco Systems, Bristol Myer Squibb, Starbucks and Nike all dropped below their respective 200-day MAs but have firmed of late and the benefit of the doubt can continue to be give to the upside provided they continue to hold above their November lows. Royal Dutch Shell, Hengan International, Uni-Charm Corp, Praxair, Herbalife and Nu Skin Enterprises have been ranging mostly below their MAs but will need to sustain breakouts from these short-term congestion areas to confirm returns to demand dominance.

Microsoft, Intel, Microchip Technology, Fresenius Medical, McDonalds and Mead Johnson have experienced technical deterioration and will need to break their progressions of lower rally highs to question the downward bias. Yum Brands posted a downside weekly key reversal this week following an unexpected drop in Chinese sales. This suggests a peak of at least near-term and potentially medium-term significance has been reached. LAM Research has rallied to test the 200-day MA, following a consistent downtrend, but will need to sustain a move above it to suggest a return to demand dominance beyond the short-term. HTC Corp has steadied somewhat following a steep decline but a further period of support building is likely required before confidence is restored.

Tesco, BHP Billiton and Rio Tinto exhibit base formation characteristics but will need to sustain breakouts from their congestion areas in order to confirm returns to medium-term demand dominance.

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