Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Global Sector Strategy
Key Points:
- Concentration of outperformance in mega-caps, and lack of enough breadth to push broad indices higher remains true through April.
- On a YTD basis, a huge chunk of the performance is coming from just a handful of stocks.
- Within the leading QQQ index, which is up 21% YTD, the top-10 mkt cap stocks make up around 85% of the performance (vs 62% of the mkt cap).
- These 10 are AAPL, MSFT, GOOG/GOOGL, AMZN, NVDA, META, TESLA, PEP, AVGO, ASML, which are up an average of 36% for the year.
- The other 90 stocks are up 8% on average.
- Within the S&P 500, the top-50 mkt. cap stocks make up around 88% of the performance (vs. 55% of the mkt. cap).
- Within the leading QQQ index, which is up 21% YTD, the top-10 mkt cap stocks make up around 85% of the performance (vs 62% of the mkt cap).
Global Sector Strategy
Key points:
- Bull/Bear scenarios vs. history (DJIA 1950-2023) look more like Bull with exception still the 2000-2002 case.
- May-Oct. market history not great, S&P avgs. a ~1% return in third year or presidency (vs. >6% in Nov-April periods).
- In the positive examples (1991, 1995, 1999, and 2007), it was Technology, Materials, and Transports with the best average performance.
- In the negative or below average years (1971, 1975, 1979, 1983, 1987, 1999, 2911, 2015, 2019), the defensive Utility and Consumer Staple performed best.
O’Neil Energy/Material Weekly
Torm (TRMD; -2.3%) – $2.9B market cap – Technicals: The stock broke out of a stage-two six-week consolidation base on above average volume
and is actionable. RS line is rising with best-possible RS Rating of 99. Up/Down Volume ratio and A/D Rating have seen sharp improvement to 1.5
from 1.3 and to B from C in the last two weeks.
O’Neil Energy/Material Weekly
Permian Resources Cp (PR) – $6.1B market cap – Technicals: The stock has bounced back to near its initial pivot range ($11.2-11.8) after a sharp pullback in early-March. Its 96 RS Rating has remained steadily above 88 for the past eight weeks. Money flows remain fairly weak (A/D Rating of D+), so looking for a strong volume break above ~$11.2.
Global Sector Strategy
Key Points:
- FTD on Nasdaq this week, and continuation of gains thereafter, a strong signal. Testing February peak which would be significant “higher-high”.
- S&P 500 a bit weaker, but also above all moving averages, 3% from Feb. peak. Russell 2000 weak spot, still below 200-DMA and with significant overhead. Breadth unlikely to improve substantially unless it can resolve some of the overhang.
- U.S. dollar weakening again after rallying through Feb. Resistance at 40-WMA and back below 10-WMA.
- This boosts USD ETFs in Europe (IEV) and Japan (EWJ). Both testing February peaks and hanging onto strong YTD RS gains versus the S&P 500.
- In both, sector rotation similar. Sharp fall in Financials but pickup of the slack in Cap Equip, CC, Staple, Retail, Tech, and Health Care.
- Plenty of breakouts incl WSG.NL, LVH.FR, EVOG.SE, STMN.CH, IFXX.DE, NIIW.JP, NPPT.JP.
- See attachment for other strong ideas in EU and Japan…mostly in the above sectors and favoring large-caps.
O’Neil Energy/Material Weekl
Nextracker (NXT) – $2B market cap; $70M – Technicals: The stock is breaking out of an IPO base with a pivot range between $34.8-37. It has a
solid RS Rating of 87 and an RS line at all-time highs. Post-IPO, money flows have been solid, including 1.8-2.0 Up/Down Volume Ratio for the past
four weeks.
O’Neil Energy/Material Weekly
Fedex Corp (FDX -1.2%) – $55B market cap – Technicals: The stock broke out of a stage-one five-week flat base on ~2.5x the average volume and is actionable. RS line is rising, with a strong RS Rating of 91. Up/Down Volume ratio improved sharply to 1.3 from 1.1 and A/D Rating rose to B from B- in the last two weeks. Industry Group Rank has sharply improved to 73 from 149 two weeks ago.
Global Sector Strategy
Key Points:
- Sharp breadth deterioration, % of stocks above 30-WMA on NYSE down to mid-30s% from above 80% in February and above 65% two weeks ago.
- Causes incl. breakdowns in Equal-weight S&P 500 (RSP), Mid-cap growth (MDYG) and value (MDYV), and Small-cap growth (IWO) and value (IWN).
- These five had sharp leads from the mkt. top in Jan’ 22 through two weeks ago.
- But over two weeks, S&P 500 and Nasdaq have picked up between 5-12% versus these five.
- On sector-basis, weak Financials, Energy, Materials, and to lesser degree Cap. Equip. contributing most to change.
- Tech, HC, Staples, Utilities picked up 4-12% versus the above four just this week.
O’Neil Energy/Material Weekly
DHT Holdings (DHT) – $2B market cap – Technicals: The stock is pulling back into its pivot range between $10.6-11.2 after breaking out of a stage three cup base after reporting Q4 earnings in mid-February. It has excellent Ratings including a 97 RS Rating and B+ A/D Rating. Below the pivot range, next support is the 50-DMA near $10.
