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 Commentary
Key points from this report:
- U.S. Technology is attempting to retake May highs, the midpoint of recent consolidation. Boosted by a drop in 10-year yield to end the week.
- Still, overall sector RS line is weak, and no decisive volume to the upside as of yet. Also, mega-cap weakness (outside of a few like GOOGL, FB, INTU) putting a lid on sector upside.
- Plenty of areas still very challenged; for example, half of software stocks are at least 25% off highs.
- Improving underlying action. Semis and hardware have the best breadth and software is starting to see some names rise on the right sides of bases. Also, there are a handful of recent IPOs with very strong demand.
O’Neil Energy/Material Weekly
Benchmark WTI Crude oil prices broke out of a nearly three-month long consolidation this week, pushing to fresh 52-
week highs and their highest level since November 2018.
O’Neil Energy/Material Weekly
A global group to watch is airlines. The global sector is beginning to emerge on the right side of a consolidation which has
lasted for abouttwo months. The setup is similar to the prior two periods of consolidation ( Sep-Oct ’20 and Dec. ’20- Feb-
’21 ) when after breaking through a downtrend line within each base, the sector had a significant move higher.
Global Sector Commentary
Key points from this report:
- Follow up to our April 1 commentary on sector relationships in the U.S. and our global Health Care note from early May.
- Extreme underperformance of the U.S. Health Care and Staple sectors has eased some in the past four to six weeks, although both still lag heavily over one year.
- Our rotation graph also backs the improvement.
- Global sectors are also improving relatively and well positioned on an absolute basis.
- Breakout totals for each are also healthy, and in the case of Staple, spiking to more than twice the long-term average over the past couple of weeks.
- Growth names to buy in each sector. Friday additions of PetIQ, Hygea Healthcare, and Fevertree Drinks. Other weekly additions included Dechra Pharmaceuticals and Bellring Brands.
- See the full note for additional ideas.
O’Neil Energy/Material Weekly
Global Sector Commentary
Key points from this report:
- Of about 2,700 total stocks with greater than $1B market cap, there are 524 that are at least 40% off 52-week highs (20% of total). By sector (stock median %s):
- Health Care: Biotech makes up more than 80% of the total. -26% over 13 weeks, +4% on Friday (May 14).
- Technology: Software and Internet Content make up 80% of the total. -34% over 13 weeks, +4% on Friday.
- Consumer Cyclical: Auto Manufacturers/Original Equip, Cannabis, Education, Movies & TV, and Leisure Services make up 70% of the total: -41% over 13 weeks, +4% on Friday.
- Energy: Alt Energy and Solar make up more than 80% of the total. -43% over 13 weeks, +5% on Friday.
- Retail: Internet Retail makes up 67% of the total. -36% over 13 weeks, +5% on Friday.
O’Neil Energy/Material Weekly
Global Sector Commentary
Key points from this report:
- Despite what has been a tough week in some market segments, overall global markets are on strong footing.
- The VT Global Index made fresh all-time highs this week, its eighth all-time high weekly close this year.
- We have all but five of 47 global markets classified in an Uptrend.
- Breakout totals are also still solid, having been above average in all weeks but two since the large spike in early November.
- Financials and Materials are two sectors outpacing their normal levels, accounting for about 40% of the total breakouts recently.
