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:
- Driven by rising interest rates and improving confidence in a broad economic re-opening, the Financial and Travel/Leisure spaces are showing strong relative performance.
- Some groups, like U.S. Regional Banks (KRE), have been outperforming for a few months, while others like Airlines (JETS) picked up over the past couple of weeks.
- Here are some ETFs that give exposure to these spaces.
O’Neil Energy/Material Weekly
Franco-Nevada (FNV.CA )-$21B market cap streaming/royalty company was removed from our Developed Markets
Focus List after shares breached the CAD 150 level. Shares were already in a multi-month downtrend and showing
very poor RS and A/D Ratings and this wek were pushed lower as gold failed to hold the $1,800/oz level. We
continue to like to Company’s strong business model (high margin low operational risk), but see no immediate
catalyst to drive the space higher. See annotated chart here.
Polyus ( PYG.RU )-$26B market cap Rissia-based gold miner was removed from our Emerging Markets Focus List
after the stock fell below RUB 14,000 support. It was already below its 200-DMA and is now over 25% off highs and
with a sharply weakening RS line. While still a favored gold miner given extremely low cost of operations, sluggish
gold prices may continue to weigh on the industry for some time. See annotated chart here.
Fine Organics Industries ( FDE.IN )-$1B market cap provider of specialty chemicals was removed from our
Emerging Markets Focus List a week after reporting disappointing Q3 FY21 earnings. The stock remains just above
support at the 200-DMA (INR 2,366), however, it is already lagging heavily and has shown declining money flows
over the past six weeks. We would consider revisiting should the stock retake the midpoint peak from January of
around INR 2,650. See annotated chart here.
Global Sector Commentary
Key points from this report:
- Breakout stats remain solid. Looking across global sectors, the trend remains strong, and every group is participating.
- Looking at the breakout trend over time for each group, the sectors with more variance over time are Materials, Industrials, Energy/Utility, and Financials. Those with more stable totals over time are Consumer Cyclical, Health Care, Retail, and Technology.
- It makes sense that when we compare the averages of the past six-plus years to the recent totals, given broadly rising markets, the difference does favor many in the first group.
- See the full report for a few dozen recent global breakouts from Financial, Material, Cyclical, and Industrial.
O’Neil Energy/Material Weekly
Global Sector Commentary
Attached is the latest Global Sector Commentary from Director, Research Analyst Kenley Scott.
Key points from this report:
- The one-week selloff and strong recovery leaves areas still extended.
- Small-cap U.S. stocks are among the leadership groups that are the most stretched. The IWO is once again the most extended from its 40-WMA that it has ever been.
- We recommend buying ideas just coming out of bases and trimming those very extended from prior consolidations.
O’Neil Energy/Material Weekly
Global Sector Commentary
Key points from this report:
- The first week since end of October with majority of global markets Under Pressure.
- Key markets shifted include the U.S., the U.K., France, Germany, Hong Kong, India, Brazil, Taiwan.
- Of all global markets, just seven held onto their 21-DMA (no large markets).
- The next couple of weeks will be key in watching recent breakouts and how they react to pivot levels and whether failed breakout totals spike.
- A moderate spike in failed breakouts is indicative of a bottoming process for a normal correction.
- A very large spike (January 2018, February 2020) is a more bearish signal.
- Currently, there are still a significant number of Focus List names holding near or above pivots, but some have also faltered. See the full report for a breakdown.
O’Neil Energy/Material Weekly
Global Sector Commentary
Key points from this report:
- At the U.S. sector level, Retail ( XRT, small/mid-cap ) is clearly the most extended, at 50% above its 200-DMA.
- For U.S. sub-sectors, the huge leaders are solar ( TAN ) and innovators ( mix of clean energy, software, biotech, etc. – ARKK ), and recent new issues ( IPO ).
- While their extended nature is not a reason to be bearish on those areas, it is tougher to find good entries for leading stocks.
- Better immediate setups ( less extended but also good relative performers ) are Technology and Discretionary at the sector level and Software, Infrastructure, and Leisure Products/Services at the sub-sector level.
- See the full report for 40+ names from these groups with good setups, including 27 Focus List ideas.
