We have tended to look at relative sector relationships on a trailing 12-mo basis as the max out/underperformance is typically between +40% to -40% for most sectors versus the S&P 500. But we know the move in artificial intelligence stocks began to pick up relative strength at the beginning of 2023 and has coincided with indices becoming more and more concentrated. Here are all 11 O’Neil sectors over that period as well as the S&P 500. Technology has more than doubled, while the average of the other 10 sectors is +15%.
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.
O’Neil Energy/Material Weekly
Shin-Etsu Chemical (UC@N.JP) – $80B market cap – Technicals: The stock bounced off its 50-DMA and is forming the right side
of a stage-three 15-week cup base, with new highs 7% away @JPy 6,926. Acc/Dist Rating of B has improved over the past two
weeks, with Up/Down Volume ratio of 1.1 indicating improving investor interest. RS line has been flat, with a strong RS Rating of 80.. It
has an average fundamental profile. EPS Rank of 53 was impacted by a decline in earnings in the last few quarters. SMR Rating of B.
Global Sector Strategy
In the U.S. market, the first half ended with very strong gains for the S&P 500 and Nasdaq Composite indices. They of the presidential cycle. The Dow Industrials also outpaced its historical average, but was up more modestly.
Global Sector Strategy
The extreme discrepancy between the top decile of market cap of stocks in the U.S., and everything eased a bit toward the end of last week. Even with the pullback from highs, the largest stocks make up almost all of the 15% year-to-date gain for the S&P 500.
O’Neil Energy/Material Weekly
Packaging Corporation of America (PKG) – $16.7B market cap – Technicals: The stock breaking out of a stage-one cup-withhandle base. Support at its 21-DMA ($182.9; -2%) followed by its 50-DMA ($180.6; -3%). Fundamental profile: Moderate EPS Rank 51
due to an EPS decline in FY23. Composite Rating of 80 and SMR Rating of B. Recent EPS estimates for 2024 and 2025 have been
revised upward.
O’Neil Energy/Material Weekly
Bayer Cropscience (BAY.IN) – Technicals: The stock is approaching the pivot of a stage-one consolidation base. Accumulate
positions on a break above INR 6,201 (+1%). Mixed fundamental profile: EPS Rank 46, Composite Rating of 57, and SMR Rating of C.
Global Sector Strategy
After a couple of months of underperformance following huge relative upside, the U.S. Technology sector has now sharply outperformed for the past six weeks. This
includes picking up between 2-7% of alpha versus the other 10 sectors just last week. Going back to the start of its relative gains from the beginning of 2023, Technology is up 85%. No other sector has kept pace with either the S&P 500 or Nasdaq Composite. The second-best Retail is up only 34%. The average of the other 10 sectors over that period is +14%.
O’Neil Energy/Material Weekly
Ameresco (AMRC) – $1.2B market cap – Technicals: The stock recently retook its 200-DMA on above average volume for the first time since July 2023. Long positions can be taken on a break above its $37.3 resistance level. Fundamental profile: Moderate EPS Rank 69 and Composite Rating of 81. EPS is expected to improve in 2024 and 2025 after a decline in 2023.
Global Sector Strategy
As we know, the U.S. market has continued to get more concentrated. There are several ways of displaying this. One is just comparing the equal-weight S&P 500 and
equal-weight Nasdaq 100 to their market-cap-weighted counterparts. Over one year, the RSP ETF lags the overall S&P 500 by around 8%, while the QQQE ETF is trailing the overall Nasdaq 100 by over 11%.
O’Neil Energy/Material Weekly
Fluence Energy (FLNC) – $3B market cap; $50M ADV – Technicals: The stock has regained its 200-DMA on high volume and is trading above this level for the first time since early January. Modest fundamental profile: EPS Rank 54, Composite Rating of 81
