Diners Delight: The casual dining space was turned upside over the last one-year period. CMG was a laggard, and just Monday jumped back above its 200 day SMA, after spending a month below it. It is not out of the penalty box yet, as one should like to see several CLOSES above it to see that the move is not a bull trap. EAT trades in bear market mode, off more than 20% from its peak made in mid-March. PZZA and DPZ are looking appetizing again, with the former seeming to put the very round par number in the rearview mirror which was the scene of an upside gap fill from the 2/24 session. WING is in the midst of a symmetrical triangle. Below is the chart of YUMC and it has advanced 21% YTD, compared to YUM higher by 8%. YUMC is on a current 5-week winning streak, and just 1% off its all-time high, while YUM trades 4% off its 52-week highs. YUM is feeling a bit heavy with bearish volume trends, while YUMC is just the opposite. Play accordingly.
Energy Sprint: As we approach the second half of 2021 in a couple of weeks, the clear standout thus far is energy. The XLE has gained almost 50%, 20 percentage points more than the second-closest major S&P sector competitor in the financials. There is still a long way to go this year but my prediction would be energy finishes as the best group, and that is not really going out on a limb. The only question is whether the bulk of the returns have been achieved already. Look for individual opportunities within buying leaders, as the creme always rises to the top. The XOP is where to search, and it may offer some good entries as the ETF was stopped cold precisely at the round 100 number this past Wednesday (a gift would be a move back to retest the double bottom with handle breakout above a 90.30 pivot taken out on 6/1 powering higher by 6.5%). Below we can see just how quickly things changed for the XLE, which was a clear underperformer as recently as last October, and by early February, circled the field to go in front like a well-trained closing thoroughbred. The markets seem to be bifurcated in 3 ways with energy and financials leading, followed by materials and industrials, and then the rest over the last 200 days.
Size Matters: The debate with "value over growth" seems to have lost some of its attention. It seems now that it is large-cap versus small-cap, as the Russell 2000 has flexed its muscles recently (the IWM is showing a bit of weakness this week with a bearish engulfing candle Wednesday and some more follow-through Thursday lower). Within healthcare, the deliberation about large versus small is heating up as well. On the ratio chart below we can see the smaller names via the PSCH (higher by 57% over the last one year period) recorded a nice run over the last one-month period, and it will be interesting to see if that was just a dead cat bounce into the February-May uptrend in favor of the XLV (higher by 22% over last one year period). If the PSCH can clear 191, it most likely runs to the very round 200 number which was resistance in early February. A breakout above that level in the cup base there could see a move toward 229 later this year. The XLV is finding support at its rising 50 day SMA for the first time following a breakout above a cup with handle pivot of 118.07 on 4/13, often an ideal entry point. I think both can work going forward.
Waste Rising To The Top: Within the diverse industrial group, heavy construction has been leading the way as many anticipate some infrastructure. Aerospace and defense names have been acting well in 2021. Airlines have been holding their own as the JETS ETF is now constructing the right side of a cup base, after a breakout above the same pattern that traded between the 21-24 numbers. One area of the industrials that does not get the attention it deserves is the waste and disposal services. It is a small group with the likes of WCN RSG and CLH. An attractive mid-cap play is AQUA that just broke above a cup with handle pivot that aligned with the round 30 number on 5/21 and has proceeded firmly higher from there. CVA exploded above a bullish inverse head and shoulders formation Wednesday. Below is the chart of best of breed name WM, and notice the good-looking bull flag. It is higher 10 of the last 14, and all 4 of the decliners fell less than .7%. This chart is far from wasteful.
Communication Services Winner: The XLC is now the 6th best major S&P sector on a YTD basis, but the group has produced a gain of almost 18% thus far in 2021. The ETF has nearly doubled after registering no CLOSES below the round 40 number last March and is now hovering around the round 80 number. Some standouts in the group include IAC which has basically traded sideways since the start of February. On its WEEKLY chart, it broke above a bull flag pivot of 90 which carried a measured move to 155, and it has exceeded that target and then some. In the coming weeks, if it can break above 180, it would then carry a measured move upward of 100 handles. Of course, the heavyweight in the space is GOOGL, and it is having issues with the round 2400 number. Below is the chart of a newcomer in RBLX that is trying to make its presence felt. It is trading between the very round 90-100 numbers and is sporting good risk/reward here toward the lower end of that range.