Chartsmarter Insights

Services To The Rescue? As the PRICE of oil rises, is it better to play the service names as opposed to the exploration and production plays? If one favors the former they would most likely make the analogy of the "Wild West" gold rush, when it made more sense to supply picks and axes to euphoric "miners", than in the resource itself. When the price of oil advances, many firms will turn on the spigots in an attempt to extract as much as they can, which would in theory push the value of crude lower as more supply takes hold. This is where services will come into play to facilitate. Or is the economy on the improve and a real demand is just around the corner? The ratio chart below recommends overweighting names in the OIH as opposed to the XOP. But this is on a very general basis. As always there will be leaders within both sub groups, and play each accordingly. WHD could offer some good risk/reward as it trades above the very round 20 number, and is now for the second time at an upside gap fill. Above the 200 day could really start "gushing" higher.

Small Business Prognosticator: No matter how you slice it, small business has taken it on the chin since early 2020. The group remains the "lifeblood" of the economy, as the vast majority of jobs are created within. Of course we are all rooting for each and every one of these operations to come back as best as possible. This week we may get a solid, overall view just how the space is doing. The chart below of CTAS provides a vast range of services for many areas within such as restaurants, and many others with uniform, cleaning services, etc, all over the USA. It REPORTS earnings this Thursday, and sports a nice cup pattern, which on its WEEKLY chart looks like a bull flag or cup with handle (was pushed back at very round 300 figure to begin base in February). It is prone to big moves with a 42 of 60 week winning streak between weeks ending 12/28/18-2/14/20. Could this be the start of another one, with so many very bearish of the economies prospects?

What Will Monday Bring? All the talk about a rotation out of technology and into more "value" oriented areas, will grow in the coming weeks. On a very basic level it was the S&P 500 that rose 1.2% this week, while the Nasdaq fell 1.1%. Technology was the worst performing major S&P sector this week, and one of only two that lost ground this week (industrials and materials each rose more than 5%). My two cents is that if we lose technologies leadership in a meaningful way, I think it will adversely effect the overall market. If the sector can just take a rest, and keep in the middle of the pack akin to a smart jockey that has a lot of horse under him in a thoroughbred race, then it will likely see a surge again into the fall. On the chart below traders can remain confident as long as the 21 day EMA holds firm. Notice it has been below the line intraday several times since reclaiming it in early April, but recorded zero CLOSES below. Interesting will be Mondays action, as this past week started with the Nasdaq up better than 2% early on, yet CLOSING 2% lower. Remember the loss put an end to 10 winning Monday's in a row. The early enthusiasm was brought on with the ADI MXIM takeover news. First time in awhile I can remember good news being interpreted as bad.

Software Supple: Software has been the beacon of light within the best performing technology space. Semiconductors are trying to say something about that, but getting back to software the IGV is off almost 5% this week so far, which would easily be its worst WEEKLY loss in 3 1/2 months. The fund could use some cooling off as it has advanced 12 of the last 16 weeks, jumping 125 handles in the process. Top component ADBE is down 4 sessions in a row, its first since February, and today CLOSED below its rising 21 day EMA for the first time. Other well known names in the arena include INTU, which looks likely to record a bearish evening star pattern tomorrow, after the prior week registered a doji candle at all time highs. VRSN is now 10% off most recent 52 week highs, and lower 4 of the last 6 weeks, and another 5.5% this week. It may be giving up support it has enjoyed at the round 200 number which doubles as 200 day SMA support as well. This groups behavior is certainly something that should be on everyones radar.

Are Most Companies Technology Names To A Degree? Willie Sutton a long time ago was asked why he robbed banks. Because "thats where the money is", he declared. He could have easily been talking about technology stocks the last year and a half, as that is where "money" has flowed, as capital goes directly to where it is treated best. That is the reason why we have been focusing a lot within that sector, and it obviously with its performance has been producing ample opportunities. There has been a lot of recent chatter that rotation out of tech is forthcoming, and it could have already begun as although it is still easily the best behaved major S&P sector YTD, on a one and three month look back period, it is trailing materials and consumer discretionary. The lines of what is a "pure" technology company are becoming blurred, with the quote (thanks Will) "there are only 3 types of companies. Companies that are technology companies, companies becoming technology companies, and companies that are being disrupted by technology companies. And so every company in the world needs to go through this digital transformation to make sure they can produce good and services in a digital way."