Relatively...Confused

From the desk of Tom Bruni @BruniCharting

We've been writing about the lack of trend in the Major Indices and highlighting some relative strength in places like Software and Insurance, but overall signals remain mixed.

This morning I set out to write another post about areas showing relative strength, hoping to find a clean theme that the most actionable stock setups fit within.

What I found can be boiled down to the length of two tweets.

"Going through the S&P 1500 I see a number of actionable names on the long side, but they don't all fit a theme. They're all from different areas of the market. Where there are themes I see a lot of extended names and unattractive entries."

and

"I can see that the path of least resistance is higher in a lot of names, but that doesn't mean that current levels offer an attractive entry."

Great themes, but no great way of executing them.

or

Great names, but no significant theme driving them.

Ideally, we'd have both. But we don't. So let's work with what we've got.

Here's the Railroads Index relative to the S&P 500, mid-way between its Upside price objective and risk management level. This remains one of the strongest trends in the market and there's little evidence of it changing anytime soon.

Click on chart to enlarge view.

The next theme we're looking at is the outperformance of the Solar industry relative to the Energy sector. This chart broke out of a 1.5-year base to its highest levels in over 3 years and as long as it's above its 2018 highs then the trend is intact.

On an absolute basis, there's a nice multi-year base that prices are pressing up against the top of. While they need to clear 27 to confirm a breakout, I think we ultimately get there in the coming  few weeks and months.

Then on the more defensive side of the market we have Consumer Staples putting in a higher low relative to the S&P 500, but on an absolute basis a lot of Large-Cap Consumer Staples components are very extended.

We think that Railroads and Solar continue to work, so we can be buying stocks in those areas where current levels offer an attractive entry.

Additionally, there are a few other "stray" names that we can be buying too.