On the stock markets, a sector rotation has been affirmed where the energy sector has been driving for about two months. Both in Europe and in the United States this sector is confirmed as the strongest in terms of the Decision Support System score calculated, as usual by the Inch platform, on trends and momentum phases, based on the daily time series.

As for Europe, 19 sectors were analyzed, which are the components of the Stoxx600 index, which includes countries such as England and Switzerland, which are considered geographically European.

The Oil & Gas sector records the highest score on the basis of the daily time series and meets all the conditions required by the ARC method which requires to evaluate each object from an absolute, relative and comparative point of view.

 

Stoxx 600 Oil & GAS – daily closing 332.90 – April 23th, 2018

The picture shows the OIL & GAS Stoxx600 sector bullish trend outcome from the daily bar chart.

InchCapital Platform – Stoxx600 OIL & GAS – Daily bar chart with golden cross – Data Source: Fida

 

From an absolute point of view, it is objectively in a bullish trend; from the relative point of view, it is objectively stronger than the reference main index Stoxx 600 and from a comparative point of view, it is the strongest in European sectoral basketball – read more InchCapital Platform – Stoxx 600 OIL & GAS

These considerations are not confirmed by the analysis of the weekly time series. Now this sector is only in sixth place (again on the 19 examined) and as can easily be seen from the long-term chart, it has not participated in any of the extraordinary bullish phases recorded by the stock markets over the past nine years.

The same considerations apply to the examination of the sectoral indices U.S.A. In this case, we have limited ourselves to examining the ten main S & P sector indices and for these the energy sector prevails if daily time series are used while the results change radically if we analyze the weekly time series.

 

S&P Energy Sector daily closing 260.05 – April 23th, 2018

The picture shows the daily bar chart of US Energy Sector

InchCapital Platform – S&P Energy Sector – Daily chart with golden cross – Data Source: Datalink.

 

Using the latter both in the U.S.A. that in Europe the sectors that have driven the rise recorded by the stock markets in the last nine years are above all: Information Technology, Industrial, Automobile and Financial.

Now, interest in the OIL & GAS sector rather than in the energy sector in the broad sense can be interpreted as a tactical and not strategic sector rotation, and this is useful in order not to reduce the liquidity flows that continue to be present in the equity circuit.

The Healthcare (ordinary non-biotechnology) and Food & Beverage sectors do not yet record structural purchases. Investors therefore do not yet have a defensive approach to risk; they are interested in making sector rotations waiting for it to resume the interest in the real driving sectors.

Operatively, these considerations are confirmed by the ARC analysis of 725 ETFs of all the main categories. In addition, in this case among the first five for DSS trend / momentum score, excluding all lever versions, there are three and more precisely in order of score:

 

  1. SPDR MS EU ENERGY (IE00BKWQ0F09 [EUR])
  2. Db X-Trackers Stx 600 Oil&Gas Ucits Etf (LU0292101796 [EUR])
  3. Lyxor Ucits Etf Stx Eu 600 Oil & Gas (FR0010344960 [EUR])

 

On the other hand, if we analyze the European shares of the energy sector, we find ENI (read more: ENI S.p.A.) in fifth place while the top placed are:

 

  1. PETROFAC – read more: InchCapital Platform – Petrofac
  2. TULLOW OIL – read more: InchCapital Platform – Tullow Oil
  3. LUNDIN PETROLEUM – read more: InchCapital Platform – Lundin Petroleum