Overview
March Employment numbers pointed to a booming economy as it emerges from a period defined by Zoom video calls.
The S&P 500 index made new highs, closing above 4000 for the first time this week.
We look at travel and leisure related ETFs, even as travel is poised to increase as more Americans are vaccinated and the CDC releases encouraging guidelines.
Our sensitive leveraged ETFs based trend detector is bullish again.
We rank the strongest Vanguard ETFs by trend strength and relative performance.
Key Question
Is now a good time to look at opportunities in the travel and leisure space in anticipation of increasing summer travel?
Performance Snapshot
The rebound that started last Thursday continued as expected. As we wrote last week, “Naturally, the question is whether the bounce can last. It might for at least a few days, as portfolio rebalancing at the end of the first quarter brings a bid to stocks.”
Trend Spectrum: Strong Rebound in the Very Short Term
Last week the very-short term picture showed 83% of the iShares US Sector ETFs trending lower. This week 57% are trending higher in the very-short term, illustrating the strong buying pressure. The long-term trend continues to be firmly higher.
The breakout in SOXL (the Direxion Daily Semiconductor Bull 3x) ETF illustrates the strength of the buying, possibly indicating end of the short-term consolidation in the market. The dashed blue line marks the top of the recent consolidation. The market spent the past two weeks digesting the rebound and now is poised to rise to new highs. Our two short-term oscillators (COST1 and COST2) are both at +100, suggesting both the strength and direction of the move is likely to continue. Note that SOXL must overcome resistance at 43 before it can move decisively higher.
Trend Direction from Leveraged ETFs
The leveraged Bullish ETFs seem to have established the upper hand this week, perhaps signaling the end to the weeks long consolidation that commenced at the end of February. The strong jobs report is likely to raise interest rate fears again, and we would like to see the very-short term sector trend spectrum reach 100%. However, the strength in the economy, coupled with soothing words from the Fed, could form the basis for another attempt at a sustained rally. This is a relatively sensitive measure of market direction, so choppy trading will lead to whipsaws.
Strongest Vanguard ETFs
We take two different approaches to examine the Vanguard ETF universe. First, we find the strongest ETFs using our Relative Performance Meter, which has a time frame of up to a year. Then, we find the ETFs that are technically the strongest, ignoring their RPM score. Thus, you can use two different strategies when looking at this chart: consider ETFs that are technically strong or have good long-term performance. Either strategy will produce winners (and losers), so it is just a starting point for your analysis.
Travel and Leisure ETFs/Stocks
As vaccinations continue apace, travel is expected to pick up in the US (see new CDC travel guidance). This should benefit restaurants, hotels, airlines, cruise lines and so on. This is confirmed in the March employment report, where gains were strongest in the leisure and hospitality sector. So, we look at several names in this sector, both in the form of ETFs and stocks. The long-term picture shows these stocks with better returns over the past year than the VOO (Vanguard S&P-500 ETF), as the market anticipated improvements after the vaccination-driven recovery.
Over the short-term, these stocks have had some weakness, and offer potentially lower-risk entry points that even a few weeks ago. Technically, these are all weaker than VOO, and some like PEJ (see below), RCL and CCL have seen some determined selling, though they seemed to have found support in the vicinity of their 50-day simple moving average, a common occurrence during uptrends.
For example, one could trade for a retest of the high near 55, should one want to take a trading perspective for PEJ. The COST1 oscillator is showing a strong downtrend, and the long-term oscillator COLT2 is neutral. This combination (weak short-term, neutral long-term) means this is an opportunity of “buying weakness”, a counter-trend entry into the long-term uptrend.
Wrap-up
If you like to do your own research, my posts should give you a good starting point, with context and suggestions. You can visit my website, chandeindicators.com, for more information and ideas. I hope you will stay tuned, and also help, by subscribing, and recommending it to your friends and colleagues.
Thank you for spending some time with me.
Disclaimer
And now for some housekeeping. This publication is for “edutainment”, education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.