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LivestreamMenuThe S & P 500 hasn’t done much of anything this summer despite the continued flurry of headlines from earnings season that’s now underway, the continuing conflict in the middle east, the AI revolution, inflation, you name. Yet the benchmark the S & P is down by just 3% from the peak on June 2. The lack of any real progress in the past two months means that we need to be increasingly vigilant for a breakout from this “coiled spring” pattern that is highlighted by the converging trendlines within the red rectangles. Price is pinned just under the 21-day moving average (7,490) and the 50-day moving average (7,470), with the 200-day way down at 7,012. But the operative pattern is the triangle consolidation (blue / purple lines) labeled as “trendline support”. This is the line in the sand that’s held for the prior four trading days. It’s possible we hold and begin to challenge the upper-end of the consolidation pattern. Just because the index seems to be napping on the beach here, let’s turn to sector rotation to see where the money’s been going in this consolidation. There are two sectors that have shown noticeable strength in here and when the S & P 500 consolidation breaks, it’s not a guarantee that these two continue to lead, but more times than not the market is tipping its hand to the next sector leaders in the never-ending game of sector rotation. Healthcare is up more than 14%, and financials are up more than 10% since June, while technology has been severely lagging. This wasn’t money leaving the market — it was money rotating into either what it views to be the defensive corner of the market amidst the uncertainty or as I said earlier, the new bull market leaders. In the event these are among the new leading sectors we find the leading stocks within these emerging sector leaders. Using Koyfin, here are the parameters I ran: $2B market cap or greater Estimates revenues +1 fiscal year ahead greater than 15% Estimates revenues +2 fiscal years ahead greater than 15% Estimates EPS +1 fiscal year ahead greater than 15% Estimates EPS +2 fiscal years ahead greater than 15% Less than 10% below 52-week high Fifteen names cleared the scan requirements, and the sector mix confirms what the performance chart told us: healthcare and financials dominate the list. There were just four technology names that made it and one consumer discretionary name. Two setups within healthcare and financials stood out to me. Eli Lilly spent seven months trapped under the roughly $1,200 level that capped it back in December, finally cleared it in July, and is now working that breakout off in a tight downwards-sloping flag sitting directly on top of old resistance — a textbook throwback. The stock is trading above all major moving averages and they are stacked in the most bullish fashion, 21 on top of 50, 50 on top of 200, and the LLY / SPY ratio is pushing to new highs — but has not yet broken out. Volume is not yet meaningfully increasing yet, but that may change when new highs are made and we move further from the summer doldrums. Fundamentally you’re paying 34.2x forward earnings for 31% revenue growth this fiscal year and 43% EPS growth — expensive on the headline multiple, reasonable against the kind of growth rate. Earnings out in August could be the catalyst that decides whether this flag revolves higher in the near term. We already hold a 2% allocation to LLY in our growth model after increasing from 1% on June 5. In our dividend model at Inside Edge we hold a 3% allocation. Upon confirmation of a break I will be looking to up that exposure. Turning to the financials, Enova International (ENVA) is the opposite profile — same scan, but half the valuations. The online leader behind CashNetUSA, NetCredit and OnDeck is just off off its 52-week high after a near-vertical June-July advance, and instead of giving anything back, it’s digesting sideways in a tight pennant with volume building on the up days and the ENVA/SPY ratio pushing to new highs. Price sits will above the moving averages that are stacked in our bullish order. The breakout from the bullish flag is confirmed with increasingly high volume. I don’t yet own this name, but I do own IBKR in our growth portfolio that also appeared in the scan. If I do add ENVA, I’ll be paying 13.1x forward earnings for 18% and 22% revenue growth and 33% and 20% EPS growth over the next two fiscal years, after a 136% total return in the past 12 months. It’s worth noting that second-order signal here too: a non-prime consumer and small-business lender making new highs tells you something about credit conditions that the financial sector chart (XLF) is already strongly hinting about. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and financial planning for retail investors, as well as regular market updates like the idea presented above. Visit us at https://www.insideedgecapital.com/cnbc DISCLOSURES: Todd owns LLY personally and for clients of his wealth management company Inside Edge Capital, LLC. Charts shown are Koyfin All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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