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Key Points

  • Growth Sectors Hold Support Levels
  • Discretionary Hits Pre-COVID Highs and Rallies
  • Cyclicals are in Consolidation Zones, Showing Better Relative Strength
  • Energy Trades to a New Cycle High
  • Defensive Groups Are Mixed but Continue to Lead

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Visiting the Sector Relatives

Information Technology

A strong rebound has taken the Technology sector toward resistance as the group continues to trade below the 50 and 200-day moving averages. A move above the 2,500 level would be a sign that the bulls are recovering from the weakness that has been playing out since the start of the year.

Relative to the S&P 500

The relative trend is still bearish below resistance and the declining 50-day moving average.

High Beta / Low Volatility chart for March 25th research.

Consumer Discretionary

The Consumer Discretionary sector is rebounding from support at the pre-COVID highs but remains below the declining 50 and 200-day moving averages. Holding the 1,050 level would be a good starting point in the base-building process, but there is more work that needs to be done below the bulls take control.  

Relative to the S&P 500

On a relative basis, Discretionary is trading below its pre-COVID levels and the declining 50-day moving average.

Discretionary / Staples (EW) chart for March 25th research.

Communication Services

Communication Services stocks continue to hold support at the pre-COVID highs for now. However, the index remains below the declining 50 and 200-day moving averages, keeping the bears in control of the trend.

Relative to the S&P 500

Relative to the S&P 500, the group remains in a downtrend, below the declining 50-day moving average, and did not make up much ground last week.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector continues to trade in a range but has moved above the moving averages on the heels of last week’s rally. A break of 560 could set the stage for the bulls to gain control.

Relative to the S&P 500

On a relative basis, Materials are an outperformer, trading above the rising 50-day moving average. The ratio has reached the May 2021 highs, where it would not be a surprise to see a pause in the near term.

Copper / Gold chart for March 25th research.

Financials

Financials are trading in a consolidation zone, with support at the pre-COVID highs. The group is below the declining 50 and 200-day moving averages, keeping the bias to the downside for now. 

Relative to the S&P 500

On a relative basis, the group is also in a consolidation. The ratio has held support and is above the 50-day moving average. A move above resistance would set the stage for further leadership.

Small Caps / Large Caps chart for March 25th research.

Industrials

Industrials are stuck in a consolidation zone below the 50 and 200-day moving averages. Resistance is near 830 (lines up with the 50-day moving average), and support comes into play near the pre-COVID highs.

Relative to the S&P 500

The relative trend is holding the 50-day moving average. Clearing the March peak would complete the bearish to bullish reversal.

Growth vs Value (Large Cap) chart for March 25th research.

Energy

The Energy sector has traded to a new cycle high and remains solidly above the rising 50 and 200-day moving averages. The bulls are in clear control of the trend, as has been the case for some time. Near-term support is at the 610 level.

Relative to the S&P 500

The relative trend remains bullish, above the rising 50-day moving average and near the recent highs.

Growth vs Value (Large Cap) chart for March 25th research.

Consumer Staples

Almost as quickly as the Consumer Staples sector swooned, it has rebounded over the past week. The rally has helped the group recapture the 200-day moving average, but there is still much to do before the 50-day moving average is reclaimed. For now, the trend is neutral.

Relative to the S&P 500

The relative trend is still bullish but well off the recent highs. The ratio remains above the rising 50-day moving average to keep the bias to the upside.

Growth vs Value (Large Cap) chart for March 25th research.

Utilities

The bulls retain control of the trend in Utilities as the group has regained the rising 50-day moving average above the rising 200-day moving average. Odds favor an attack on the prior highs.

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average and trading near the high for the cycle.

Growth vs Value (Large Cap) chart for March 25th research.

Health Care

The Health Care sector is now in consolidation with support near 1,450 and resistance near the 1,590 level. The group is between the flat 50 and 200-day moving averages to solidify the neutral trend.

Relative to the S&P 500

The relative trend is bullish, trading near the high for the cycle and above the rising 50-day moving average.

Growth vs Value (Large Cap) chart for March 25th research.

Real Estate

Real Estate has rebounded from support at the pre-COVID highs while remaining below the declining 50 and 200-day moving averages. The bears keep the ball until the moving averages are reclaimed.

Relative to the S&P 500

On a relative basis, the group is below resistance and the 50-day moving average.

Growth vs Value (Large Cap) chart for March 25th research.

Take-Aways

There is no denying that last week gave investors a strong rebound and a reprieve from the selling presser that has been in place for most of the year. Many sectors have moved higher from important support levels, but it is hard to make the case that much has changed about the prevailing trends on an absolute or relative basis. Growth sectors continue to lag, cyclicals remain neutral, and defensive sectors are still leading.

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