Key Points
- Consumer Discretionary is at a Key Relative Level–Will It Break Through?
- Materials Continue to Falter
- Energy Holds a Key Long-Term Relative Zone (For Now)
- Utilities Recapture the 200-Day Moving Average to the Upside
- Health Care Regained the 50-Day Moving Average to the Upside, Remains the Only Sector Above the 50-Day
Visiting the Sector Relatives
Information Technology
Technology has recaptured a long-term zone at 2,020 to the upside in last week’s trading session, with room for the declining 50-day moving average. Next resistance lines up with the 2,500 level, one that bulls will watch closely.
Relative to the S&P 500
The group remains in a downtrend, fighting with the ratio’s declining 50-day moving average. Until the sector can show some degree of strength by breaking out of the downtrend line to the upside, the bias is with the bears.
Consumer Discretionary
The Consumer Discretionary sector has found support and rallied to the upside at the pre-COVID highs of 1,050 below a declining 50-day moving average, leaving the door open for an attack on the indicator to the 1,200 level.
Relative to the S&P 500
The group is struggling below the March 2020 lows, a relative area that bulls want to see recapture to the upside. Note the higher low throughout this month. Should this zone give way to the upside, the stage could be set for a potential trend reversal. Until then, the bears appear to be in control.
Communication Services
After a brief breakdown below the pre-COVID highs, Communication Services has recaptured this level to the upside. While this is early development, bulls will want to see the declining 50-day moving average retaken to the upside.
Relative to the S&P 500
The group has managed to gain ground above the ratio’s declining 50-day moving average. However, until the downtrend line can be broken out to the upside, the bias remains bearish with the downtrend.
Materials
Materials continue trading below the trading range that’s defined much of the price action for the past year to the downside. These developments come on the heels of a 50-200-day moving average Death Cross, with resistance lining up at the breakdown level at 495.
Relative to the S&P 500
The relative performance has taken a nosedive from the relative highs in May of last year, printing values below the ratio’s now-declining 50-day moving average.
Financials
The Financials sector has rallied at the pre-covid highs at 520 below a declining 50-day moving average. Should this level hold, the group could stage an attack on the 50-day moving average from below.
Relative to the S&P 500
The relative performance has broken down slightly from the trading range that’s defined the neutral performance for the last year below the ratio’s declining 50-day moving average. This is an area that the group has struggled with in the past and one that bulls want to see quickly regained to the upside.
Industrials
Industrials have rallied out of 720 support and the pre-COVID highs to the upside. Note that the group found resistance at the declining 50-day moving average earlier in the month and will be an area the bulls are watching closely.
Relative to the S&P 500
The group continues to falter at the March relative highs and has sliced through the ratio’s rising 50-day moving average to the downside over the past several trading sessions.
Energy
Energy has found support at the 540 zone after slicing through the 50-day moving average to the downside. Should this level give way to the downside, the next long-term support zone lined up with the pre-COVID highs at 460.
Relative to the S&P 500
On a relative basis, the group has rebounded from the pre-COVID relative highs below the ratio’s flat 50-day moving average.
Consumer Staples
Consumer Stapes has found long-term support at the 710 zone and appear to be setting up an attack on the 200-day moving average from below. Note that price found resistance at this indicator in late May and is an area that bull will likely be keeping an eye on.
Relative to the S&P 500
The group remains an outperformer, trading above the ratio’s rising 50-day moving average on a series of higher lows.
Utilities
Utilities have recaptured the declining 200-day moving average to the upside in a bullish turn of events for the defensive sector in yesterday’s trading session. However, the group remains below the pre-COVID highs of 360, leaving the bias with the bears until this zone can be retaken to the upside.
Relative to the S&P 500
Despite lackluster absolute performance, the group remains an outperformer, holding the highlighted relative support zone to the upside above the ratio’s rising 50-day moving average.
Health Care
The Health Care sector has recaptured both the 1,450-breakdown level and the declining 50-day moving average to the upside over the past week, with the 200-day moving average set in its sights.
Relative to the S&P 500
The group remains an outperformer, breaking out of long-term relative resistance at the highlighted zone above the ratio’s rising 50-day moving average.
Real Estate
The Real Estate Sector has recaptured the pre-COVID highs at the 260 zone over the previous two trading sessions, putting the declining 50-day moving average around the 275 level into play.
Relative to the S&P 500
The group continues to chop, grind, and struggle below the ratio’s declining 50-day moving average while relative performance has been roughly flat over the past year of trading.
Take-Aways
Many pre-COVID highs across sectors are either being tested as support or recaptured to the upside, with increasing importance on those sectors that command higher weights respectively in the S&P 500. Cyclical sectors such as Financials, Energy, Materials, and Industrials continue to falter on a relative basis. Defensive sectors such as Health Care, Consumer Staples, and Utilities maintain their outperformance, signaling a risk-off tone.
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