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Take-Aways:

Two weeks ago, we noted that many sectors were likely to pay a visit to their June lows. That view has played out. There is scope for a near-term relief rally, but it is hard to make an overly compelling bullish case on the absolute trends in the market. This leaves investors in a position to find what is “less bad.” Sectors that fit the bill are Energy, Utilities, Staples, and Health Care.

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Visiting the Sector Relatives

Information Technology

The Technology sector remains below the declining 50 and 200-day moving averages and has undercut the June lows. A near-term rally could see the sector test the declining 50-day, but the bearish trend remains in place until proven otherwise. 

Relative to the S&P 500

The relative trend remains below the 50-day moving average and price-based resistance. The summer lows are in the process of being tested. A move below this level of support would keep the group in the underperforming camp.

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

Consumer Discretionary

The Consumer Discretionary sector traded below the 50 and 200-day moving averages as well as resistance near 1,210. The groups have yet to test the June lows, but we are hard-pressed to make a compelling bullish case until the 200-day moving average is reclaimed.

Relative to the S&P 500

On a relative basis, Discretionary remains in a consolidation. However, the ratios have recently moved below the 50-day moving average under price-based resistance. More time is needed.

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

Communication Services

The Communication Services sector remains below price-based resistance and the 50-day moving average as it trades well below the declining 200-day moving average. The door is open to a test of the COVID lows.

Relative to the S&P 500

The relative trend is below the 50-day moving average, trading near all-time lows.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector remains below the 50 and 200-day moving averages as it does battle with price-based support near the June lows. There is scope for a near-term rally, but it will likely be countertrend in nature, given a large amount of overhead resistance.

Relative to the S&P 500

On a relative basis, the group is fighting with the 50-day moving average above price-based support to keep the trend neutral for now.

Copper / Gold chart for March 25th research.

Financials

Financials are holding below the 50 and 200-day moving averages as they test support at the June lows and pre-COVID highs. Bulls need to recapture the 200-day moving average to make a stronger case.

Relative to the S&P 500

On a relative basis, the ratio is trading above support and the 50-day moving average. For investors who must be invested, this is a sector that has been less bad of late.

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

Industrials

Industrials remain below the 50 and 200-day moving averages but are testing support near the 720 level that we have been highlighting. The bulls need to retake the 200-day moving average to make a more compelling case.

Relative to the S&P 500

The relative trend is dancing with the 50-day moving average as it trades in a consolidation. The series of higher lows is an encouraging development, but resistance must be broken for the group to take a leadership position.

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

Energy

The Energy sector is trading above support but between the 50 and 200-day moving averages as the trend has become choppy in the near term. Above 530, the bulls keep the benefit of the doubt, and they will make a stronger case above the moving averages. A move below 470 negates the bull case.

Relative to the S&P 500

The group remains a leader, with the ratio consolidating above the 50-day moving average and near the June peak.

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

Consumer Staples

Proving that nothing is immune in a bear market, the defensive Consumer Staples have cascaded through the June lows below the declining 50 and 200-day moving averages. Support comes into play near 690.

Relative to the S&P 500

The relative trend remains in a near-term consolidation, oscillating around the 50-day moving average. The ratio is above support, keeping it in a neutral position.

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

Utilities

Further proof that nothing is spared in a bear market, Utilities have moved below the moving averages. However, the series of higher lows and higher highs since the COVID bottom remain in place.

Relative to the S&P 500

The relative trend is testing the 50-day moving averages after being rejected at price-based resistance.

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

Health Care

Health Care is trading below support and the moving averages. The June lows are still intact, keeping the trend neutral with a downside bias.

Relative to the S&P 500

The relative trend remains strong as Health Care has been a less bad sector of the market. The ratio is above the 50-day moving average after holding support.

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

Real Estate

Real Estate has extended further below price-based support at the pre-COVID highs and is below the 50 and 200-day moving averages. The June lows have been breached, entrenching the bears in the top position.

Relative to the S&P 500

On a relative basis, the group has broken down, trading below the resistance and the 50-day moving averages. The bulls will need time to regroup.

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

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