Key Points
- Technology and Discretionary Need to Clear their 200-Day Moving Averages
- Communication Services Builds a Base but Still Lags
- Energy Continues to Fight to Defend the Long-Term Trend
- Health Care Gives Up Its Leadership Position
- Staples and Utilities Begin to Stall on a Relative Basis
Visiting the Sector Relatives
Information Technology
The Technology sector has reclaimed broken support above the now rising 50-day moving average. Now it must contend with the 200-day moving average to make the claim that the bulls have taken control of the trend.
Relative to the S&P 500
The relative trend has also broken above resistance above the 50-day moving average. Breaching the March/April peak would be the next step for the group to regain a leadership position.
Consumer Discretionary
The Consumer Discretionary sector has continued to rally after reclaiming the 50-day moving average. There is price-based resistance at the declining 200-day moving average that must be overcome for the bulls to take control of the trend.
Relative to the S&P 500
On a relative basis, Discretionary has made a solid rebound above the 50-day moving average. Breaking above resistance would set the stage for further outperformance.
Communication Services
The Communication Services sector continues to build a base at the pre-COVID peak around the 50-day moving average. Investors are still waiting for a clear directional break as the current consolidation plays out below the declining 200-day moving average.
Relative to the S&P 500
The relative trend is moving toward the recent lows, below the 50-day moving average.
Materials
The Materials sector is still fighting to regain broken support and the declining 50-day moving average. Any rally from here will have to contend with the 200-day moving average, which is in the 2021/2022 consolidation zone. There is still a lot of work to do.
Relative to the S&P 500
On a relative basis, the ratio is trending below the 50-day moving average after failing at prior highs. More time is needed for a base to build.
Financials
Financials have rallied from support at the pre-COVID high to regain the 50-day moving average. There is still work to do to regain the declining 200-day moving average, which may be an area of resistance in the day/weeks ahead.
Relative to the S&P 500
On a relative basis, the ratio is below support and the declining 50-day moving average.
Industrials
Industrials have made a solid rebound from the pre-COVID highs to retake the 50-day moving average. The group must now prepare to wrestle with the declining 200-day moving average. Getting above this level would set the stage for a run to the prior highs.
Relative to the S&P 500
The relative trend is dancing with the 50-day moving average as it consolidates below resistance.
Energy
The Energy sector is holding the rising 200-day moving average while trading below the declining 50-day moving average. Support at the January 2020 highs is the key level for the bulls to defend should the 200-day give way.
Relative to the S&P 500
The relative trend remains under pressure, below resistance, and the 50-day moving average. Regaining these levels would put the bulls back on top.
Consumer Staples
Staples continue to consolidate, trading around the 200-day moving average and above the 50-day moving average. The trend is neutral.
Relative to the S&P 500
The relative trend remains in a near-term consolidation above support but below the declining 50-day moving average. Equity bulls want to see this ratio break support and continue to move lower.
Utilities
Utilities are rising in a choppy, sawtooth fashion and have moved above the 50 and 200-day moving averages. There is room for the recent highs, and the moving averages should provide support for a pullback.
Relative to the S&P 500
The relative trend is stalling at the 50-day moving average below resistance. Here too, equity bulls want to see the ratio move lower.
Health Care
The Health Care group is fighting at the 50 and 200-day moving averages after reclaiming broken support. There is still a lot of work to do before the bulls take control of the trend.
Relative to the S&P 500
The relative trend has lost upside momentum and has sliced below the 50-day moving average.
Real Estate
Real Estate is holding above support and the 50-day moving average while trading below the declining 200-day moving average.
Relative to the S&P 500
On a relative basis, the group is in a neutral trend, oscillating around the 50-day moving average below resistance.
Take-Aways
Many sectors have seen strong rebounds take their prices above their respective 50-day moving averages. At the same time, many remain below their declining 200-day moving averages. This dynamic shifts the trends from bearish to neutral, leaving more work to do before the bulls can claim that they have regained control. One bullish datapoint is stalling of bullish relative trends on the part of the defensive sectors of the market, especially Staples and Utilities.
Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.