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Key Points

  • Technology Squares Off with the 200-Day Moving Average
  • Communication Services Continues to Base
  • Energy Regains the 50-Day Moving Average
  • Health Care Weakens Further
  • Utilities Make a New High

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Visiting the Sector Relatives

Information Technology

The Technology sector rallied to a new three-month high yesterday as it trades into the 200-day moving average. Clearing this level would increase the odds of an attack on the December highs. The 50-day moving average has turned higher and could be used as a support level if the group sees a pullback in the near term.

Relative to the S&P 500

The relative trend remains above the rising 50-day moving average as it trades in a short-term consolidation. Clearing resistance sets the stage for further outperformance.

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

Consumer Discretionary

The Consumer Discretionary sector remains in rally mode with its sight set on the resistance and the 200-day moving average. These levels must be cleared for the bulls to take control of the trend. Near-term pullbacks are likely to see support at the rising 50-day moving average.

Relative to the S&P 500

On a relative basis, Discretionary has support at the rising 50-day moving average. Breaking above price-based resistance would point to the potential for further outperformance.

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

Communication Services

The Communication Services sector remains above support and the flat 50-day moving average as it continues to build a base at the pre-COVID peak. Clearing the 205 level opens the door to a run to the declining 200-day moving average.

Relative to the S&P 500

The relative trend is still bearish as it trades below the 50-day moving average.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector has cleared short-term resistance above the 50-day moving average to move into the 2021/22 consolidation zone. The trend is now neutral, with support at the 490 level.

Relative to the S&P 500

On a relative basis, the ratio is trending below the 50-day moving average but has a strong level of support just below. The trend is neutral here as well.

Copper / Gold chart for March 25th research.

Financials

Financials continue to rally from support at the pre-COVID high above 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 days/weeks ahead.

Relative to the S&P 500

On a relative basis, the ratio is testing resistance and the declining 50-day moving average. Breaking this level would set the stage for further outperformance.

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

Industrials

Industrials continue to work higher from the pre-COVID highs and the 50-day moving average to close above the 200-day moving average. There is now running room for the November/December highs.

Relative to the S&P 500

The relative trend remains in consolidation above the 50-day moving average but below resistance. The series of higher lows tilts the odds in favor of a breakout.

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

Energy

The Energy sector is not going down without a fight as it recaptures the 50-day moving average above the rising 200-day moving average. The benefit of the doubt remains with the long-term uptrend for now.

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 in control.

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

Consumer Staples

Staples has rallied above the 200-day moving average above the 50-day moving average. The group is now poised for a run to the April highs.

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.

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

Utilities

Utilities have moved to a new high above the rising 50 and 200-day moving averages. The choppy but rising trend remains in place, keeping the bulls in control.

Relative to the S&P 500

The relative trend is dancing with the 50-day moving average below resistance. Here too, equity bulls want to see the ratio move lower.

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

Health Care

The Health Care group has regained the 200-day moving average above the 50-day moving average and price-based support. This gives the sector a bullish leaning, but the trend is still neutral below the 1,600 level.

Relative to the S&P 500

The relative trend continues to fade below the 50-day moving average.

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

Real Estate

Real Estate has rallied further from support and the 50-day moving average and now faces a test at the 200-day moving average. Clearing the 200-day gives the group daylight to the December and April peaks.

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.

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

Take-Aways

The past week can generally be viewed as one of continued improvement for the sectors of the S&P 500. All groups are above their 50-day moving averages, and five of eleven are above their respective 200-day moving averages. The Relative trend in Technology and Discretionary continues to improve while Energy and Health Care weaken. Six groups traded to new three-month highs yesterday: Real Estate, Utilities, Technology, Health Care, Discretionary, and Industrials.

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