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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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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