Key Points

  • Technology & Discretionary Rebound, Will the Relative Trends Improve?
  • Communication Services Remain Under Relative Pressure
  • Industrials and Energy Lead the Cyclical Charge
  • Financials Are Not Responding to Rate Spikes
  • Defensive Sectors Turn in a Mixed Showing

Visiting the Sector Relatives

Information Technology

The Technology sector has staged a sharp rebound after a false breakdown and is now testing the declining 50-day moving average from below. The 200-day moving average is also in range, and both have the potential to provide resistance in the near term. Support remains in the 2,500-2,600 range, holding above these levels but below the moving averages will keep the trend neutral. Breaking above the moving averages will be a sign that the bulls are taking control of the trend.

Relative to the S&P 500

The relative trend remains below support and below the declining 50-day moving average, despite a rebound over the past week. There is still work to do here.

Consumer Discretionary

The Consumer Discretionary sector has rallied to test the declining 50-day moving average but remains below the 200-day moving average. Thus far, the rally has not produced a higher high, keeping the trend in favor of the bears for now. However, support moved up to the 1,270 level.

Relative to the S&P 500

On a relative basis, Discretionary has reclaimed price-based support while trading below the declining 50-day moving average. The trend remains bearish for now.

Communication Services

Communication Services has rebounded from the 215-support level that we have been highlighting but remains below the declining 50 and 200-day moving averages. The bears keep the benefit of the doubt for now.

Relative to the S&P 500

Relative to the S&P 500, the group remains in a downtrend, below the declining 50-day moving average and trading near the recent 52-week lows.

Materials

Materials have rallied from the support zone that we called out last week to retake the 50 and 200-day moving averages. This is a sign that the bulls are taking control of the trend, opening the door to a move to the January highs.  

Relative to the S&P 500

On a relative basis, the ratio is battling resistance while holding above the rising 50-day moving average. A move above the resistance level would signal the potential for further outperformance.

Financials

Financials remain in a consolidation zone, above support at the 580 level but trapped between the 50 and 200-day moving averages. It is surprising to see the group not act better in the face of rising interest rates.

Relative to the S&P 500

On a relative basis, the group remains in a choppy trend, oscillating around the 50-day moving average while holding below resistance. Here too, we are surprised by the lack of better performance.

Industrials

Industrials are attacking the 200-day moving average after making a strong move above the 50-day moving average. This is a signal that the bulls are taking control of the trend and opens the door to move to the January highs.

Relative to the S&P 500

The relative trend remains above resistance, and the 50-day moving average is trending higher. The ratio has also been making higher highs and higher lows since the start of the year.

Energy

The trend in energy remains bullish after a successful test of support at the 530 level. The steadily rising 50 and 200-day moving averages confirm this view.

Relative to the S&P 500

The relative trend also remains strong, above the 50-day moving average.

Consumer Staples

Staples have rebounded from support and the 200-day moving average but remain below the declining 50-day moving average. Thus far, the series of lower highs since the start of the year remains in place.

Relative to the S&P 500

Staples have broken down on a relative basis, with the ratio closing below resistance and the 50-day moving average.   

Utilities

Utilities are holding above the key 355 level and above the 50 and 200-day moving averages. The door is open for an attack on the January highs.

Relative to the S&P 500

The relative trend is testing support at the breakout level, above the rising 50-day moving average. Until these levels are broken, the bulls retain control of the trend.

Health Care

Health Care bulls face one last hurdle as they try to take control of the trend, resistance at the 1,590 level. Closing above this mark sets the stage for a run to the January highs as price hold above the 50 and 200-day moving averages.

Relative to the S&P 500

On a relative basis, the ratio is above the rising 50-day moving average and trades near a new 52-week high.

Real Estate

Real Estate remains in a consolidation zone between 280 and 305 after briefly trading below support. The group is fighting the 50 and 200-day moving averages, which must be overcome before a stronger bullish case can be made. 

Relative to the S&P 500

On a relative basis, the group has failed at resistance and is now testing the flat 50-day moving average.

Take-Aways:

The growth sectors of the market have staged impressive rebounds, but trends remain mostly bearish until key moving averages are retaken. The cyclical groups are putting in a better showing with leadership on the part of Energy and Industrials, though we are surprised by the weakness in Financials. Defensive sectors are a mixed bag.

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.