Key Points
- Putting Growth vs. Value in Perspective
- Technology and Discretionary Pause after Strong Runs
- Cyclicals are Fighting Support at Their Breakout Levels
- Utilities and Staples are Defensive Laggards
- New Relative Lows for Health Care
Chart in Focus
Much was made of the underperformance of the Growth theme relative to Value yesterday. However, a bit of perspective is in order. The S&P 500 Growth/Value ratio peaked in September 2020 and traded in a consolidation for more than a year before breaking out this month. At the same time, the 63-day Rate of Change for the ratio is positive, signaling that the three-month trend is to the upside. If the trend is bullish and above the breakout level, Growth retains an advantage over Value.
Visiting the Sector Relatives
All the charts below look at the sectors of the S&P 500 on an absolute basis (top panel) and relative to the S&P 500 (bottom panel) to get a sense of the leaders, laggards, and shifts in trends. We include the 50-day moving average on each.
Information Technology
After trading to another new high yesterday, the Technology sector reversed lower with the broader market. The trend remains to the upside, above the rising 50-day moving average which is coming into line with price-based support at the 2,810 level.
Relative to the S&P 500
Consumer Discretionary
The Consumer Discretionary sector also traded to a new high yesterday before fading into the close. The trend remains bullish with support to near-term pullbacks around the September lows, near 1,600. Below that, the rising 50-day moving average becomes important.
Relative to the S&P 500
Communication Services
The Communication Services sector closed below the declining 50-day moving average yesterday but is holding above support at the 265 level. Trading since July has been choppy, and we are happy to let the bulls and bears battle to determine a clear direction.
Relative to the S&P 500
Materials
The Materials sector is fighting with support at the breakout level to avoid its recent strength being classified as a false move. The group remains above the 50-day moving average, which would come into play if support failed to hold.
Relative to the S&P 500
Financials
The Financials are also waging a battle with support at the breakout level as well as the rising 50-day moving average. If the group was going to reverse its recent pullback, this would be the logical spot for an advance to begin.
Relative to the S&P 500
Industrials
The Industrial sector is the third in the group of cyclical sectors battling support at its breakout level. The group remains above the rising 50-day moving average, keeping the bulls in command for now.
Relative to the S&P 500
Energy
Energy is fighting to hold the 50-day moving average just below price-based support. If the group is going to rebound to resume the bullish trend, this is the place to dig in.
Relative to the S&P 500
Consumer Staples
Consumer Staples has pulled back from the recent highs and is now testing support at the breakout level. Further weakness should find buyers near the 50-day moving average, around the 740 level.
Relative to the S&P 500
Real Estate
The Real Estate sector is hovering near the recent highs and remains above important support provided by the 50-day moving average at the 295 mark. The bulls remain in control above this level. A breakdown would target the October lows.
Relative to the S&P 500
Utilities
Utilities continue to trade in consolidation while holding above the 50-day moving average. The case can be made that there is an upside bias to the trend, but there is a clear resistance level that must be overcome before a stronger bullish case can be made.
Relative to the S&P 500
Health Care
Health Care is breaking below short-term support but remains above the 50-day moving average. Below the moving average, the October lows are in play.
Relative to the S&P 500
Take-Aways:
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