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Key Points

  • Technology and Discretionary See Small Relative Improvements
  • Communication Services Begin to Lag Again
  • Financials Are Breaking Relative Support
  • Make or Break Time for Energy Bulls
  • Defensive Sectors Remain Leaders in a Bear Market

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Visiting the Sector Relatives

Information Technology

The bears remain in control of the trend in the Technology sector as the group trades below the 50 and 200-day moving averages as well as resistance near 2,500. If the price is below 2,500, there is downside potential to the 1,800 – 1,900 zone. The groups failed at the 50-day moving average yesterday.

Relative to the S&P 500

The relative trend continues to build a base after moving above the 50-day moving average. Regaining resistance would be a bullish sign on a relative basis.

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

Consumer Discretionary

The Consumer Discretionary has been holding support at the pre-COVID highs but remains in a bearish trend below the declining 50 and 200-day moving averages. Until the price is above 1,300, it is hard to make a bullish case for the group.

Relative to the S&P 500

On a relative basis, Discretionary has seen a slight improvement of late, moving above the 50-day moving average.

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

Communication Services

Communication Services stocks are trading around the pre-COVID levels but have failed to retake the 50-day moving average, which is well below the 200-day moving average. The bears remain in control of the trend.

Relative to the S&P 500

The relative trend is turning lower after a few weeks of improvement, closing below the 50-day moving average.

Lumber / Gold chart for March 25th research.

Materials

The bears remain in control of the trend in the Materials sector. Price is below the declining 50 and 200-day moving averages, and there is room for the pre-COVID peaks. It is hard to make a bullish case until the 500-level is regained.

Relative to the S&P 500

On a relative basis, the ratio is trending below the 50-day moving average after failing at resistance.

Copper / Gold chart for March 25th research.

Financials

Financials continue to test support at the pre-Covid highs, but the bears are in control with the price below the moving averages and resistance at 590. 

Relative to the S&P 500

On a relative basis, the ratio is now breaking support below the declining 50-day moving average.

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

Industrials

Industrials are testing support at the pre-COVID peak, below the moving averages, as they trade in a consolidation. A countertrend bounce can’t be ruled out, but the bears remain in control.

Relative to the S&P 500

The relative trend is fading from the 50-day moving average as it continues to trade below price-based resistance.

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

Energy

The Energy sector has reached an inflection point as it meets the rising 200-day moving average below a declining 50-day moving average. If the bulls are going to turn the tides and regain control, this is a logical place to make a stand.

Relative to the S&P 500

The relative trend remains under pressure, below support, and the 50-day moving average. Regaining these levels would put the bulls back on top.

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

Consumer Staples

Staples are having a hard time breaking above the 50-day moving average, which is below the 200-day moving average.

Relative to the S&P 500

The relative trend remains bullish, above the 50-day moving average. In this case, bullish is a function of being less bad.

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

Utilities

Utilities are fading below resistance to moving back below the 50 and 200-day moving averages. The trend is neutral but under pressure.

Relative to the S&P 500

The relative trend is testing support at the rising 50-day moving average. This defensive group continues to lead in a bear market.

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

Health Care

The Health Care group is holding above support as it tests the moving averages from below. The trend is neutral. 

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average.

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

Real Estate

Real Estate remains under pressure, below the pre-COVID peaks. The index is below the 50 and 200-day moving averages, and odds favor the further downside. 

Relative to the S&P 500

On a relative basis, the group is below resistance and the 50-day moving average.

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

Take-Aways

Defensive leadership remains the name of the game as the bears remain in control of the market. We are intrigued by a slight improvement in the relative trends for Technology and Discretionary, but more time is needed for confirmed reversals to take hold. Energy is at an inflection point; if the bulls want to win the match, they must take control here and now.

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