Key Points

  • Growth Sectors are Testing Important Support
  • Communication Services Eyes the Pre-COVID Highs
  • Cyclicals Are Mixed, Energy Tries to Reassert a Bullish Trend
  • Financials and Industrials Struggle to Keep Pace
  • Defensive Groups Are Relative Leaders, but Absolute Trends Are Neutral

Visiting the Sector Relatives

Information Technology

The Technology sector continues to do battle with the 2,500 level, below the declining 50 and 200-day moving averages. While it is encouraging to see the bulls defend this level, it is hard to become too excited with the index below the moving averages.

Relative to the S&P 500

The relative trend is bearish below resistance and the declining 50-day moving average.

Consumer Discretionary

The Consumer Discretionary sector remains in a bearish trend below the 50 and 200-day moving averages. Last week we called out that the March lows were in play, and they have been reached. Thus far, they are being defended, but it is too early to begin to make a bullish case.

Relative to the S&P 500

On a relative basis, Discretionary has lost the 50-day moving average and remains below resistance.

Communication Services

Communication Services remains under intense pressure, below the declining 50 and 200-day moving averages. The pre-COVID peak is a logical next support level.

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 near multiyear lows.

Materials

Materials continue to test the moving averages after establishing resistance near the 570 level. The trend is neutral as the battle for control rages between bulls and bears.

Relative to the S&P 500

On a relative basis, the bulls continue to hold their advantage. The ratio is above resistance and the 50-day moving average.

Financials

Financials have broken support as they remain below the declining 50 and 200-day moving averages. Below the 580 level, there is room down to 520.

Relative to the S&P 500

On a relative basis, the group remains in a choppy consolidation, but a downside bias remains as the ratio holds below the declining 50-day moving average.

Industrials

Industrials have also broken support below the declining 50, and 200-day moving averages as the bears take control of the trend. Below 830, the 760 level is the next logical support level.

Relative to the S&P 500

The relative trend is holding the 50-day moving average. Clearing the March peak would complete the bearish to bullish reversal.

Energy

The Energy sector is fighting hard at the rising 50-day moving average, which is well above the rising 200-day moving average. The bulls are in control of the trend and breaking 600 would be a sign that uptrend is resuming. Below 530, the bullish case will have to be reassessed.

Relative to the S&P 500

The relative trend remains bullish, above the rising 50-day moving average. The ratio is on the verge of breaking above the March peak to make a new high for the cycle.

Consumer Staples

Last week showed us that in a bear market, even the defensive sectors are not immune to selling pressure. The Staples have pulled back below the breakout level. The index remains above the 50 and 200-day moving averages, keeping the trend in favor of the bulls.

Relative to the S&P 500

The relative trend is bullish as the group was less bad last week. The ratio is above support and the rising 50-day moving average.

Utilities

Utilities also closed below the breakout level. Additionally, the group has lost the 50-day moving average, putting it in a neutral position. The rising 200-day moving average is a key line in the sand for the bulls. 

Relative to the S&P 500

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

Health Care

After losing support at the breakout level, Health Care has given up the 50 and 200-day moving averages. The trend is neutral, awaiting a clear direction. 

Relative to the S&P 500

On a relative basis, the ratio is above the 50-day moving average and the breakout level, keeping the group in a leadership position…for now.

Real Estate

Real Estate has broken below support at the 300 level and moved below the 50 and 200-day moving averages. The trend is now neutral.   

Relative to the S&P 500

On a relative basis, the group remains a leader but is testing important support at the breakout level and the 50-day moving average.

Take-Aways:

Over the past week, we have learned that in a bear market, even the defensive sectors eventually come under attack. All of them have lost their breakout levels to trade back into the consolidation zones. Despite this, they remain relative outperformers as they are still “less bad” than the broader average. Cyclicals remain mixed while the growth themes continue to trade heavily.

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.