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Key Points

  • Two Groups Remain Above Their Key Moving Averages, Down from Three Last Week
  • Technology Tests Support at the 50-Day Moving Average
  • Communication Services Are Still Bearish
  • Energy’s Absolute and Relative Trends Are Bullish
  • Industrials and Materials Have Our Attention

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Visiting the Sector Relatives

Information Technology

After failing to break above the 200-day moving average, the Technology sector has fallen to the rising 50-day moving average. The bulls want to see this level defended as a break would put the June lows into play.

Relative to the S&P 500

The relative trend is in the process of breaking below the 50-day moving average after failing at resistance. It is hard to make a case for outperformance until this resistance level is overcome.

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

Consumer Discretionary

The Consumer Discretionary sector has continued to fade from the declining 200-day moving average and is making its way toward the rising 50-day moving average. There is a support at 1,200, which bulls need to hold to avoid a trip back toward the June lows.

Relative to the S&P 500

On a relative basis, Discretionary remains in consolidation with support near the rising 50-day moving average and resistance around the February/March peaks.

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

Communication Services

The Communication Services sector is moving below price-based support and the 50-day moving average as it trades well below the declining 200-day moving average. The odds that the June lows will be tested have now increased.  

Relative to the S&P 500

The relative trend continues to make new cycle and all-time lows below the declining 50-day moving average, keeping the group firmly in the camp of underperformance.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector remains stuck between the 50 and 200-day moving averages and is in the process of testing price-based support. The trend is still neutral as it waits for a clear directional break.

Relative to the S&P 500

On a relative basis, the group has been less bad over the past week. The ratio has moved through the 50-day moving average and there is strong support just below.

Copper / Gold chart for March 25th research.

Financials

Financials are trapped between the 50 and 200-day moving averages as they trade in a neutral trend. There is strong support near 520, which lines up with the June lows and the pre-COVID highs.  

Relative to the S&P 500

On a relative basis, the ratio continues to test resistance and the declining 50-day moving average as the group trades in a neutral trend.

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

Industrials

Industrials have seen their trend shift to neutral as the group trades between the 50 and 200-day moving averages. Below the 50-day, there is important support near 720, which lines up with the June lows and the pre-COVID highs.

Relative to the S&P 500

The relative trend continues to grind higher, above the 50-day moving average. There is resistance just overhead, but the series of higher lows tilts the odds in favor of a breakout.

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

Energy

The Energy sector continues to move higher, above the 50 and 200-day moving averages. There is price-based support near 530. Above these levels there are increased odds that the June highs will be tested.

Relative to the S&P 500

The relative high is also now in play as the ratio has moved above the 50-day moving average and through resistance.

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

Consumer Staples

Staples remain in a consolidation, trading between the moving averages. However, the uptrend from the COVID lows is still in place.

Relative to the S&P 500

The relative trend remains in a near-term consolidation above support but below the flat 50-day moving average. Breaking above the moving average sets the stage for further outperformance.

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

Utilities

Utilities are pulling back from recent highs continuing the saw-tooth rally pattern that has been in place since the March 2020 lows. The group remains above the rising 50 and 200-day moving averages, keeping the trend bullish.

Relative to the S&P 500

The relative trend is holding above the 50-day moving average and must not contend with price-based resistance. A breakout would increase the odds of further outperformance.

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

Health Care

Health Care has broken below the 50-day moving average to test price-based support. Below 1,460, the June lows will be in play. The group must move above the 200-day moving average to make a stronger bullish case.

Relative to the S&P 500

The relative trend remains below the 50-day moving average as it continues to test price-based support.

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

Real Estate

After being rejected at the 200-day moving average, the Real Estate sector is testing the rising 50-day moving average above key support. This puts the trend in a neutral position.

Relative to the S&P 500

On a relative basis, the group is also in a neutral trend, oscillating around the 50-day moving average below resistance.

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

Take-Aways

Last week, we noted that the bullish case was hard to make with many sectors’ stocks in neutral trends on an absolute and relative basis. While equities have weakened over the past week of trading, most groups remain above important support levels. Industrials, Materials, and Utilities have our attention, with the potential for stronger leadership. Energy is reasserting a bullish trend. Communication Services remain a sector to avoid.

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