Growth and Defensive Sectors
Show Bullish Traits

by | Apr 5, 2022

Key Points

  • Technology & Discretionary Hold the Moving Averages
  • Communication Services Improve but Remains in a Downtrend
  • Materials and Energy Begin to Stall
  • Financials and Industrials Fade
  • Defensive Groups Exhibit Some Strength, Utilities Shine

Visiting the Sector Relatives

Information Technology

The Technology sector is holding above the 50 and 200-day moving averages, with the former beginning to turn higher. There is resistance near the 2,880 level that must be overcome before a stronger bull case can be made. Should that level be breached, there’s upside room to attack the January highs.

Relative to the S&P 500

The relative trend improved further over the past week, holding above support and the 50-day moving average. Breaking above the February highs would be a step in the direction of regaining a leadership position.

Consumer Discretionary

The Consumer Discretionary sector is also holding above the 50 and 200-day moving averages, and the 50-day is beginning to turn to the upside. Resistance near 1,520 must be overcome before a stronger bullish case can be made.

Relative to the S&P 500

On a relative basis, Discretionary is holding above the 50-day moving average as it continues to improve from the March low. Breaking above the February high would help move the group toward a leadership position.

Communication Services

After holding support at the 215 level, Communication Services has moved above the 50-day moving average. There is still a lot of room between price and the declining 200-day moving average, and the series of lower highs and lower lows remains in place.

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, which is in the process of being tested.

Materials

Materials are stalling after making a strong move from the March lows. The group is above the 50 and 200-day moving averages, and there is short-term support near 540. Breaking above the January highs could be the start of a new bullish trend.   

Relative to the S&P 500

On a relative basis, the ratio is still fighting price-based resistance above the rising 50-day moving average. There is a slight edge for the bulls above these two levels.

Financials

Financials remain in a consolidation zone, above the 580 level but below the 2021 highs. The index has moved below the 50 and the 200-day moving averages. The trend remains solidly neutral.

Relative to the S&P 500

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

Industrials

Industrials remain in a neutral position, stuck in consolidation that has been in place for a year while trading between the 50 and 200-day moving averages. Support is near the 830 level, and resistance is at the January highs.

Relative to the S&P 500

The relative trend is breaking to the downside, closing below the 50-day moving average. Support at the January lows is now in play.

Energy

The trend in energy remains bullish, with price above the rising 50 and 200-day moving averages. Recent price action appears to be a pause after a strong run. Near-term support is at the 530 level.

Relative to the S&P 500

The relative trend also remains above the 50-day moving average but is consolidating after a strong move since the start of the year. The group retains a leadership position until this trend shows signs of reversing.

Consumer Staples

Staples continue to rebound from price-based support that lines up with the rising 200-day moving average. The index is also above the 50-day moving average and has broken the series of lower highs that began in January.

Relative to the S&P 500

Despite solid absolute performance of late, the relative trend remains under pressure after closing below the breakout level and the 50-day moving average. 

Utilities

Utilities have extended further beyond the breakout level after we noted that the highs were in play in this note two weeks ago. The index is above the rising 50 and 200-day moving averages, though the case can be made that it has become extended from these measures of trend.

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average and price-based support. If we wanted to lodge a complaint, it would be that Friday’s high was not met with a new high for the relative ratio. However, the benefit of the doubt remains with the bulls for now.

Health Care

Health Care continues to trade above the breakout level and the rising 50 and 200-day moving averages. Above the 1,590 mark, the door is open for an attack on the December highs.

Relative to the S&P 500

On a relative basis, the ratio is testing the rising 50-day moving average after having a challenging time breaking above resistance. The trend remains in favor of the bulls for now, but they will want to see a clean breakout soon.

Real Estate

Real Estate bulls are capitalizing on the slight edge that we gave them last week. The group has broken above resistance as it trades above the 50 and 200-day moving averages. The door is open for an attack on the December highs.

Relative to the S&P 500

On a relative basis, the group is in a sloppy consolidation, above the 50-day moving average but unable to break through resistance.

Take-Aways:

The growth sectors of the S&P 500 continue to improve, especially Technology and Consumer Discretionary. Cyclicals are becoming mixed as Materials and Energy pause while Financials and Industrials weaken. The defensive groups have a bullish bias, led by Utilities. We also note that Real Estate and Health Care have broken above resistance.

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.