Key Points

    • S&P 500 Notches a Second Record Weekly Close
    • Technology Re-Emerging as a Leader
    • Cyclicals Continue to Fade on a Relative Basis
    • “Defense” Lags, Bullish for Equities Overall
    • Health Care Catches our Attention

Chart in Focus

The S&P 500 closed at a record high for a second consecutive week, confirming a break from the consolidation that had marked trading since early May. The index is above the 10-week moving average and is well above the 40-week moving average, both of which are moving higher. Momentum for the long-term trend remains bullish, with the 14-week RSI now in an overbought position. Near-term support is at the breakout level, while more important support is in the zone of the consolidation lows.

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

The Technology sector continues to move higher on an absolute basis, closing at a record high on Friday. Near-term support remains at the breakout level, near 2,550. Should that fail to hold, the rising 50-day moving average would be the next key level to watch.

Relative to the S&P 500:

On a relative basis, the ratio remains above the 50-day moving average, which is shifting from declining to flat. The group is in the process of breaking above near-term resistance. Should a breakout take hold, the door is open for an attack on the relative highs set in September of last year.

Consumer Discretionary

The Consumer Discretionary sector has also moved to a new high on an absolute basis, above the flat 50-day moving average, breaking out of a consolidation that has been in place for much of 2021. The moving average also sits in the support zone near 1,400.

Relative to the S&P 500:

On a relative basis, the group remains in a downtrend, yet to break the series of lower highs and lower lows that has been in place since last October. A step in the right direction is the fact that the ratio is now above the 50-day moving average, but more time is needed for a base to build.

Communication Services

The Communication Services sector has traded to a new high, remaining above the rising 50-day moving average, which is in the zone between 255 and 260 that marks price-based support in the near-term.

Relative to the S&P 500:

On a relative basis, the ratio is fighting to hold a breakout to new highs, trading above the rising 50-day moving average.

Materials

Materials remain below the 50-day moving average, but above price-based support in the 490 – 500 range. A break of this support level would likely indicate that the uptrend from the March 2020 lows has come to an end.

Relative to the S&P 500:

On a relative basis, the group has weakened further over the past week, remaining below the 50-day moving average which is moving lower as well. The relative support is now a key level on the downside.

Financials

Financials continue to test resistance at the rising 50-day moving average after a successful test of support. The structure is the uptrend from the March 2020 lows remains in place, but odds favor a choppy consolidation in the near-term. 

Relative to the S&P 500:

On a relative basis, the group remains below the 50-day moving average. Thus far, relative support is holding, and a lower low has yet to be established. A break of support would move the group into a lagging position.

Industrials

The Industrials sector is also in the process of testing the 50-day moving average from below, after holding price-based support. As with the Financials, the uptrend from the March 2020 lows remains intact but there is scope for trading to remain choppy until the moving average is breached.

Relative to the S&P 500:

On a relative basis, the group continues to move to the downside, trading below a declining 50-day moving average. More time is needed for a base to build before a shift back to leadership can take hold.

Energy

The Energy sector remains above the rising 50-day moving average on an absolute basis as it continues to fight to achieve a sustained break above resistance. Should a breakout take hold, the odds favor a move back to the pre-pandemic highs near 465.

Relative to the S&P 500:

On a relative basis, the ratio is testing the rising 50-day moving average while continuing to hold below resistance.

Consumer Staples

The Consumer Staples sector is above price-based support but remains below the 50-day moving average. Remaining above support keeps the odds in favor of the highs being tested in the near-term.

Relative to the S&P 500:

On a relative basis, the steady downtrend remains in place. The ratio has traded to another new low over the past week, below the declining 50-day moving average.

Real Estate

Real Estate continues to consolidate above the 50-day moving average on an absolute basis, maintaining its uptrend. Price is above the near-term breakout level, near 265, that marks support. 

Relative to the S&P 500:

On a relative basis, Real Estate has pulled back to test the rising 50-day moving average, above price-based support. Holding these levels will be important to keeping the uptrend from the 2021 lows in place.

Utilities

The Utilities sector remains below the declining 50-day moving average and in a consolidation that has been playing out since last November. Support is near the 300 level, while resistance is at 345.

Relative to the S&P 500:

The relative trend remains bearish, making new lows again over the past week of trading. Below the declining 50-day moving average, the trend remains to the downside for this defensive group.

Health Care

The Health Care sector scored a breakout to record levels last week after a recent successful test of the rising 50-day moving average. Near-term support moves up to the breakout level, near 1,460.

Relative to the S&P 500:

On a relative basis, the group remains in base-building mode. Some progress has been made, with the ratio above the flat 50-day moving average. However, it will take a move above resistance to turn the relative trend bullish.

Take-Aways

New leadership appears to be emerging in the U.S. equity market. As the S&P 500 trades at record levels, groups such as Technology and Communication Services are taking the lead from the cyclical sectors. Defensive groups continue to lag, a bullish development for equities in general. Health Care is a group that has caught our attention, as absolute highs are met with early signs of a shift in the relative trend.

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.