Take-Aways:
Once again, we find it hard to make a compelling bullish case for the market, given sector trends. For investors who must have equity exposure, Energy and Utilities remain leadership. Discretionary and Financials continue to improve and warrant some extra attention. We are hard-pressed to find a trend that is worse than Communication Services.
Visiting the Sector Relatives
Information Technology
The Technology sector has faded from the underside of the 50-day moving average below the declining 200-day moving average. Below these levels, the June lows are in play and are likely to be tested.
Relative to the S&P 500
The relative trend remains the 50-day moving average and price-based resistance. The summer lows are in the process of being tested. A move below this level of support would keep the group in the underperforming camp.
Consumer Discretionary
The Consumer Discretionary sector is slightly above the 50-day moving average while remaining below the declining 200-day moving average. Price-based support at the 1,200 level is a key line in the sand for the bulls to defend. Below that mark, the group is likely to test 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. The group made a 63-day relative high yesterday.
Communication Services
The Communication Services sector remains below price-based support and the 50-day moving average as it trades well below the declining 200-day moving average. The June lows have now been broken to the downside, keeping the bears firmly in control of the trend.
Relative to the S&P 500
The relative trend is below the 50-day moving average, trading at all-time lows.
Materials
Despite a strong rally yesterday, the Materials sector remains below the 50 and 200-day moving averages as well as price-based resistance at the 490 level. The bears are in control until these levels are breached to the upside.
Relative to the S&P 500
On a relative basis, the group is fighting with the 50-day moving average above price-based support to keep the trend neutral for now.
Financials
Financials have moved back below the 50-day moving average while remaining below the declining 200-day moving averages after another short-lived rally. Support at the 520 level is a line the bulls must defend in the near term.
Relative to the S&P 500
On a relative basis, the ratio continues to improve, trading above support and the 50-day moving average. For investors who must be invested, this is a sector that has been less bad of late. The group made a 63-day relative high yesterday.
Industrials
Industrials have moved back below the 50-day moving average but remain below the declining 200-day moving average. Price-based support comes into play near the 720 mark.
Relative to the S&P 500
The relative trend is dancing with the 50-day moving average as it trades in a consolidation. The series of higher lows is an encouraging development, but resistance must be broken for the group to take a leadership position.
Energy
The Energy sector remains 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 group remains a leader with the ratio above the 50-day moving average and near the June peak.
Consumer Staples
Staples proved that even havens are not immune in a bear market. The group is below the 50 and 200-day moving averages as it trades in a sloppy consolidation. The June lows are in play.
Relative to the S&P 500
The relative trend remains in a near-term consolidation, oscillating around the 50-day moving average. The ratio is above support, keeping it in a neutral position.
Utilities
Utilities remain above the rising 50 and 200-day moving averages as they pull back from record levels. The grinding uptrend from the March 2020 lows remains in place as bulls hold the top position.
Relative to the S&P 500
The relative trend is above the 50-day moving average and is now testing resistance. A breakout would increase the odds of further outperformance.
Health Care
Health Care is holding price-based support below the 50 and 200-day moving averages. The trend here remains neutral.
Relative to the S&P 500
The relative trend has improved on the week and has retaken the 50-day moving average above price-based support. The group is in the “less bad” camp and would move into a leadership position with a break above the summer highs.
Real Estate
Real Estate has broken below price-based support at the pre-COVID highs and is below the 50 and 200-day moving averages. The June lows are now on the table.
Relative to the S&P 500
On a relative basis, the group is in a neutral trend, oscillating around the 50-day moving average below resistance. The group made a six-month relative low yesterday.
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