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Key Points

  • Tech Breaks Out to the Upside—Can It Hold?
  • Consumer Discretionary Faces a Key Test
  • Financials Begin to Underperform
  • Energy Holds the Line
  • Health Care Rolls Over on a Relative Basis

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Visiting the Sector Relatives

Information Technology

Technology has broken out of key resistance to the upside at the 2,500 level above a rising 50-day moving average, and the sector has the 200-day moving average at 2,675 set in its sights.

Relative to the S&P 500

On a relative basis, the group appears to be in a bearish to bullish transition as it breaks above a long-term zone of polarity above the ratio’s rising 50-day moving average.

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

Consumer Discretionary

The Consumer Discretionary sector faces a key test at 1,300 resistance as the group trades above the rising 50-day moving average. The bulls want to see an upside breakout above this zone.

Relative to the S&P 500

The group has broken out of relative resistance to the upside at the March lows above the ratio’s rising 50-day moving average after struggling to maintain any material ground above the indicator all year long.

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

Communication Services

The sector continues to chop and grind at the pre-COVID highs at the 190 zone as the group struggles with the declining 50-day moving average, which is well below the 200-day moving average.

Relative to the S&P 500

The group continues its trend of underperformance this week relative to the S&P 500 in breaking relative support to the downside below the ratio’s declining 50-day moving average.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector has found resistance at the declining 50-day moving average after the continued rally from long-term support at the 450 zone. The bias remains with the bears until the indicator can be cleared to the upside.

Relative to the S&P 500

On a relative basis, the group continues to trade below relative resistance at the highlighted zone below the ratio’s declining 50-day moving average, a key zone that the bulls want to see taken out to the upside. Here, too, the bears remain in control.

Copper / Gold chart for March 25th research.

Financials

After rallying from long-term support at the pre-COVID highs at the 520 zone, Financials continue trading above the flat 50-day moving average with 590 resistance coming into play.

Relative to the S&P 500

On a relative basis, the group has found long-term relative resistance at the highlighted zone below the ratio’s declining 50-day moving average after a series of lower highs in the ratio over the prior quarter of trading.

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

Industrials

After a strong rally above the flat 50-day moving average, Industrials are testing resistance at the June highs at the 815 zone from below. Should this area give way, the 200-day moving average comes into play shortly thereafter.

Relative to the S&P 500

The group continues to be an in-line performer at best relative to the S&P 500—not breaking down and not breaking out, struggling around the ratio’s 50-day moving average.

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

Energy

Energy is doing battle with the declining 50-day moving average and making a valiant attempt to hold support after breaking out of the 585 zone to the upside over the prior two trading sessions. Intermediate-term support lines up with the 530 zone and the 200-day moving average, should the 585 zone give way to the downside.

Relative to the S&P 500

On a relative basis, the group is struggling around the pre-COVID relative highs below the ratio’s declining 50-day moving average. Energy bulls want to see this level held to the upside in the coming weeks.

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

Consumer Staples

The Consumer Staples sector has broken out to the upside of both 775 resistance at the May highs and the 200-day moving average on a recent bout of strength over the prior two trading sessions, making this sector one of only three that have been able to maintain ground above the 200-day moving average.

Relative to the S&P 500

Despite recent strength on an absolute basis, the group has pared back recent relative gains below the ratio’s declining 50-day moving average and is heading toward relative support at the highlighted zone.

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

Utilities

Utilities have popped to the upside in the prior three trading sessions, once again breaking out of the pre-COVID highs at the 360 zone above rising 50 and 200-day moving averages.

Relative to the S&P 500

Much akin to the price action in Staples, Utilities have begun to underperform on a relative basis, trapped between relative support at the highlighted zone and the ratio’s declining 50-day moving average.

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

Health Care

Health Care remains trapped below overhead resistance at the 1,550 zone and the 200-day moving average, a level bulls want to see taken out to the upside. Until a breakout can materialize, a natural stance remains prudent.

Relative to the S&P 500

On a relative basis, the former sector darling has rolled over into an underperformer, trading below long-term relative resistance at the highlighted zone, and breaking materially below the ratio’s 50-day moving average for the first time since Q4 of last year.

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

Real Estate

The Real Estate sector has moved up to test 280 resistance from below after a rally from the flat 50-day moving average late last month. Should an upside breakout occur, the 200-day moving average near the 290 zone comes into significance.

Relative to the S&P 500

It was another week of the same as the group chops and grinds around the ratio’s 50-day moving average.

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

Take-Aways

All eyes are on the largest S&P 500 weighting as the Technology sector breaks out to the upside, leaving investors curious as to whether the breakout will hold this time around. The second largest index weighting, Health Care, continues to create a performance headwind for the S&P 500. While the underperformance from Health Care, Consumer Staples, and Utilities has been a welcome development for the equity bulls, the price action in the cyclicals remains mixed.

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