Playing the
Relative Game Now

by | Apr 26, 2022

Key Points

  • Growth Sectors Remain Under Pressure on an Absolute Basis
  • Technology Tests a Key Support Level
  • Communication Services Breaks Important Support
  • Sellers Find the Energy and Materials Sectors
  • Defensive Groups Are Relative Leaders

Visiting the Sector Relatives

Information Technology

Last week we noted that the 2,500 was in play for the Technology sector, and that level was reached yesterday before the bulls stepped in to defend. The index remains below the 50 and 200-day moving averages, keeping the bears in control of the trend for now.

Relative to the S&P 500

The relative trend is bearish below resistance and the declining 50-day moving average.

Consumer Discretionary

The Consumer Discretionary sector remains in the hands of the bears, with the index below the 50 and 200-day moving averages. The March lows are still in play and are a key level for the bulls to defend should they be reached. Breaking 1,500 would put the trend in favor of the bulls.

Relative to the S&P 500

On a relative basis, Discretionary is holding the 50-day moving average but remains below resistance, making it hard to become overly excited about this group.

Communication Services

Communication Services has breached support at the 215 level as it extends below the declining 50 and 200-day moving averages. Below 215, they retain control, and the odds of a move down to 190 are increased.

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 and near multiyear lows.

Materials

Materials have moved down to test the moving averages after establishing resistance near the 570 level. The trend is neutral as the battle for control raged between bulls and bears. Yesterday’s reversal to close near the high of the day can be considered an advantage for the bulls.

Relative to the S&P 500

On a relative basis, the bulls continue to hold their advantage. The ratio is above resistance and the 50-day moving average.

Financials

Financials remain in a consolidation zone, above the 580 level but below the 2021 highs. The index is holding also below the 50 and the 200-day moving averages. The trend remains solidly neutral, but yesterday’s reversal shows us that the bulls are continuing to fight hard.

Relative to the S&P 500

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

Industrials

Industrials remain in a neutral position, stuck in consolidation, above support but below the 50 and 200-day moving averages. Yesterday’s reversal from early weakness points to the bulls continuing to fight, but the bears retain the edge until the moving averages are breached to the upside.

Relative to the S&P 500

The relative trend is showing signs of improvement as it regains the 50-day moving average. Clearing the March peak would complete the bearish to bullish reversal.

Energy

In a swift three-day decline, the Energy sector has lost the first support zone and the 50-day moving average. The next key level for the uptrend is 530. Should that give way, the 200-day moving average will be in play.

Relative to the S&P 500

The relative trend has checked back to the rising 50-day moving average. For now, the ratio is in consolidation, and the benefit of the doubt remains with the bulls. However, investors in the space should have a close eye on this trend.

Consumer Staples

Staples are holding above the 810-support level and the rising 50 and 200-day moving averages. Yesterday’s reversal close near the top of the range is a signal that the bulls are not ready to give up control of the trend. 

Relative to the S&P 500

The relative trend has traded to new highs, above support, and the rising 50-day moving average.

Utilities

Utilities were not immune to last week’s selling pressure, and the index has pulled back toward price-based support and the 50-day moving average. Both key levels are above the rising 200-day moving average, keeping the trend bullish but under pressure.

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average and price-based support. The ratio is trading near recent highs.

Health Care

Health Care has given up the breakout level for the second time since December and has pulled back to the test the moving averages. The trend moves to a neutral position, awaiting a clearer direction.

Relative to the S&P 500

On a relative basis, the ratio is above the 50-day moving average and the breakout level, keeping the group in a leadership position.

Real Estate

Real Estate pulled back to support at 300 before the bulls stepped in to defend that key level. The index is above the 50 and 200-day moving averages, keeping the bulls in control of the trend.  

Relative to the S&P 500

On a relative basis, the group remains a leader as it extends above the rising 50-day moving average after breaking resistance. 

Take-Aways:

The bearish bias that has gripped the market since the start of the year has started to seek out the groups that had been holding up well on an absolute basis. Investors who must maintain an allocation to U.S. equities are now likely playing a relative game where finding the pockets of the market which are less bad would be a win. As of now, the strongest relative trends are in the defensive sectors. Energy remains a leader but must be watched closely.

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.