Key Points
- Broad Participation as Financials Attack their Highs
- Technology’s Relative Uptrend Stalls
- Bullish Relative Trend Change for the Energy Sector
- Materials and Industrials Rebound from Support; Will it Continue?
- REITs and Utilities Fade as Rates Rise
Chart in Focus
With interest rates moving higher, the Financials will remain in focus in the near-term. The group tends to benefit from higher rates, and, thus far, that has been playing out. Looking at the group from the perspective of longer-term breadth trends, we can see that over 93% of the stocks in the S&P 500 Financials sector are above their respective 200-day moving average. The index itself is pushing to the top of the recent consolidation range as it trades above its own rising 200-day moving average. Odds favor new highs.
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
After a brief undercut last week, the Technology sector has rallied to reclaim broken support and the 50-day moving average. The 2,700 level remains important and, should that give way, support at 2,600 will likely be tested.
Relative to the S&P 500
The relative trend remains in a stalling pattern between support at the 50-day moving average and price-based resistance. Rising interest rates are likely a headwind for the group in the near-term. A break of the moving average will open the door to a test of support at the April highs once again.
Consumer Discretionary
The Consumer Discretionary sector has regained its 50-day moving average and pushed to the top of the range that has been in place since July. Price-based support near 1,400 continues to be the key level for the consolidation. Resistance is near 1,490.
Relative to the S&P 500
Communication Services
The Communication Services sector remains below the 50-day moving average after breaking below near-term support last week. Below these two key levels, the odds favor a move to the next support level near 260.
Relative to the S&P 500
Materials
The Materials sector has tested and held price-based support but remains below the 50-day moving average as the consolidation continues. Until there is a decisive break one way or the other, we are content to watch the battle raging within the consolidation zone.
Relative to the S&P 500
Financials
The Financials have pushed to the top of the consolidation zone, putting resistance at the 650 level in play. The group is above the rising 50-day moving average as the recent backup in interest rates has acted as a tailwind for the group.
Relative to the S&P 500
Industrials
The Industrials have tested and held support but remain below the 50-day moving average. The group continues to trade in the consolidation that has been in place since May.
Relative to the S&P 500
Energy
After holding price-based support, the Energy sector has reversed higher to break above the 50-day moving average and the short-term consolidation zone. The door is now open to an attack on the highs near 420.
Relative to the S&P 500
At the same time, the relative trend has reversed higher and is in the process of breaking resistance. The ratio is above the 50-day moving average, increasing the odds that Energy is regaining the leadership position that it lost in March.
Consumer Staples
The Consumer Staples sector remains below the 50-day moving average and is having a hard time regaining broken support (now resistance?). Odds now favor a move down to the next support level near 710.
Relative to the S&P 500
Real Estate
Real Estate has broken price-based support after losing the 50-day moving average last week. The group has now made a lower high, and a lower low as the early stages of a trend reversal appear to be at hand.
Relative to the S&P 500
Utilities
The Utilities Sector has traded lower for 13 consecutive days. The late August strength was a false breakout, and the group is now well below the 50-day moving average, which is beginning to turn lower. This is a group that is sensitive to interest rates and is now feeling the pressure.
Relative to the S&P 500
Health Care
The Health Care sector remains below the 50-day moving average, opening the door to a move down to price-based support near 1,470.