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Key Points

  • Only Three Groups are Above Their 50 and 200-Day Moving Averages
  • Technology and Discretionary Fail at Their 200-Day Moving Averages
  • Communication Services Make a Relative Low
  • Energy Begins to Reassert Its Uptrend
  • Utilities Remain in an Uptrend

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Visiting the Sector Relatives

Information Technology

The Technology sector has met resistance at the 200-day moving average and has not been able to break through. The bulls in the space want to see any further weakness find support near the rising 50-day moving average to have confidence that the June lows will not be breached.

Relative to the S&P 500

The relative trend was not able to break above resistance and is now moving toward the rising 50-day moving average. Until the short-term resistance level is overcome, the case for outperformance is difficult to make.

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

Consumer Discretionary

The Consumer Discretionary sector has also failed at resistance provided by the declining 200-day moving average while remaining above the rising 50-day moving average. This keeps the downtrend from the November highs in place, and the bulls want to see support near the 50-day hold.

Relative to the S&P 500

On a relative basis, Discretionary remains in a consolidation with support near the rising 50-day moving average and resistance around the February/March peaks.

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

Communication Services

After a rally attempt, the Communication Services sector is moving lower to test support at the flat 50-day moving average. The group remains well below the declining 200-day moving average. More time is needed as a base builds near the pre-COVID highs.

Relative to the S&P 500

The relative trend is bearish, below the declining 50-day moving average and at its lows for the cycle.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector is trapped between the 50 and 200-day moving averages as it tests short-term support at the 490 level. The trend is neutral and awaits a clear directional break.

Relative to the S&P 500

On a relative basis, the ratio is holding below the 50-day moving average but has a strong level of support just below. The trend is neutral.

Copper / Gold chart for March 25th research.

Financials

Financials have seen their rally stall below the declining 200-day moving average while remaining above the 50-day moving average. There is stronger support at the pre-COVID peaks that equity bulls want to see hold on further weakness.

Relative to the S&P 500

On a relative basis, the ratio is testing resistance and the declining 50-day moving average as the group is not yet ready to take a leadership position.

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

Industrials

Industrials have moved below the 200-day moving average after a brief trip above it. Further weakness is likely to find support at the rising 50-day moving average. Below that, the pre-COVID highs are the last line of defense for the bulls.

Relative to the S&P 500

The relative trend remains in a consolidation above the 50-day moving average but below resistance. The series of higher lows tilts the odds in favor of a breakout.

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

Energy

The Energy sector remains above the 50-day moving average, which was regained last week, as the 200-day moving average continues to grind to the upside. Short-term support has been established near the 520 level. Above this mark, there is running room to the June highs.

Relative to the S&P 500

The relative trend has also improved, moving above resistance and the 50-day moving average. Above these levels, there is a case to be made for further outperformance.

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

Consumer Staples

Staples remain above the 50 and 200-day moving averages as they trade in consolidation. Above the moving averages, the door is open for a run to the April highs.

Relative to the S&P 500

The relative trend remains in a near-term consolidation above support but below the flat 50-day moving average. Breaking above the moving average sets the stage for further outperformance.

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

Utilities

Utilities are trading near record highs above the rising 50 and 200-day moving averages despite selling off with the broader market yesterday. Further weakness is likely to find support at the moving averages to keep the choppy advance from the COVID lows in place.

Relative to the S&P 500

The relative trend has moved above the 50-day moving average and will now have to contend with price-based resistance. Moving above that level puts the group in a clear leadership position.

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

Health Care

Health Care remains in a consolidation zone between the 50 and 200-day moving averages while trading above price-based support near 1,460. Clearing the 1,600 level is key for making a stronger bullish case.

Relative to the S&P 500

The relative trend remains below the 50-day moving average as it tests price-based support.

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

Real Estate

Real Estate has been rejected at the declining 200-day moving average. Further weakness is likely to find support near the 50-day moving average and the pre-COVID peak. The trend is neutral until there is a decisive directional break.

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.

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

Take-Aways

The improvements that we have been highlighting over the past few weeks have begun to stall, with many groups below their 200-day moving averages. There are only three groups above both the 50 and 200-day moving averages: Utilities, Staples, and Energy. At the same time, there are not many clear relative trends that point to decisive leadership. It is hard to make a case for being aggressively bullish; however, many groups are holding above support, so there is not an overly compelling bear case either.

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