Key Points
Key Chart
The S&P 500 Metals and Mining Index traded to a new highs on an absolute basis yesterday on the heels of strength in copper. The index is in a steady uptrend above the rising 50-day moving average and we note that yesterday’s close was at the high of the day. On a relative basis, the trend also remains to the upside, the group traded to a 21-day relative high yesterday.
Visiting the Sector Relatives
All the charts below will look at the individual sector indexes on an absolute basis (top panel) and relative to the S&P 500 (bottom panel) to get a sense of leaders, laggards and shifts in trends. We include the 50-day moving average on each.
Materials
The S&P 500 Materials Sector traded to a new high yesterday as the steady uptrend continues. The group is above the rising 50-day moving average. Support is in the 480 – 500 range and there is a potential upside to the 620 level.
Relative to the S&P 500:
The Materials Sector has entered a consolidation after a choppy move higher and is trading above the rising 50-day moving average.
Communication Services
The Communication Services Sector is trending higher, above the 50-day moving average which has acted as support to pullbacks recently. Price-based support can be found at the 220 level. On the upside, there is room to the 290 level.
Relative to the S&P 500:
Financials
The Financials Sector traded to another new high yesterday and the steady path to the upside continues. The group is above the rising 50-day moving average and there is price-based support at 550 in the near term. On the upside, there is potential for the index to move to the 670 level.
Relative to the S&P 500:
On a relative basis, the Financials have pulled back to test the rising 50-day moving average and remain in an uptrend since making a low in November.
Industrials
The Industrials Sector is trending higher, above the rising 50-day moving average, and traded at a new high yesterday. Near-term support is in the area near the moving average (800 – 820). On the upside, there is potential for the group to reach the 905 mark.
Relative to the S&P 500:
Industrials are testing support at the rising 50-day moving average as the group continues to make higher highs and higher lows vs the broader index. A break above near-term resistance would be the next step in continued outperformance.
Technology
The Technology Sector is trading at record levels above the rising 50-day moving average after holding support at the September highs. Above support, there is an upside to the 2,790 level.
Relative to the S&P 500:
Despite trading at record levels on an absolute basis, the Technology Sector has more work to do to break to new highs on a relative basis. Thus far, price-based support and the 50-day moving average are holding. A break above the September high would put the group back in a leadership position.
Consumer Staples
Consumer Staples traded lower yesterday and failed to make a new high along with the broader market. The group remains above the rising 50-day moving average and support at the 700-breakout level.
Relative to the S&P 500:
On a relative basis, the trend to the downside is clear. The group is fading below the 50-day moving average and traded to a 21-day relative low yesterday.
Real Estate
Last week we wrote that Real Estate was threatening new highs. This week the group is at new highs, breaking above the levels that were reached prior to the pandemic. Those prior highs near 260 should act as support in the near-term. On the upside, there is room for the group to reach 325.
Relative to the S&P 500:
On a relative basis, Real Estate appears to be “making the turn.” The ratio has retaken the 50-day moving average, which is beginning to move higher.
Utilities
The Utilities Sector has not threatened a break to new highs above the pre-pandemic levels. The group is above a meandering 50-day moving average but below two important resistance points.
Relative to the S&P 500:
Health Care
The Health Care Sector is trading at record levels, above the rising 50-day moving average after breaking up and out of a short-term consolidation. The move to the upside has taken the group to an extended level relative to the moving average (50-day Z-score was recently over 3). It would not be surprising to see a pause in near 1,450 in the near-term.
Relative to the S&P 500:
Consumer Discretionary
The Discretionary Sector is holding near-term support above the slowly rising 50-day moving average as the group trades near record levels. The group will be in focus today as one of its largest stocks, Tesla reported results after the close last night.
Relative to the S&P 500:
Energy
The Energy Sector continues to consolidate around the rising 50-day moving average after failing to break above resistance at the 2019 consolidation. This is a key point that must be overcome to have confidence that the uptrend from the March lows will continue.
Relative to the S&P 500:
Take-Aways
Like last week, there are many sectors which are trading at record levels along with the S&P 500. This is a bullish confirmation of the trend’s strength, the more participation, the more likely the trend is to persist. However, the question of leadership remains up in the air.
There are clear underperformers such as Staples, Utilities, and Health Care, but on the upside, rotation remains the theme.