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Take-Aways:

There is continued improvement under the surface of the S&P 500, with a handful of groups regaining their 50-day moving averages after staging rebounds over the past few weeks. To be sure, there is still a lot of work to do for the trends to become bullish, so the focus remains on relative strength. That focus continues to point to Energy and Health Care as sustained leadership while identifying Industrials and Financials as emerging leaders.

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Visiting the Sector Relatives

Information Technology

After regaining broken support in the prior week, Technology closed above the 50-day moving average this week. The rally from the lows is impressive but has not done much to change the prevailing downtrend for the group. We want to see a move above 2,500 to have more confidence that strength will last.

Relative to the S&P 500

The relative trend remains below the 50-day moving average after breaking down from the consolidation zone.

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

Consumer Discretionary

The Consumer Discretionary sector trades below the 50 and 200-day moving averages but has established a support level near the pre-COVID highs. A countertrend rally has an upside to the 1,200 mark.

Relative to the S&P 500

On a relative basis, Discretionary remains in a consolidation. However, the ratio remains below the 50-day moving average and is below price-based resistance. More time is needed.

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

Communication Services

The Communication Services sector remains below price-based resistance (now at 174) and the 50-day moving average as it trades well below the declining 200-day moving average. The door remains open to a test of the COVID lows.

Relative to the S&P 500

The relative trend is below the 50-day moving average, trading at all-time lows.

Lumber / Gold chart for March 25th research.

Materials

The Materials sector has regained the 50-day moving average but remains below the 200-day moving average, which must be overcome for the group to become incrementally bullish from here. Support near 430 provides a clear level that can be used to manage risk.

Relative to the S&P 500

On a relative basis, the group is fighting to regain the 50-day moving average above price-based support to keep the trend neutral for now.

Copper / Gold chart for March 25th research.

Financials

Financials have broken above the 50-day moving average but remain below the 200-day moving average after holding support at the pre-COVID highs. The bulls need to recapture the 200-day moving average to make a stronger case.

Relative to the S&P 500

On a relative basis, the ratio is trading above support and the 50-day moving average. For investors who must be invested, this is a sector that should be on the radar.

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

Industrials

Industrials are fighting to break above the 200-day moving average after regaining the 50-day moving average over the past week. A move above the measure of long-term trend would set the stage for a test of the highs.  

Relative to the S&P 500

The relative trend has broken out of the consolidation, putting the group into a leadership position.

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

Energy

The Energy sector is trading above support and the 50 and 200-day moving averages. Last week we noted that the highs were in play, and the group has not disappointed.

Relative to the S&P 500

The group remains a leader, with the ratio trading near the highs above the 50-day moving average.

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

Consumer Staples

After holding support at the 690 level, Consumer Staples has regained the 50-day moving average and has its sight set on the 200-day moving average.  Breaking this long-term trend could set the stage for a run toward the highs.

Relative to the S&P 500

The relative trend remains in a near-term consolidation but is holding above support and the rising 50-day moving average.

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

Utilities

Utilities remain below the now declining 50 and 200-day moving averages but have held support near the 325 level. The 50-day has crossed below the 200-day moving average, and there is now strong resistance near the 360 level.

Relative to the S&P 500

The relative trend remains below the rising 50-day moving average. Resistance must be broken to make a case for leadership.

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

Health Care

Health Care has pushed through the 200-day moving average and is above the 50-day moving average after holding support near 1,400. Breaching the August peak could set the group up for an attack on the April peak. 

Relative to the S&P 500

The relative trend remains strong. The ratio is above the 50-day moving average after holding support and trades near the 2020 highs.

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

Real Estate

Real Estate remains below the declining 50 and 200-day moving averages but has held support at the 210 level to give investors the countertrend rally that we called out last week. Resistance comes into play near the 50-day moving average.

Relative to the S&P 500

On a relative basis, the group remains in a bearish trend below the declining 50-day moving average.

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

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