The Key Is Finding
What’s Less Bad

by | Mar 15, 2022

Key Points

  • Technology Breaks Support, Remains an Underperformer
  • Another New Relative Low for Communication Services
  • Materials Break Relative Resistance
  • Industrials Turn the Corner on a Relative Basis
  • Defensive Sectors Outperform

Visiting the Sector Relatives

Information Technology

The Technology sector continues to move lower, closing below the 2,500 level yesterday while the 50 and 200-day moving averages rollover. Resistance moved to the downside for a second consecutive week and now sits near 2,600.

Relative to the S&P 500

The relative trend remains below support and below the declining 50-day moving average.

Consumer Discretionary

Consumer Discretionary remains under pressure, below the declining 50 and 200-day moving averages. Below these measures of trend, the 2021 lows are a potential downside objective.

Relative to the S&P 500

On a relative basis, Discretionary is below price-based support while trading below the declining 50-day moving average.

Communication Services

Last week, we noted that the door was open for a move to 215 for the Communication Services sector. This week, that level has been reached. The bears keep the benefit of the doubt with the price below the 50 and 200-day moving averages.

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 has made another new one-year low.

Materials

Materials have carved out a zone of support in the 490 to 510 range in the short term. Price remains below the 50 and 200-day moving averages, keeping the benefit of the doubt with the bears for now. 

Relative to the S&P 500

On a relative basis, the picture has improved on the week. The ratio is breaking above resistance and is holding above the rising 50-day moving average. The group continues to benefit from being “less bad.”

Financials

Financials remain in a consolidation zone, above support at the 580 level but below the 50 and 200-day moving averages. This keeps the trend neutral.

Relative to the S&P 500

On a relative basis, the group also remains in a choppy trend, oscillating around the 50-day moving average while holding below resistance.

Industrials

Industrials continue to wrestle with support at the 830 level. The group is below the declining 50 and 200-day moving averages, levels that must be regained for the bulls to take control of the trend.

Relative to the S&P 500

The relative trend remains above resistance, and the 50-day moving average is trending higher. Less bad is still good enough for this cyclical group.

Energy

The Energy is taking a breath after moving well above the 50 and 200-day moving averages. Support remains near 530, then 450 below that.

Relative to the S&P 500

The relative trend also remains strong, trading near a 52-week high, above the 50-day moving average.

Consumer Staples

Staples are breaking support at the 200-day moving average, below the declining 50-day moving average. The bears have taken control of the trend.  

Relative to the S&P 500

Despite the price weakness mentioned above, the fact of the matter is Staples remains “less bad” and is in a bullish relative trend. The ratio has found support at the rising 50-day moving average and is on the verge of breaking resistance.  

Utilities

Utilities are holding above the key 355 level and above the 50 and 200-day moving averages. In a market full of broken support levels, Utilities stand out as they trade above resistance.

Relative to the S&P 500

The relative trend is near a 52-week high, putting the group in a leadership position as it trades above the rising 50-day moving average.

Health Care

Health Care remains trapped in a consolidation zone, below the moving averages (which acted as a wall of resistance yesterday), with support near 1,460. Bulls want to see the 1,590-level regained to set the stage for a run to new highs.

Relative to the S&P 500

On a relative basis, the ratio is above the rising 50-day moving average and has moved to a new 52-week high. Once again, less bad is good enough.

Real Estate

Real Estate remains in a consolidation zone between 280 and 305 after briefly trading below support. The group is below the 50 and 200-day moving averages, which must be overcome before a stronger bullish case can be made. 

Relative to the S&P 500

On a relative basis, the group has spiked higher, above the 50-day moving average, and is on the verge of a breakout.

Take-Aways:

For the second week in a row, “less bad is good enough” for investors who must maintain an allocation to equities and are playing the “relative” game. Thematically, defensive groups are outperforming along with cyclical. The growth sectors have been and remain weak on an absolute and relative basis.

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.