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Key Points

  • Growth Sectors Look to Hold Support Levels
  • Discretionary Has Room to Pre-Covid Highs
  • Cyclicals are in Consolidation Zones, Showing Better Relative Strength
  • Energy Trades New Near Cycle Highs
  • Defensive Groups Are Mixed

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Visiting the Sector Relatives

Information Technology

The Technology sector remains below broken support (now resistance?) at the 2,500 level and the declining 50 and 200-day moving averages. The series of lower lows and lower highs from the early 2022 peak were kept in place on Friday. The bears remain in control of the trend.  

Relative to the S&P 500

The relative trend is bearish below resistance and the declining 50-day moving average.

Consumer Discretionary

The Consumer Discretionary sector traded to a new cycle low last week and now has the pre-COVID highs in sight to the downside. The group is below the declining 50 and 200-day moving averages.

Relative to the S&P 500

On a relative basis, Discretionary is trading below its pre-COVID levels and the declining 50-day moving average.

Communication Services

Communication Services stocks continue to hold support at the pre-COVID highs for now. However, the index remains below the declining 50 and 200-day moving averages, keeping the bears in control of the trend.

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, despite a rally attempt in the near term.

Materials

The Materials sector is trading in a clearly defined range but remains below the 50 and 200-day moving averages. The trend is neutral, with a slightly bearish bias.

Relative to the S&P 500

On a relative basis, Materials are an outperformer, trading above the rising 50-day moving average. The ratio is threatening the highs from May 2021.

Financials

Financials are trading in a consolidation zone, with support at the pre-COVID highs. The group is below the declining 50 and 200-day moving averages, keeping the bias to the downside for now. 

Relative to the S&P 500

On a relative basis, the group is also in a consolidation. The ratio has held support and is in the process of breaking above the 50-day moving average. A move above resistance would set the stage for further leadership.

Industrials

Industrials are stuck in a consolidation zone below the 50 and 200-day moving averages. Resistance is near 830 (lines up with the 50-day moving average), and support comes into play near 760. Below 760, the pre-COVID highs are likely to be tested.

Relative to the S&P 500

The relative trend is holding the 50-day moving average. Clearing the March peak would complete the bearish to bullish reversal.

Energy

The Energy sector is threatening a break to new highs for the cycle, trading above the 50 and 200-day moving averages. The bulls remain in control of the trend, and there is support near 590.

Relative to the S&P 500

The relative trend remains bullish, above the rising 50-day moving average, and traded to a new high yesterday.

Consumer Staples

The Consumer Staples sector has come under intense pressure in the near term, thanks in part to a poorly received earnings report from WMT. The group has moved below the 50 and 200-day moving and will now have to work to repair the technical damage that has been done.

Relative to the S&P 500

The relative trend is still bullish but well off the recent highs. The ratio remains above the rising 50-day moving average to keep a bullish bias.

Utilities

Utilities have regained broken support and will now look to move above the 50-day moving average to reestablish a bullish trend. The rising 200-day moving average keeps the bulls in control of the long-term trend.    

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average and trading near the high for the cycle.

Health Care

The Health Care sector continues to rebound from support but remains below the 50 and 200-day moving averages. The trend is neutral with a bearish bias until the moving averages are breached to the upside.

Relative to the S&P 500

The relative trend is bullish, trading to a new high for the cycle last week. Support moves higher, above the rising 50-day moving average.

Real Estate

Real Estate continues to hold support at the pre-COVID highs while remaining below the declining 50 and 200-day moving averages. The bears keep the ball until there is proof that a rally is taking hold.    

Relative to the S&P 500

On a relative basis, the group is below resistance and the 50-day moving average.

Take-Aways:

At the risk of sounding like a broken record, “less bad” continues to be the focus for investors who must maintain an allocation to U.S. equities. Energy remains the best sector trend in the market, and other cyclicals are holding within consolidation zones. Growth themes continue to lag, while defensives offer a mixed bag.
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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.