Time to Pay Attention
to the Growth Themes Again?

by | Mar 29, 2022

Key Points

  • Technology & Discretionary Continue to Rebound
  • Communication Services Remain Under Relative Pressure
  • Materials, Industrials, and Energy Are Cyclical Leaders
  • Financials Continue to Lag Despite Higher Rates
  • Utilities Break to New Highs

Visiting the Sector Relatives

Information Technology

The Technology sector continues to rally, breaking above the 50 and 200-day moving averages after holding support in the 2,500-2,600 zone. This is a signal that the bulls are slowly taking control of the trend, a position that would be enhanced by a move above the February high near 2,880.

Relative to the S&P 500

The relative trend has also improved over the past week, regaining support and moving slightly above the 50-day moving average. Moving above the February highs would open the door to an attack on the peaks from late 2021.

Consumer Discretionary

The Consumer Discretionary sector is following through on last week’s strength, powering above the 50-day moving average to battle with the 200-day moving average. Breaking this measure of long-term trend would set the stage for a run to the November highs.

Relative to the S&P 500

On a relative basis, Discretionary has moved above the 50-day moving average as it works to transition from a bearish to a bullish trend.

Communication Services

Communication Services has moved further above the 215-support level and is now testing the 50-day moving average. The 200-day moving average remains well above current levels, making it hard to make an overly compelling bullish case right now. The series of lower highs and lower since the August 2021 peak remains in place.

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 trading near the recent 52-week lows.

Materials

Materials continue to move higher, setting their sights on the January peak. The index is above the 50 and 200-day moving averages, which could provide support to pullbacks in the near term.   

Relative to the S&P 500

On a relative basis, the ratio is still fighting price-based resistance above the rising 50-day moving average. There is a slight edge for the bulls above these two levels.

Financials

Financials remain in a consolidation zone, above the 580 level but below the 2021 highs. The index has recently reclaimed the 50 and 200-day moving averages, which could act as support in the near term.

Relative to the S&P 500

On a relative basis, the group remains in a choppy trend, oscillating around the 50-day moving average while holding below resistance. The lack of better relative performance in the face of rising interest rates remains a surprise.

Industrials

Industrials have pushed above the 200-day moving average after breaking through the 50-day moving average in the prior week. However, the index remains in the choppy consolidation that has been in place for nearly a year. Holding above the moving averages gives a slight edge to the bulls in the near term.

Relative to the S&P 500

The relative trend remains above resistance and is dancing with the 50-day moving average, which is trending higher. The ratio has also been making higher highs and higher lows since the start of the year.

Energy

The trend in Energy remains bullish after a successful test of support at the 530 level. The steadily rising 50 and 200-day moving averages confirm this view. Support is near the 540 level.

Relative to the S&P 500

The relative trend also remains above the 50-day moving average. If we wanted to lodge a complaint, it would be that the recent absolute high was met with a lower relative peak. However, Energy retains a leadership position until there is a clear reversal.

Consumer Staples

Staples have rebounded from support and the 200-day moving average and have now reclaimed the 50-day moving average. Moving above the 800-level brings the January highs into play.

Relative to the S&P 500

Staples continue to trend lower on a relative basis, below a 50-day moving average that is shifting from rising to flat.

Utilities

Last week we noted that the door was open for the Utilities to attack their prior highs. They have done that and more, breaking out of the consolidation that has been in place since last August. The rising 50 and 200-day moving averages support this fresh bullish trend.

Relative to the S&P 500

The relative trend is moving higher above the 50-day moving average after testing and holding price-based support.

Health Care

Health Care bulls are in the process of clearing the hurdle at the 1,590 level as the index trades above the 50 and 200-day moving averages. Holding above 1,590 clears a path for a move toward the late 2021 highs.

Relative to the S&P 500

On a relative basis, the ratio is above the rising 50-day moving average but is having a challenging time breaking above resistance. The trend remains in favor of the bulls for now, but they will want to see a clean breakout in the near future.

Real Estate

Real Estate remains in a consolidation zone between 280 and 305. The group has regained the 50 and 200-day moving averages, giving a slight edge to the bulls.

Relative to the S&P 500

On a relative basis, the group is in a sloppy consolidation, oscillating around the flat 50-day moving average.

Take-Aways:

Technology and Discretionary are leading a possible resurgence in the “growth” themes under the surface of the S&P 500. At the same time, cyclical themes continue to exhibit signs of leadership. The defensive sectors are a mixed bag, but the strength in Utilities has our attention.

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.