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Key Points

  • Growth Sectors Leave Bullish Hammers in Place, Tradable Lows?
  • Cyclicals Are Battling Support at Breakout Levels
  • Defensive Groups Are Testing Support
  • Energy Rebounds to New Highs
  • Health Care Moves to a Neutral Stance

Visiting the Sector Relatives

Information Technology

The bears have tried to take the upper hand in the Technology space, but the bulls are fighting hard. Important support at the 2,900 level was breached yesterday before a late rally pushed back above, leaving a large “hammer” candle on the chart. The index remains below the 50-day moving average, putting the burden of proof on the bulls in the near term.

Relative to the S&P 500

The relative trend remains above price-based support but has a lot the moving average, moving to a neutral position for now.

Consumer Discretionary

The Consumer Discretionary is in the process of testing the risk management level that we highlighted last week, near 1,560, but a late rally has kept the bulls in the match. We can’t rule out a rebound to retest the 50-day moving average.

Relative to the S&P 500

On a relative basis, Discretionary is fighting to regain a leadership position but was turned away at the 50-day moving average. There is still a lot of work to do here.

Communication Services

The Communication Services sector also used a late rally to close near the top of its trading range yesterday but remains below the broken support and the declining 50-day moving average. The group remains one of the worst trends in the market, but we are open to a near-term bounce that brings the moving average into play.

Relative to the S&P 500

Relative to the S&P 500, the group remains in a downtrend below the low from early 2021. A lot of work that needs to be done before this sector becomes compelling on a relative basis.

Materials

Materials are testing the 560-breakout level and the rising 50-day moving average. This sets up a straightforward scenario. Above 560, the bulls are in control. Below that level, risk should be managed. Odds favor a continuation to the upside, however, as the group has been making higher lows of late.  

Relative to the S&P 500

On a relative basis, Materials remain neutral, battling the 50-day moving average below price-based resistance.

Financials

The upside that was hinted at last week came to fruition this week as the Financials have broken to new highs above the 670 level. The 50-day moving average is turning highs, and the bulls are in control for now and until the price is below 650.

Relative to the S&P 500

The relative trend has impressed on the week, spiking to regain the 50-day moving average. While we can’t rule out a short-term throwback, the odds favor a run at the October highs.

Industrials

The Industrial sector can’t catch a break(out). After another false move above resistance, the group has fallen back into the consolidation zone. So far, the 50-day moving average is acting as support, and the bulls retain the benefit of the doubt, but there are better trends out there.

Relative to the S&P 500

The relative trend remains bearish but is showing signs of improvement as the 50-day moving average has been breached and resistance is being tested.

Energy

The Energy sector has broken to new highs, in line with the view that we expressed last week. Above 450, the bulls are in control and will remain in control until 425 is broken. The 50-day moving average is turning higher as well.

Relative to the S&P 500

The relative trend has healed well, regaining the 50-day moving average and trading above renaissance.

Consumer Staples

The bulls remain in control in the Consumer Staples sector. The only knock that we have is that the index remains extended above the 50-day moving average. Short-term support is near 795, while stronger support is at 760.

Relative to the S&P 500

The relative trend is also bullish, taking out the next resistance level while trading above the rising 50-day moving average.

Utilities

Utilities are holding above the breakout level after reaching new highs. Near-term support is near 355, being tested now. The 50-day moving average is rising and above the key 345 level that we have highlighted. Above this mark, the bulls are in control.

Relative to the S&P 500

The relative trend is holding above the 50-day moving average, which has shifted from declining to flat to rising. The trend continues to improve.

Health Care

Health Care moves into the neutral camp, between support and resistance and dancing with the 50-day moving average.

Relative to the S&P 500

On a relative basis, Health Care is testing/holding support, keeping the benefit of the doubt with the bulls.

Real Estate

Real Estate has pulled back to test support and the 50-day moving average. The hammer candle yesterday shows us that the bulls are not ready to give up control yet. Above 295, they retain the benefit of the doubt.

Relative to the S&P 500

On a relative basis, the group has pulled back to test the rising 50-day moving average, bulls want to see this level hold.

Take-Aways:

The growth sectors of the S&P 500 all fended off a strong bearish attack yesterday to close near the highs of the range. This sets the stage for the short-term, tradable lows to be established with a clear level that can be used to manage risk.

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.