Violent Selling Leaves
No Sector Immune

by | Jun 14, 2022

Key Points

  • Growth Sectors Weaken Further
  • Communication Services Breaks a Key Level
  • Cyclical Remain Mixed on a Relative Basis
  • Sellers Finally Find the Energy Sector
  • But For Real Estate, Defensive Sectors are Outperforming

Visiting the Sector Relatives

Information Technology

Last week we noted that the bears are in control of the Technology sector as price is below 2,500. They have not wasted their top position, driving the index further below the declining 50 and 200-day moving averages. Odds favor a move toward the pre-COVID highs.

Relative to the S&P 500

The relative trend is still bearish below resistance and the declining 50-day moving average.
High Beta / Low Volatility chart for March 25th research.

Consumer Discretionary

After rebounding from support at the pre-COVID highs, the Discretionary sector has moved back to those levels again. The index is well below the declining 50 and 200-day moving averages, keeping the bears in control of the trend until a more stable base develops.

Relative to the S&P 500

On a relative basis, Discretionary remains in a downtrend, below the declining 50-day moving average.
Discretionary / Staples (EW) chart for March 25th research.

Communication Services

Communication Services stocks have broken support at the pre-COVID highs, cascading further below the declining 50 and 200-day moving averages. The bears are in control, a dynamic that we have been highlighting for weeks.

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.
Lumber / Gold chart for March 25th research.

Materials

The Materials sector is breaking support at the lower end of the consolidation zone and trades below the 50 and 200-day moving averages. The bears are taking control of this formerly neutral sector.

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 now facing resistance at the May 2021 peak.

Copper / Gold chart for March 25th research.

Financials

Financials are testing 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 remains in a consolidation. The ratio has held support but must retake the 50-day moving average. A move above resistance would set the stage for further leadership.
Small Caps / Large Caps chart for March 25th research.

Industrials

Industrials remain 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 the pre-COVID highs.

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

Energy

After evading them for months, the sellers found the Energy sector yesterday. Interestingly, they did not do much damage to the bullish trend. The index is still above the rising 50 and 200-day moving averages and has yet to make a lower low. 

Relative to the S&P 500

The relative trend remains bullish, above the rising 50-day moving average and near the recent highs.
Growth vs Value (Large Cap) chart for March 25th research.

Consumer Staples

Staples failed at the 200-day moving average, below the 50-day moving average, and are heading lower again. The group has room for a support zone between 665 and 695.

Relative to the S&P 500

The relative trend continues to improve, keeping this defensive sector in the “less bad” camp.
Growth vs Value (Large Cap) chart for March 25th research.

Utilities

Utilities have broken support at the pre-COVID highs and are now below the 50 and 200-day moving averages. At best, we can say that the trend is now neutral.

Relative to the S&P 500

The relative trend is bullish, above the rising 50-day moving average.
Growth vs Value (Large Cap) chart for March 25th research.

Health Care

In the Health Care sector, the bears took full advantage of the edge that we gave them last week, pushing the index through support below the 50 and 200-day moving averages.

Relative to the S&P 500

The relative trend is bullish after holding support at the rising 50-day moving average.
Growth vs Value (Large Cap) chart for March 25th research.

Real Estate

Real Estate has seen the bears act with authority as they gap the index through support at the pre-COVID peak below the 50 and 200-day moving averages. 

Relative to the S&P 500

On a relative basis, the group is below resistance and the 50-day moving average.
Growth vs Value (Large Cap) chart for March 25th research.

Take-Aways

If I had employed the adage “if you don’t have anything nice to say, don’t say anything at all,” there would not be a note today. The sectors are mostly breaking down following the carnage in the market yesterday. For some groups, this should come as no surprise to our readers. The bears remain in control. Investors who must maintain an allocation to equities continue to play the game of finding what is “less bad.”

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.