Key Points
- Growth Sectors Cascade to the Downside, Time Is Needed to Heal These Wounds
- Cyclicals Hold Up Better, Energy Is Best of the Bunch but Watch Industrials
- Defensive Groups Do Their Job on a Relative Basis
- Staples Remain Solid
- New Relative Lows for Communication Service
Visiting the Sector Relatives
Information Technology
The 2,900 level that we have been highlighting gave way quickly last week, leading to a cascade to the downside before yesterday’s reversal. We now have lower lows and lower highs below the 50-day moving average, not a good look if you are bullish on Technology.
Relative to the S&P 500
Consumer Discretionary
The Consumer Discretionary remained under a lot of pressure despite yesterday’s late rally. The index is below the declining 50-day moving average and key support levels. Above 1,390, traders can play for 1,490. Between those levels, there is no clear trend for investors.
Relative to the S&P 500
Communication Services
The Communication Services has also cascaded to the downside, below the declining 50-day moving average, after losing support at 255. Below this level, the bears are in control.
Relative to the S&P 500
Materials
Materials have broken below a confluence of support at the breakout level, the rising trend line, and the 50-day moving average. However, the low end of the 2021 range has not been breached, making this one of the “cleanest dirty shirts” in the market.
Relative to the S&P 500
Financials
Financials are a sloppy mess below the declining 50-day moving average but holding within the 2021 range. Retaking the 650 level would set up a compelling opportunity; below that level, there is a grudge match between the bulls and bears.
Relative to the S&P 500
Industrials
The Industrial sector tagged the bottom of the 2021 range before staging a rebound yesterday. The index is below the declining 50-day moving average and remains in the consolidation zone, making it one of the more compelling trends in the market.
Relative to the S&P 500
Energy
The Energy sector was not immune to the selling pressure that has hit stocks over the past week. However, the group remains above the breakout level and the rising 50-day moving average. This is arguably the best trend of all the sectors currently.
Relative to the S&P 500
Consumer Staples
The bulls remain in control in the Consumer Staples sector despite giving up short-term support at the 795 level. The 50-day moving average held its ground during yesterday’s selling pressure. Above 760, the trend is to the upside.
Relative to the S&P 500
Utilities
Utilities are back in the consolidation zone after a failed breakout. The group closed below the 50-day moving average yesterday, and the trend is neutral for now—above 355 is more compelling for the bulls.
Relative to the S&P 500
Health Care
Health Care remains in the neutral camp for now. Traders can use yesterday’s low as a level against which to manage risk while playing for a rally back to the declining 50-day moving average. Below 1,450, the bears take control of the match.
Relative to the S&P 500
Real Estate
Real Estate lost support at the 305 level to return to the consolidation zone that began in September. Above 275 but below the moving average, the trend is neutral. Below that mark, the bears are in control.
Relative to the S&P 500
Take-Aways:
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