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Key Points

  • High Beta/Low Volatility Battles at Resistance
  • Discretionary/Staples Still Has Work to Do
  • The Growth/Value Rebound Meets the 200-Day Moving Average
  • Copper/Gold Needs to Clear a Key Level
  • High Yield vs. Treasuries Faces Rejection

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio traded to price-based resistance just below the declining 200-day moving average but has not yet been able to break through. At the same time, the 14-day RSI did not break from its bearish regime. Equity bulls want to see further weakness find support at the rising 50-day moving average and not break below support at the June low. For now, the holding pattern that we referenced last week remains in place.

High Beta / Low Volatility chart for March 25th research.

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio is holding above the flat 50-day moving average while remaining below the declining 200-day moving average. The 14-day RSI is having a hard time breaking above 60, but the bullish divergence that we called out last week remains in play. This divergence must now be confirmed by the ratio breaking above resistance in order to make a stronger case for risk assets.

Discretionary / Staples (EW) chart for March 25th research.

Growth vs. Value (Large Cap)

The Growth/Value ratio still has the 200-day moving average in its sights after rebounding from support. The rising 50-day moving average points to an improving trend in the near term. The trend is now in a neutral position. The 14-day RSI is trying to shift to a bullish regime after failing to become oversold at the May and June lows. As of now, it is hard to declare a winner in the Growth/Value debate.

Lumber / Gold chart for March 25th research.

Small Caps vs. Large Caps

The Small Cap/Large Cap ratio remains in a tug-of-war between price-based support and resistance as it trades around the pinched moving averages. The 14-day RSI confirms a neutral trend as it trades in the middle of the range. We are still waiting for a winner to emerge.

Copper / Gold chart for March 25th research.

Lumber vs. Gold

The Lumber/Gold ratio is having a hard time clearing the 50-day moving average, below the 200-day moving average. There is a clear support level, which, if broken, would signal that risk appetite is turning bearish once again. The 14-day RSI remains in a bearish regime.

Small Caps / Large Caps chart for March 25th research.

Copper/Gold

The bounce from support for the Copper/Gold ratio has met its first challenge at the declining 50-day moving average. A move above the 50-day would be a positive development but there is still a lot of overhead resistance and the declining 200-day moving average to overcome before this ratio is in the clear. The 14-day RSI is in a bearish regime, below the 60-level.

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

High Yield vs Treasuries

The High Yield to Treasuries ratio has seen its rebound through the 50-day moving average meet resistance at the declining 200-day moving average. The resistance point lines up with a key price level that must be overcome to have confidence that the rally in risk assets is likely to continue. The 14-day RSI is fighting to break from a bearish regime but is not there yet.

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

Take-Aways

Last week, we highlighted that we wanted to see the key themes that we track to break above their 200-day moving averages to make a stronger bullish case. This week has seen those themes pause below that key measure of the long-term trend. While a pause can and should be expected after a swift rebound, how the themes react from here will be telling. The bulls want to see a continuation higher. If that does not play out, this will prove to have been another bear market rally. The current pause is anything but silent.

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