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Key Points

  • High Beta/Low Volatility Holds Support
  • Growth/Value Rallies for a Second Consecutive Week
  • Lumber/Gold Meets Resistance at the 50-Day Moving Average
  • Copper/Gold Remains in Freefall
  • High Yield Remains Weak vs. Treasuries

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio is holding support at the summer 2020 highs but remains below the declining 50 and 200-day moving averages. The 14-day RSI is showing signs of waning downside momentum while holding in a bearish regime.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio remains under pressure as investors favor the more defensive pockets of the consumer landscape. The ratio is below the declining 50 and 200-day moving averages and remains below the levels seen prior to the onset of the COVID pandemic. The 14-day RSI is holding in a bearish regime.

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

Growth vs. Value (Large Cap)

The Growth/Value ratio is holding above the 50-day moving average after regaining broken support. Remaining above these levels opens the door to a test of the declining 200-day moving average as the 2022 downtrend shows signs of abating in the near term. The 14-day RSI is trying to break from a bearish regime as it tests the 60-level.

Lumber / Gold chart for March 25th research.

Small Caps vs. Large Caps

The Small Cap/Large Cap ratio remains stuck in a consolidation zone, unable to build on the strength that was exhibited from April to June. The ratio is below the 50 and 200-day moving averages as it awaits a clear directional break. Until then, the trend is neutral. The 14-day RSI is holding in a bullish regime, above the 40-level, but price must break above the October/November highs before the bullish case can be made.

Copper / Gold chart for March 25th research.

Lumber vs. Gold

The Lumber/Gold ratio is running into resistance at the declining 50-day moving average after rallying from oversold conditions over the past month. The flat 200-day moving average paints a picture of a long-term neutral trend. However, below both moving averages, and with the 14-day RSI still below 60, the bias is to the downside for now.

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

Copper/Gold

The Copper/Gold ratio has gone into freefall after breaking support in the middle of June. The ratio is well below the declining 50 and 200-day moving averages and is testing the level seen prior to the onset of the COVID pandemic. Momentum confirms the bearish trend as the 14-day RSI sits in an oversold position.

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

High Yield vs Treasuries

The High Yield to Treasuries ratio continues to move lower, below the declining 50 and 200-day moving averages and price-based resistance. Momentum confirms the risk-off trend as the 14-day RSI trades in a bearish regime.

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

Take-Aways

The key themes and relationships that we track continue to send two clear messages. The first is that investors remain risk averse. The second is that the markets continue to see slowing economic growth. The bearish trends in the Copper/Gold ratio and the High Yield/Treasuries ratio are the most glaring data points that confirm these views. The rebound in the Growth/Value ratio is noteworthy in its early days.

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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.