Across the equity landscape, Low Volatility ratios have pared back much of their recent gains as equity indices have rallied to the upside in recent weeks. Low Volatility stocks tend to outperform during a period of market stress, and a continued decline in these relationships would be a welcome development for equity bulls. While these relationships are below their respective declining 50-day moving averages in Large, Mid, and Small Caps, the levels highlighted in the charts below are key zones to break down from to have confidence in a continued upside rally.
S&P 500 Low Vol Relative to S&P 500
The S&P 500 Low Vol ratio is testing relative support at the highlighted zone below the ratio’s declining 50-day moving average. Note the breakdown in RSI at the 45 zone, the lower bound of the bullish regime that’s defined the uptrend since late last year. Equity bulls want to see this support zone taken out to the downside to having continued confidence in a continued market rally.
S&P 400 Low Vol Relative to S&P 400
The S&P 400 Low Vol ratio is testing relative support at the June lows after rolling over through the declining 50-day moving average in late last month. RSI is testing the lower bound of the bullish regime that’s defined the uptrend since Q1 of this year. Here too, bulls want to see a breakdown.
S&P 600 Low Vol Relative to S&P 600
The S&P 600 Low Vol ratio has sliced through the rising 50-day moving average to the downside over the prior week of trading and is heading for a test of the rising trendline of relative support that’s defined the uptrend in this relationship since Q4 of last year. RSI in the ratio has broken down below the 40-level, a zone that has also been a characteristic of the uptrend. Printing an oversold reading in RSI combined with a trendline breakout to the downside would be a welcome development for Small Cap bulls.
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