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Key Points

  • High Beta/Low Vol Bounces at a Key Zone
  • Growth Rallies Relative to Value
  • Small Caps Continue to Grind Relative to Large Caps
  • Lumber/Gold Sets its Sights on the 50-Day Moving Average
  • High Yield Credit Spreads Pare Back, But Long-Term Trends are Intact

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Vol ratio has rebounded from support at the summer 2020 highs, a level that we have been highlighting over the previous two weeks. While the ratio received an upside boost, note that RSI remains in a bearish regime as the ratio continues to trade below declining 50 and 200-day moving averages.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has also rebounded from relative support at the summer 2020 relative lows, below declining 50 and 200-day moving averages. In a similar fashion to the High Beta/Low Vol ratio, RSI also remains in a bearish regime.

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

Growth vs. Value (Large Cap)

The Growth Value ratio has rallied through both the declining 50-day moving average and relative support in a strong upside move in this week’s trading session. RSI has broken out of the 60 level, the zone that’s defined the bearish price action for the ratio all year long.

Lumber / Gold chart for March 25th research.

Small Caps vs. Large Caps

The Small Cap/Large Cap ratio continues to fight with the pinching 50 and 200-day moving averages, moving lower on the week, but remaining in the trading range that’s defined the price action since Q4 of last year. RSI is knocking in the floor of the 40 level, a zone that the Small Cap bulls are watching for a rebound.

Copper / Gold chart for March 25th research.

Lumber vs. Gold

The Lumber/Gold ratio continues to rally to the upside out of the relative support zone that we have been calling out in our notes over the previous weeks, with the declining 50-day moving average set in its sights. RSI has broken out of a bearish regime to the upside above the 60 level with the 70/overbought zone now in play. 

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

Copper/Gold

The Copper/Gold ratio has bounced at long-term relative support after the cascade-like downside price action that’s defined trading over the previous weeks. RSI is eyeing the 40 zone after printing several oversold readings recently. While the moves are encouraging for the bulls, more work needs to be done to repair the damage.

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

High Yield vs Treasuries

High Yield Credit Spreads have pared back in the July 7th trading session after falling 1 basis point short of the 6% mark, a level not seen since the depths of the COVID crash. RSI has moved back down from the 70 level as the bond market digests the appetite for risk. For now, the bias remains to the upside.

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

Take-Aways

Several risk proxies that we track have experienced noteworthy bounces in this week’s trading session. While this tends to work for short-term bulls, it has done little to change the long-term trends that have been in play for most of the year. Across asset classes, much work needs to be done to change the long-term “risk-off” price action that’s characterized most of the intermarket relationships we cover.

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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.