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Key Points

    • High Beta/Low Volatility Continues to Stabilize
    • Discretionary/Staples Start to Build a Base
    • The Growth/Value Rebound Is Still in Play
    • Copper/Gold Bunces from Support, There is Still Work to Do
    • High Yield vs. Treasuries Is a “Show Me” Story

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio is now in a holding pattern between support and resistance as well as the 50 and 200-day moving averages. The fact that the 14-day RSI has not become oversold since December is an interesting tell for the direction of the eventual break from the pattern. However, we would like to see a move through resistance before committing to a bullish view.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio is doing battle with the 50-day moving average as it trades below resistance at the pre-COVID levels and the declining 200-day moving averages. The 14-day RSI made a higher low in June, even as the price made a lower low. This bullish divergence could signal the start of a base-building process.

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, which is turning higher at support. The ratio must still contend with the declining 200-day moving average. Breaking above that level sets the stage for a potential run to new highs. The 14-day RSI has been making higher highs of late, signaling the potential for a momentum shift.

Lumber / Gold chart for March 25th research.

Small Caps vs Large Caps

The Small Cap/Large Cap ratio remains in a consolidation zone as it oscillated around the 50 and 200-day moving averages. We are still looking for a clear break from the zone. A move above the October/November peaks would confirm a bullish trend and greater risk appetite on the part of investors. A break of support would send the opposite message. There remains a slight edge to an upside breakout as the 14-day RSI has held above the 40-level of late.

Copper / Gold chart for March 25th research.

Lumber vs Gold

Once again, the Lumber/Gold ratio has faded from the declining 50-day moving average, which is below the 200-day moving average, confirming the downside bias that we called out last week. The 14-day RSI remains in a bearish regime.

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

Copper vs Gold

The bounce from support for the Copper/Gold ratio continues to play out below the declining 50 and 200-day moving averages. While this is somewhat encouraging, there is still a lot of overhead resistance, and the 14-day RSI remains in a bearish regime. 

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

High Yield vs Treasuries

The High Yield to Treasuries ratio is holding above the 50-day moving average below the 200-day moving and resistance. Taking out these resistance points is key to signaling further increases in risk appetite in the market. The 14-day RSI is having trouble at the 60-level and remains in a bearish regime.

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

Take-Aways

This week we have ween the themes and relationships to track risk appetite hold their ground after rebounding during the prior two weeks. Most have shown signs of stabilization after a strong downtrend but still have work to do before new uptrends are established. 

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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.