Key Points

  • High Beta/Low Volatility Weakens Further
  • Discretionary/Staples Breaks a Key Support Level
  • Copper/Gold Makes a Move to the Downside
  • Growth/Value Decides to Head Lower
  • Small Caps/Large Caps Hold Up for a Second Week

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility Ratio continues to fade below the declining 50 and 200-day moving averages as it edges closer to support at the initial peak from the COVID lows. The ratio has been making lower highs and lower lows since November, the definition of a downtrend. Rallies are likely to find resistance at the prior consolidation lows. The 14-day RSI is holding in a bearish regime, keeping momentum in favor of risk aversion.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has broken support below the declining 50 and 200-day moving averages. The ratio is now below the levels that were seen prior to the risk-off trend that was caused by the onset of the COVID pandemic. Momentum confirms the bearish trend as the 14-day RSI once again finds itself in an oversold position. While it might be tempting to blame current weakness on the declines in large Discretionary stocks such as AMZN and TSLA, note that this ratio uses the equal weight versions of these sectors to get a true picture of this relationship, which remains risk-off.

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

Lumber vs Gold

The Lumber/Gold Ratio is holding between the 50 and 200-day moving averages in a consolidation. Momentum is neutral, confirming the price action, but we note a slight bearish bias as the 14-day RSI has been making lower highs since December.

Lumber / Gold chart for March 25th research.

Copper vs Gold

The Copper/Gold ratio is in the process of breaking support after trading in consolidation for 14 months. Last week we gave a slight edge to a downside move as the ratio traded below the 50 and 200-day moving averages, where it still finds itself this week. The 14-day RSI is in a bearish regime, lending momentum confirmation to the price action.

Copper / Gold chart for March 25th research.

Small vs Large

For a second consecutive week, Small Caps are outperforming their Large Cap peers. The ratio has recaptured the 50-day moving average but remains below the 200-day moving average for now. Clearing that hurdle could set the stage for further outperformance, especially if the 14-day RSI is able to break from its current bearish position.

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

Growth vs Value

The Large Cap Growth vs. Large Cap Value theme has broken support below the declining 50 and 200-day moving averages, keeping the trend in favor of Value. Momentum confirms this trend as the 14-day RSI is in a bearish regime and nearing oversold levels.

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


With the S&P 500 under pressure for a sixth consecutive week as we enter the day, is it not surprising to see the risk-off trends that we have been highlighting continue to play out. Key support levels that we highlighted in last week’s note are now being broken. While it is possible that there could be rallies in the equity markets in the near term, until these risk dynamics change, those rallies are likely nothing more than countertrend in nature.
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