Key Points

  • Watching the Shift Toward Global Stocks over U.S. Stocks
  • Copper/Gold Ratio Fails at Resistance
  • Lumber/Gold Pullback Finds Support, Momentum is Still Bullish
  • Growth Making a Stand vs. Value?
  • Small Caps Holding Support vs. Large Caps

Chart in Focus:

While much of our focus is on key themes and relationships in the U.S. markets, we would be remiss not to point out the possible transition taking place abroad. The Global Dow Index is trading near a resistance level relative to the S&P 500. The ratio has been slowly moving higher since November and is above the 50 and 200-day moving averages. The 14-period RSI has not been oversold since September, and may be in the process of shifting to a bullish regime. A break of resistance would confirm the regime shift. It is still early, but this is a theme that is worth watching closely.

Key Themes and Relationships

We update our views on the key relationships that we track across the market to get a sense of investor’s willingness to take on risk. We also highlight the trends playing out in major factors such as Growth, Value, Large Cap, and Small Cap.

High Beta vs Low Volatility

The consolidation continues for the ratio of the S&P 500 High Beta Index vs. the S&P 500 Low Volatility Index. The consolidation is playing out around the 50-day moving average, but above the 200-day moving average and price-based support. The 14-period RSI is in the middle of the range, lending a confirmation to the choppy near-term trading activity.

Consumer Discretionary vs Consumer Staples (Equal Weight)

The ratio of Consumer Discretionary stocks relative to the Consumer Staples stocks remains under near-term pressure, below the declining 50-day moving average. Thus far, support at the 2018 highs is holding. A break of this level would target the rising 200-day moving average. Momentum in the ratio continues to wane, making a series of lower highs and lower lows.

A break of support while the RSI moves to an oversold position would be a signal that the uptrend from the March 2020 lows has ended.

*We use the equal weight indexes to account for AMZN’s large weight in the Discretionary sector.

Copper vs Gold

The weekly trend in the Copper/Gold ratio is fading from the resistance level that we highlighted last week. At the same time, the 10-year yield is trading below important near-term resistance. Generally, over rolling 13-week periods, there is a positive correlation between the Copper/Gold ratio and the 10-year yield. A failure to breakout would call into question the narrative of run-away inflation, as well as a continued strong ramp in global economic growth.

Lumber vs Gold

Last week we highlighted the fact that the Lumber/Gold ratio was extended to the upside. Right on cue, the ratio pulled back due to a combination of Lumber weakness and Gold strength. The pullback, thus far, has found support at the rising 50-day moving average. At the same time, the 14-period RSI did not reach oversold levels. Perhaps more interestingly, the past three tests (assuming the current test holds) of the 50-day have taken place with the RSI making a higher low. This is a sign that momentum remains in the favor of further upside for the ratio.

The themes below can show us where investors are allocating capital within the equity market.

Growth vs Value

The great debate in the market continues, as Growth is attempting to mount a comeback relative to Value. The ratio is holding above near-term support but remains below the 50 and 200-day moving averages. At the same time, the 14-period RSI continues to trade in a bearish regime. The burden of proof is squarely on the Growth bulls, as the trend remains to the downside.

Continued weakness on the part of the Copper/Gold and Lumber/Gold ratios would be supportive of the Growth/Value relationship making a turn to the upside.

Small vs Large

The other debate that continues without a winner (thus far) is the one between Small Caps and Large Caps, as their ratio remains in the support zone. Trading below the declining 50-day moving average gives a slight edge to the Large Caps. A break of support would target the rising 200-day moving average on the downside. Momentum is not providing a “tell”, as the RSI trades in the middle of the range.


There are subtle short-term shifts in the risk dynamics in the U.S. equity market, but the long-term trends continue to favor risk seeking over risk aversion. High Beta vs. Low Volatility continues to consolidate as does Discretionary vs. Staples. Neither theme has broken down. Lumber is bouncing from support relative to the Gold. Copper vs. Gold is a wildcard as resistance holds for now.

Growth is trying to build a base vs. Value but has a lot of work to do. Small Caps are making a stand vs. Large Caps, but will it hold? The potential shift in favor of global stocks over the U.S. is perhaps the most compelling theme in the markets currently.

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.