Most Risk-Off Trends
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Key Points

Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Vol ratio has found long-term relative support at the December 2020 lows under a declining 50 and 200-day moving average after finding relative resistance at the early March relative lows of this year. While we note that momentum, shown by 14-day RSI, has been stuck in a bearish regime and making lower highs, an oversold reading has yet to be achieved this year. An RSI print below 30 would give the bears the additional confirmation that they desire. 

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has broken below long-term support at the highlighted level below declining 50 and 200-day moving averages. Note the ratio finding relative resistance at the declining 50-day moving average twice in March, a common characteristic of a downtrend. The lower highs in 14-day RSI, and the indicator being stuck in a bearish regime lend additional confirmation to the downtrend in this ratio. For now, the onus is with the bears.

Lumber vs Gold

The Lumber/Gold Ratio has broken above the highlighted relative resistance zone to the upside above the flat 200-day moving average with the 50-day moving average set in its sights. 14-Day RSI has moved back into a bullish regime (above 50), but we want to see the downtrend line in the RSI and the 50-day moving average taken out to the upside to have confidence that the trend has changed from neutral to bullish.

Copper vs Gold

The Copper/Gold ratio, unsurprisingly, offers no new price action developments as wary investors watch this risk keenly in the trading range that’s plagued this relationship for over a year. With the 50 and 200-day moving averages pinching and momentum compressing along with price action, investors continue to sit back and watch for the slightest of new developments.

Small vs Large

The Small Cap/Large Cap ratio has found long-term relative support at the June 2020 relative highs but has found relative resistance at the ratio’s rising 50-day moving average, and both are below a declining 200-day moving average. 14-Day RSI has broken out into a bullish regime but is currently testing that bullish regime to the downside at the highlighted level. A previous attempt in this ratio to make a bearish to bullish reversal was attempted in February/March of this year but was met with resistance at the ratio’s 200-day moving average, an indicator that price needs to clear to the upside to have confidence that the bulls are in control.

Growth vs Value

The Large Cap Growth/Value ratio has found relative support at the highlighted zone and the relative lows of May of last year below the ratio’s declining 50 and 200-day moving averages. 14-Day RSI has moved up to make another attempt to break out into a bullish range, but the previous breakout attempt found resistance at the 60 level as the ratio failed to hold its ground above the 50-day moving average in March and April. While it would not be surprising to see Growth get a countertrend bounce relative to Value, the onus is with Value bulls until the 200-day moving average can be cleared to the upside.

Take-Aways