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Key Points

    • High Beta/Low Volatility Remains Stuck in a Range
    • Discretionary/Staples Tests the 50-Day Moving Average
    • Small Caps Weaken vs. Large Caps but Remain in a Consolidation
    • Commodity Ratios Are Sitting on Support
    • High Yield vs. Treasuries Moves to the Middle of the Range

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio remains trapped between support and resistance. Recent weakness has pushed the ratio below the 50-day moving average; however, it has not moved the 14-day RSI below 40. Until there is a clear break in either direction, this relationship is stuck in neutral, waiting for investors to take a more definitive stance.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio continues to test support at the 50-day moving average while trading below price-based resistance and the falling 200-day moving average. The 14-day RSI has been making higher lows since May, but we need to see a break above the 200-day to believe that risk appetite is returning to the market.

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

Growth vs Value (Large Cap)

The Growth/Value ratio has moved below the 50-day moving average after failing to push above the 200-day moving average during the June-August rally. The ratio remains above price-based support, and the 14-day RSI has not broken below the 40-level. The trend is neutral with a cautious bias.

Lumber / Gold chart for March 25th research.

Small Caps vs Large Caps

The Small Cap/Large Cap ratio remains between price-based support and resistance as it trades below the 50 and 200-day moving averages. The 14-day RSI is moving below 40, signaling the potential for support to be tested.

Copper / Gold chart for March 25th research.

High Yield vs Treasuries

The High Yield to Treasuries ratio remains stuck between support and resistance but below the 50 and 200-day moving averages. The 14-day RSI is testing 40 after failing the become overbought on the recent rally attempt.

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

Lumber vs Gold

The Lumber/Gold ratio continues to test but has not broken, price-based support below the 50 and 200-day moving averages. The 14-day RSI has moved to the middle of the range after holding above 40 this week.

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

Copper vs Gold

The Copper/Gold ratio has pulled back to the test the 50-day moving average well below the falling 200-day moving average. The 14-day RSI remains in a neutral position, holding above the 40-level for now.

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

Take-Aways

The key themes that we track to measure risk appetite in the market are not given a clear message in either direction. Strength from the June lows has been reversed over the past two weeks, but the ratios have not broken down in a way that screams “risk-off.” Perhaps the unofficial end of summer will bring us a clearer directional view of investors’ tolerance for risk.

*There will not be a note on Monday as markets in the U.S. are closed. Enjoy the long weekend.

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