Not Going Down
Without a Fight

by | Mar 18, 2022

Key Points

  • High Beta/Low Volatility Continues to Hold Support
  • Discretionary/Staples Faces a Test at the 50-Day Moving Average
  • Lumber/Gold Fades in the Near Term
  • Growth/Value Is Still in a Downtrend
  • Small Caps/Large Caps Have a Key Hurdle to Clear

Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility Ratio is not going down without a fight. The ratio undercut support once again this week but managed to rally back into the consolidation zone. The burden of proof remains with the bulls as the ratio trades below the declining 50 and 200-day moving averages. The 14-day RSI is in a bearish regime despite not becoming oversold this week. Until the ratio can break above the moving averages, the bias remains toward risk-off.

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio is making a push back to the underside of the declining 50-day moving average, which is below the 200-day moving average. The trend is still bearish, with a series of lower highs and lower lows in place. The 14-day RSI is well below the 60 level in a bearish regime.

Lumber vs Gold

The Lumber/Gold Ratio pulled back further this week to trade below the rising 50-day moving average but is still above the 200-day moving average. The 14-day RSI has held at the 40 level, for now, keeping it in a bullish regime.

Copper vs Gold

The Copper/Gold ratio has rallied back to the underside of the pinched 50 and 200-day moving averages as it continues to trade in the range that has been in place for more than a year. The 14-day RSI is stuck in the middle of the range, confirming the neutral price action of the ratio. 

Small vs Large

The ratio of Small Caps to Large Caps has paused in its rally this week, closing below the 50-day moving average while remaining above the 200-day moving average. Clearing the October/November peaks will make a case for further outperformance much easier to make. The 14-day RSI is in a bullish regime, confirming recent price strength.

Growth vs Value

The Large Cap Growth vs. Value theme remains in a downtrend below the 50 and 200-day moving averages, keeping the bias to the downside (in favor of Value). The 14-day RSI is in a bearish regime but has been making a higher low of late. Despite this divergence, until the ratio moves above the moving averages, it is hard to make a case for Growth. This view is unchanged on the week.

Take-Aways

Most of the themes and relationships that we track to gauge risk appetite have staged rallies along with risk assets this week. Thus far, these rallies appear to be countertrend in nature as most of the ratios remain below their 50 and 200-day moving averages.

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