Key Points

  • High Beta/Low Volatility Stalls and Moves Lower
  • Discretionary/Staples Fades From the 50-Day Moving Average
  • Lumber/Gold Remains Under Pressure, Nears a Key Level
  • Growth/Value Holds Its Position on the Week
  • Small Caps/Large Caps Weaken After Last Week’s Wobble

Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility Ratio moved back below the 50-day moving average, which is trading below the 200-day moving average. The ratio remains in a wide consolidation, unable to maintain upside traction on rally attempts. The 14-day RSI is moving lower after failing to exit a bearish regime. While there had been some signs of increasing risk appetite over the past two weeks, it appears that more time is needed before this ratio can make a sustained move higher.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has turned lower at the declining 50-day moving average, which is moving steadily below the 200-day moving average. Thus far, the ratio has been unable to break the series of lower highs that have been in place since the November peak. The 14-day RSI of the ratio is moving lower while maintaining its position in a bearish regime.

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

Lumber vs Gold

The Lumber/Gold ratio remains in retreat mode for a third consecutive week, moving further below the declining 50-day moving average toward the 200-day moving average. The 14-day RSI is near oversold levels after flashing a bearish divergence at the March peak, indicating that momentum is shifting in favor of the bears. Breaking below the 200-day moving average will confirm that the trend is now to the downside.

Lumber / Gold chart for March 25th research.

Copper vs Gold

The Copper/Gold ratio continues to trade in the consolidation that has been in place for 13 months, oscillating around the pinched 50 and 200-day moving averages. The 14-day RSI confirms the neutral price action as it trades firmly in the middle of the range.

Copper / Gold chart for March 25th research.

Small vs Large

The ratio of Small Caps to Large Caps remains under pressure for a second consecutive week, holding below the 50-day moving average, which is below the 200-day moving average. We continue to highlight that the October/November peaks should be eclipsed before a case for Small Cap outperformance can be made. The 14-day RSI is near the oversold level after breaking the short-term uptrend from the December lows.

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

Growth vs Value

The Large Cap Growth vs. Value theme is doing all it can to hold the improvements it has made over the past two weeks. The ratio remains above the 50-day moving average but below the 200-day moving average. The 14-day RSI is holding in a bearish regime, unable to break above the 60-level. The bullish divergence that we have been highlighting remains in play, but growth bulls want to see the ratio move above the 200-day moving average to have confidence that outperformance can continue.

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

Take-Aways

After showing some improvement in the prior two weeks, the themes that we track to gauge risk appetite in the market have begun to stall. It appears that more time is needed for decisive trends to emerge across these relationships.

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.