Key Points

  • Tech’s Strength Is Global
  • Are We Seeing a Regime Shift under the Surface?
  • Copper/Gold on the Verge of a Breakdown
  • Growth vs Value Breaks to New Highs
  • Small Caps Stuck in the Mud vs Large Caps

Chart in Focus:

In the Note below, we highlight a possible breakdown in the Copper/Gold ratio that coincides with a breakout in the Growth/Value ratio. If Growth is going to lead, we must imagine that Technology will be a key beneficiary. We have been bullish on Technology, highlighting strength in Software and Semiconductors. However, the strength is not isolated to the U.S. The S&P Global 1200 Information Technology Index has broken to new highs on an absolute basis, above the rising 50-day moving average. At the same time, the relative performance (vs. the S&P 500) is in the process of attacking the early 2021 highs. 

The following relationships can help give us a sense of the level of risk appetite on the part of investors.

High Beta vs Low Volatility

The High Beta to Low Volatility ratio remains in consolidation just below the highs, thus far unable to establish a breakout. The ratio is trading above the rising 50 and 200-day moving averages, which keeps the trend in favor of High Beta for now. At the same time, the 14-RSI is holding in a bullish regime. Above the moving averages, our bias remains to the upside.

Discretionary vs Staples

The ratio of Consumer Discretionary stocks is relative to Consumer Staples stocks traded to another new high this week, remaining above the 50 and 200-day moving averages. Price-based support lines up with the 50-day moving average, and the 14-day RSI is holding in a bullish regime. There is a small divergence, as the RSI has not made a higher high with the price. We are watching this closely.

Copper vs Gold

The Copper/Gold ratio remains under pressure this week, below the 50 and 200-day moving averages. At the same time, an important support for the 2021 consolidation is now being tested after the “false breakout” to new highs in October. While the RSI has not become oversold, there appears to be a shift into a bearish regime after the indicator failed to confirm the price highs.

A breakdown in this ratio would signal that a regime shift in likely underway as investors position for an environment of slowing growth.

Lumber vs Gold

After a strong rally this week, the Lumber/Gold ratio has reclaimed the 50-day moving average but remains below the declining 200-day moving average. Breaking above the October high and the 200-day would go a long way in changing our view that this ratio is stuck in a base-building process. The 14-day RSI has also rebounded but has not broken from a bearish regime yet.

Small vs Large

A funny thing happened while everyone was fixated on the breakout in Small Caps; the ratio of Small Caps vs. Large Caps did not care one bit. The ratio remains stuck between the 50 and 200-day moving averages and in the consolidation that has been in place since July. The 14-day RSI also remains stuck in the middle of the range. A break of the 200-day moving average would signal that Small Caps have taken control, but a break of support puts Large Caps in the driver’s seat.

Growth vs Value

The Growth vs. Value theme has broken to new highs, and we must wonder if this is in response to the potential regime shift hinted at by the Copper/Gold ratio. Growth/Value is above the rising 50 and 200-day moving averages, while the 14-Day RSI is overbought, confirming the bullish trend.


The ratio that we are watching most closely is Copper/Gold. It has been consolidating for most of the year and is now on the verge of a breakdown after making an unconfirmed high in August. Further weakness would confirm the strength that we are seeing in the Growth/Value theme and set the stage for a regime shift under the market’s surface that favors Growth. 

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.