Key Points

  • Size Is a Factor in the Growth/Value Debate
  • High Beta Can’t Breakout vs. Low Volatility
  • Copper/Gold Rebounds, but Lacks Momentum
  • Some Perspective on the Commodity Ratios
  • It’s Hard to Favor Small Caps

Chart in Focus:

The Growth vs. Value debate has been a big theme in 2021. However, as with everything in markets, there is a nuance that is often overlooked. In this case, the nuance is in size. Growth is leading Value, as we discuss below, but only when looked at through the lens of Large Cap stocks. In the land of Small Caps, Growth is anything but leadership, with the ratio well below the highs and now fighting with declining 50 and 200-day moving average. At the same time, the 14-day RSI is making lower highs and maybe shifting to a bearish regime.

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 continues to trade in consolidation, trapped between the rising 50 and 200-day moving averages and the 2021 highs. In our view, this points to a lack of a clear view on risk appetite in the market. The fact that the 14-day RSI is holding in a bullish regime gives a slight edge to High Beta, but until there is a clean break to the upside, the best course of action is likely a balanced approach to risk-taking.

Discretionary vs Staples

The ratio of Consumer Discretionary stocks relative to Consumer Staples stocks is pulling back from the record highs but remains above the moving averages as well as price-based support. The 14-day RSI is in a bullish regime, but we note that it did not become overbought on the recent run to new highs by price and is making a lower high. A break of support on the heels of this divergence would point to decreasing risk appetite on the part of investors.

Lumber vs Gold

The Lumber/Gold ratio has continued to move higher after reclaiming the 50-day moving average but remains below the 200-day moving average, which is the key test in determining if a new uptrend is truly taking hold. It is interesting to note that the 14-day RSI is making a lower high at overbought levels. Below the 200-day moving average, the base case is for a continuation of the current consolidation in price.

Copper vs Gold

The Copper/Gold ratio has rebounded from support, saving itself from a breakdown for now. The ratio has retaken the 50 and 200-day moving averages to trade back into the middle of the consolidation that has been in place for most of 2021. The 14-day RSI has rebounded with the price after failing to become oversold, but we note that the recent rally has not been enough to move the indictor above 60. This keeps the indicator in a neutral position with a bias toward a shift to a bearish regime.

Last week we wrote that “a breakdown in this ratio would signal that a regime shift is likely underway as investors position for an environment of slowing growth.” This remains the case but would be negated with a move to new highs.

Putting the Commodity Charts in Perspective

The Copper/Gold and Lumber/Gold ratios have spiked over the past week, but what is driving the action under the hood?

  • In the case of Lumber/Gold, it is a combination of strength in the price of Lumber along with weakness in the price of Gold. However, Lumber is now testing resistance as Gold tests trendline support.
  • In the case of Copper/Gold, it is mostly a function of weakness in Gold, as Copper remains in a flat trend.

Small vs Large

The battle between Small Caps and Large Caps continues to rage, with the ratio falling below the 50-day moving average, which remains below the declining 200-day moving average. Near-term support remains in place, but we find it hard to favor Small Caps when the ratio is below the moving averages. At best, we can say that the stance is neutral, which is confirmed by the 14-day RSI holding in the middle of the range. As we wrote last week, 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

Despite a pullback this week, the Growth vs. Value theme remains above the breakout level and the moving averages. If this remains the case, the advantage must be with Growth. The bullish Growth trend is confirmed by momentum as the 14-day RSI is in a bullish regime and recently become overbought with the new high in price.


The key themes and relationships that we track are beginning to point to decreasing risk appetite on the part of investors, or at least a higher degree of indecision. High Beta has not been able to breakout vs. Low Volatility, Small Caps continue to lag Large Caps, and the Lumber/Gold and Copper/Gold ratios remain stuck in consolidations. Growth over Value can be seen as a more “risk averse” dynamic but it only plays out in the Large Cap space. Should it spread to Small Caps, the case would become even stronger.

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.