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Key Points

    • High Beta/Low Volatility Squares Off with Important Resistance
    • Discretionary/Staples Continues to Build That Base
    • The Growth/Value Rebound Has Played Out Nicely, Now is the Next Test
    • Copper/Gold Bunces from Support, there is Still Work to Do
    • High Yield vs. Treasuries is a “Show Me” Story

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio remains in a holding pattern between the 50 and 200-day moving averages, support, and resistance. The rebound with risk assets since June is an encouraging development for equity bulls. A move above resistance would be an added bullish data point should it play out. The 14-day RSI is trying to shift to a bullish regime as it trades near the 60-level, looking for a breakout.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has rallied from the 50-day moving average, a bullish response to the positive divergence that we highlighted here two weeks ago. The ratio must clear resistance and the declining 200-day moving average for us to claim that the trend is to the upside, but the past two weeks have been a step in that direction. The 14-day RSI is trying to break from a bearish regime.

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

Growth vs Value (Large Cap)

The Growth/Value ratio has made a solid rebound from the now rising 50-day moving average to bring the declining 200-day moving average into range. Breaking the 200-day would be a signal that growth is regaining control relative to value. The 14-day RSI has been making higher lows of late as it attempts to shift to a bullish regime.

Lumber / Gold chart for March 25th research.

Small Caps vs Large Caps

The Small Cap/Large Cap ratio remains in a consolidation zone as it oscillated around the 50 and 200-day moving averages. We are still looking for a clear break from the zone. A move above the October/November peaks would confirm a bullish trend and greater risk appetite on the part of investors. A break of support would send the opposite message. There remains a slight edge to an upside breakout as the 14-day RSI has held above the 40-level of late.

Copper / Gold chart for March 25th research.

Lumber vs Gold

The Lumber/Gold ratio is making another run at the declining 50-day moving average, below the 200-day moving average. The ratio is trading near an area of support, but more time is needed for us to be convinced that a durable rally is developing. The 14-day RSI is moving higher from oversold levels but remains in a bearish regime.

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

Copper vs Gold

The bounce from support for the Copper/Gold ratio continues to play out below the declining 50 and 200-day moving averages. While this is encouraging, there is still a lot of overhead resistance, and the 14-day RSI remains in a bearish regime.

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

High Yield vs Treasuries

The High Yield to Treasuries ratio has staged a rebound as risk assets have caught a bid since the beginning of July. The ratio is above the 50-day moving average but must now face a strong test at resistance and the declining 200-day moving average. Breaking this level would set the stage for further upside in the ratio and would be a bullish data point for investors. The 14-day RSI is beginning to break from a bearish regime.

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

Take-Aways

The key themes and relationships that we track on a weekly basis all have the same look as many of the equity and fixed income ETFs that we highlight. They have made strong rebounds to move above their 50-day moving averages but still must clear their 200-day moving averages before a stronger bullish case can be made. Our views have become incrementally bullish over the past few weeks as signs point to risk appetite returning to the market. Clearing these 200-day moving averages would be the next step in the development of these bullish views.

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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.