Take-Aways:
Despite a volatile week of trading in the equity and fixed income markets, there has been little change in the key themes and relationships we track. The slightly more bearish bias that we called out last week led to an undercut of the June lows for the S&P 500 this week. That bearish/risk-off bias remains in place, and we note the Lumber/Gold ratio is breaking support, adding further support to our views.
Key Themes and Relationships
Semiconductors vs. S&P 500
Semiconductors remain under pressure relative to the S&P 500, trading below the declining 50 and 200-day moving averages. The ratio is testing support, and a break would be further bearish development. The 14-day RSI of the ratio is holding in a bearish regime and has not been overbought since November 2021; momentum remains with the bearish trend.
High Beta vs. Low Volatility
The High Beta/Low Volatility ratio remains below the 50 and 200-day moving averages as it trades in a consolidation zone. A break of support could signal the next stage of risk aversion in the market. Rally attempts this year have not been able to push the 14-day RSI out of a bearish regime.
Consumer Discretionary vs Consumer Staples (Equal Weight)
The Discretionary/Staples ratio is holding below the 50 and 200-day moving averages. Resistance remains at the pre-COVID consolidation zone, a level that must be overcome to begin to claim that risk appetite is returning to the market. The 14-day RSI is holding in a bearish regime.
Growth vs Value (Large Cap)
The Growth/Value ratio remains below the 50 and 200-day moving averages. The ratio is holding above price-based support, and the 14-day RSI is holding at the 40-level. The trend is neutral with a cautious bias. Growth bulls need to see a move above the moving averages to have more confidence in sustained leadership.
Small Caps vs Large Caps
The Small Cap/Large Cap ratio remains between price-based support and resistance as it trades below the 50 and 200-day moving averages. The 14-day RSI is in the middle of the range, confirming the neutral price trend. However, the series of lower highs for the indicator signals that the bears are maintaining momentum.
High Yield vs Treasuries
The High Yield to Treasuries ratio continues to trade between support and resistance below the 50 and 200-day moving averages. Bulls want to see support hold as a break could signal further unwinding of risk in the market. The trend here remains neutral, confirmed by the 14-day RSI trading in the middle of the range.
Lumber vs Gold
The Lumber/Gold ratio is breaking support below the declining 50 and 200-day moving averages. This is a sign of continued risk aversion in the market. The 14-day RSI has been making lower highs since December and remains in a bearish regime.
Copper vs Gold
The Copper/Gold ratio continues to trade in a neutral position between support and resistance and the moving averages. The trend is confirmed by the RSI sitting in the middle of the range. However, there is a downside bias with the RSI still trading in a bearish regime.
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