Key Points
- High Beta vs. Low Volatility Weakens Below the Moving Averages
- Discretionary vs. Staples Break a Key Support Level
- Copper/Gold Holds Support but the Trend Is Still Flat
- Small Caps Fade from Resistance Against Large Caps
- Growth Still Weak vs. Value
Key Themes and Relationships
High Beta vs Low Volatility
The High Beta to Low Volatility ratio remains mired in the consolidation that has been in place for nearly a year, trading below the 50 and 200-day moving averages but above price-based support. The 50-day moving average has crossed below the 200-day moving average for the ninth time since 2012. The 14-day RSI is moving lower in a bearish regime.
Consumer Discretionary vs Consumer Staples (Equal Weight)
The ratio of Consumer Discretionary stocks has broken price-based support as it trades below the 50 and 200-day moving averages. At the same time, the 14-day RSI has moved into an oversold condition after failing to become overbought on the rally to new highs in November. As we noted last week, a break of support would signify that investors continue to shift to a risk-off stance.
Lumber vs Gold
The Lumber/Gold ratio is pausing this week, checking back to the rising 50-day moving average, which is above the 200-day moving average. The 14-day RSI has left overbought conditions, and there is a small divergence in play as the indicator did not make a higher high with the price on Wednesday.
Copper vs Gold
The Copper/Gold ratio continues to hold our attention as it fights price-based and moving average support. The 14-day RSI is not tipping a directional break as it trades in the middle of the range.
Drilling down on Copper and Gold, respectively, we can see that the choppy nature of the ratio above is a function of range-bound trading for each. Neither of these metals has established a clear bullish or bearish trend since last May.
Small vs Large
Small Caps have weakened further relative to Large Caps this week, remaining below the declining 50 and 200-day moving averages and broken support (now resistance). Momentum confirms this weakness as the 14-day RSI made another lower high and continues to trade in a bearish regime.
Growth vs Value
This week, the Large Cap Growth vs. Value theme has followed through on weakness, moving further below the 200-day moving average. The 50-day moving average is moving lower after the ratio cut below it late last year. The 14-day RSI is in oversold conditions, confirming the weakness in the price trend.
Take-Aways
The signs point to a lack of risk appetite on the part of investors this week. High Beta continues to struggle vs. Low Volatility, and Discretionary has broken a key support level vs. Staples. At the same time, Small Caps have been turned away at resistance relative to Large Caps, and the Growth vs. Value theme has moved further below the 200-day moving average.
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.