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Take-Aways:

The strongest day for the S&P 500 since the COVID lows has pushed the index through the key 3,900 level that we have been highlighting. This incrementally bullish dynamic opens the door for a possible run to the 200-day moving average. With the advance, we have seen a more risk-on message from the themes that we track. Many have moved above their respective 50-day moving averages. The next step is to break above their 200-day moving averages. From a trend perspective, Small over Large and Value over Growth remain in place.    

Before diving into our normal Friday content, we wanted to put some context around the strong rally in stocks yesterday. The 5.5%+ gain for the S&P 500 was its largest since the March and April 2020 leading into and coming out of the COVID bottom.

The advance took the index through the key 3,900 level, an incrementally bullish development that has the potential to take the index to the declining 200-day moving average.

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

Key Themes and Relationships

Semiconductors vs. S&P 500

Semiconductors rallied strongly to regain broken support and the declining 50-day moving average. The ratio remains below the declining 200-day moving average. Holding above support would be a sign that the bearish trend is beginning to reverse.

The 14-day RSI is trying to break from a bearish regime, and we would welcome an overbought reading as a sign of building upside momentum.

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

High Beta vs. Low Volatility

The High Beta/Low Volatility ratio remains stuck between support and resistance but has regained the 50-day moving average. The ratio is set to do battle with the 200-day moving average, a break of which could be viewed as incrementally positive for risk appetite in the market.

The 14-day RSI remains in a bearish regime but is testing the upper bound. Here too we would welcome an overbought reading to signal stronger upside momentum.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has regained the 50-day moving average while trading below the declining 200-day moving average. Breaking above the 200-day and resistance at the pre-COVID levels could set the stage for further outperformance by Discretionary.

The 14-day RSI is trying to break from a bearish regime after failing to become oversold since the June lows.

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

Growth vs Value (Large Cap)

Despite a strong move to the upside yesterday, the Growth/Value ratio remains below the 50 and 200-day moving averages. The ratio is still below the May lows, keeping the 2018-2019 consolidation zone in play.

The 14-day RSI is in a bearish regime as it works off an oversold condition.

Lumber / Gold chart for March 25th research.

Small Caps vs Large Caps

The Small Cap/Large Cap ratio remains above a short-term support level but must still contend with the peaks from October/November 2021. Breaking above this level would put the Small Caps in a strong leadership position.

The 14-day RSI is holding above the short-term downtrend line as it shows signs of a shift to a bullish regime.

Copper / Gold chart for March 25th research.

High Yield vs Treasuries

The High Yield to Treasuries ratio continues to trade between support and resistance and between the moving averages. We are waiting on a clear directional break. 

The trend here remains neutral, confirmed by the 14-day RSI trading in the middle of the range. However, the lack of oversold readings of late tilts the odds slightly in favor of an upside resolution.

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

Lumber vs Gold

The Lumber/Gold ratio remains below support and the 50 and 200-day moving averages. Equity bulls want to see this ratio moving higher with stocks.

The 14-day RSI has continued to fade, but we note that it has found support near 40. This could be the start of a momentum shift, but more time is needed.

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

Copper vs Gold

The Copper/Gold ratio continues to trade in a neutral position between support and resistance, and between the moving averages.

The 14-day RSI could be shifting into a bearish regime. Bulls would like to see this indicator become overbought as/if the ratio moves above resistance.

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

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