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Key Points

    • High Beta/Low Vol Knocks on Resistance
    • Impressive Breakout in Growth/Value – Will it Hold?
    • Lumber/Gold Breaks Down
    • Copper/Gold Heads for Another Test of Support
    • High Yield Credit Spreads Roll Over

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta/Low Volatility ratio has been no slouch in the recent rally as it tests resistance at the highlighted zone after finding support at the ratio’s now-rising 50-day moving average. Momentum continues to print values above the 60-level in a bullish regime. Equity bulls want to see a breakout in this ratio to have increased confidence in the recent rally.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio continues to test long-term relative resistance at the highlighted zone above the ratio’s flat 50-day moving average after posting a higher low in July. Here too, bulls want to see a breakout. RSI is once again knocking on the 60 level, the upper bound of the bearish regime that’s defined the downtrend since Q4 of last year.

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

Growth vs Value (Large Cap)

The Large Cap Growth/Value ratio has broken out of long-term relative resistance to the upside on a strong move this week, trading well above the ratio’s rising 50-day moving average with the declining 200-day moving average set in its sights. RSI is just shy of printing an overbought reading at the 70 level, a zone that the Growth bulls want to see taken out to the upside.

Lumber / Gold chart for March 25th research.

Small Caps vs Large Caps

It was another week of more of the same for the Small Cap/Large Cap ratio as it tests the declining 200-day moving average from above. Momentum remains in a bullish range above the 40 zone as the ratio continues to chop and grind sideways.

Copper / Gold chart for March 25th research.

Lumber vs Gold

The Lumber/Gold ratio has broken relative support in this week’s trading on an overbought reading in RSI, confirming the downtrend. Note resistance at the declining 50-day moving average in the middle of July as they posted a lower high. For now, the bias remains with the bears.

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

Copper vs Gold

The Copper/Gold ratio is heading for another test of long-term relative support at the highlighted zone after a stabilization attempt over the past several weeks below the declining 50 and 200-day moving averages of the ratio. RSI was rejected at the 50- zone and will now likely be the upper bound of a bearish range. Here too, the bias remains with the bears.

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

High Yield vs Treasuries

High Yield Credit Spreads have sliced through the flat 50-day moving average and the long-term breakout zone to the downside, adding a degree of confidence to the risk asset bulls in the recent rally. RSI is testing the 35 zone and the lower bound of the bullish momentum regime that has stalled prior declines in Q4 of last year and Q2 of this year. While the recent reversal has been encouraging for risk assets, bulls will now look for an oversold reading to have confidence in their positive outlook.

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

Take-Aways

At this time, there is simply not enough evidence across the relationships that we track to suggest that the markets have made the shift from risk-off to risk-on. Rather, the evidence points to somewhere in between the two dynamics. Bulls look for breakouts from resistance in High Beta/Low Vol, Discretionary/Staples, some degree of stabilization in both Lumber/Gold and Copper/Gold, and an oversold print in the RSI of High Yield Credit Spreads.

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