Take-Aways:
The themes that we track remain in a neutral position. Many are stuck between support and resistance and/or the 50 and 200-day moving averages. The bearish case for equities is supported by the fact that many of the ratios are below declining 200-day moving averages. Bulls will argue that key support levels are holding as downside momentum continues to wane. This leaves trends stuck in neutral.
Key Themes and Relationships
High Beta vs Low Volatility
The High Beta/Low Volatility ratio remains trapped between support and resistance and between the 50 and 200-day moving averages. This theme remains in a neutral position, but we note a subtle shift playing out as the 14-day RSI has not become oversold on recent bouts of weakness. This could indicate that downside momentum is waning.
Consumer Discretionary vs Consumer Staples (Equal Weight)
The Discretionary/Staples ratio continues to test support at the 50-day moving average while trading below price-based resistance and the falling 200-day moving average. It appears that the ratio is building a base after a steady decline for most of the year. The 14-day RSI has been making higher lows since May, but we need to see a break above the 200-day to believe that risk appetite is returning to the market.
Growth vs Value (Large Cap)
The Growth/Value ratio remains below the 50-day moving average after failing to push above the 200-day moving average during the June-August rally. The ratio is holding above price-based support, and the 14-day RSI is fighting hard at the 40-level. The trend is neutral with a cautious bias.
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 moving below 40, signaling the potential for support to be tested. The trend is neutral, with a slight downside bias.
High Yield vs Treasuries
The High Yield to Treasuries ratio remains stuck between support and resistance and the 50 and 200-day moving averages. The 14-day RSI has held at the 40 level and now sits in the middle of the range. The trend is neutral.
Lumber vs Gold
The Lumber/Gold ratio continues to test but has not broken price-based support below the 50 and 200-day moving averages. The 14-day RSI has moved to the middle of the range after holding above 40 this week. If this ratio is going to make a turn to the upside, this is a logical spot for it to begin.
Copper vs Gold
The Copper/Gold ratio is holding its test of the 50-day moving average below the declining 200-day moving average as it trades between support and resistance. The 14-day RSI remains in a neutral position, holding above the 40-level.
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