Still Not in the Mood
to Take Risk

by | Apr 22, 2022

Key Points

  • High Beta/Low Volatility Extends Lower
  • Discretionary/Staples Remains in a Bearish Trend
  • Lumber/Gold Tries to Stabilize
  • Growth/Value Decides to Head to the Downside
  • Small Caps/Large Caps Still Have Work to Do

Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility Ratio is moving lower after breaking support two weeks ago. The ratio is below the declining 50 and 200-day moving averages and has room for the next potential support level. The 14-day RSI is in a bearish regime, lending momentum confirmation to the bearish price action.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio remains in a downtrend, below the declining 50 and 200-day moving averages. The ratio has room for the next support level as the trend continues to send a risk-off message. The bearish trend is confirmed by the 14-day RSI holding in a bearish regime.

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

Lumber vs Gold

After declining for five consecutive weeks, the Lumber/Gold ratio is trying to stabilize near the flat 200-day moving average. The ratio remains below the declining 50-day moving average and in a choppy trend. There is not a clear advantage for either fighter at this time. The 14-day RSI has moved to the middle of the range, confirming the neutral trend.

Lumber / Gold chart for March 25th research.

Copper vs Gold

The Copper/Gold ratio continues to trade in the consolidation that has been in place for more than 13 months, oscillating around the pinched 50 and 200-day moving averages. The 14-day RSI confirms the neutral price action as it trades firmly in the middle of the range. This remains one of the most frustrating trends in the market.

Copper / Gold chart for March 25th research.

Small vs Large

The ratio of Small Caps to Large Caps is trying to stabilize below the 50 and 200-day moving averages but it’s too early to begin to think that the trend has changed. Breaking above the moving averages would be a good first step. The 14-day RSI is holding in a bearish regime.  

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

Growth vs Value

Over the past two weeks, the Large Cap Growth vs. Value theme has moved further below the 50-day moving average, which is, in turn, moving further below the 200-day moving average. The ratio appears to be intent on moving down to the next support level, and the bearish trend is confirmed by the declining 14-day RSI.

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

Take-Aways

Over the past two weeks, the themes and relationships that we track in this note have continued to send the message that there is a lack of risk appetite on the part of investors.  Unfortunately, as we have highlighted for the past few months in other notes, fixed income is not providing a port a storm at the moment.

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.