The 60% Equity, 40% Fixed Income portfolio has long been a staple for portfolio asset allocation across investor types for decades. The iShares Core Growth Allocation ETF (AOR, 60% Equity, 40% Fixed Income target) provides investors with a reliable proxy that can be utilized within Intermarket relationships to evaluate strength between asset classes outside of equities and fixed income. In this note, the relative strength of the 60/40 proxy (AOR) is compared to proxies for Commodities, Alternatives, and Cryptocurrencies.

below is a preview of the Intermarket analysis report from Research by Potomac. 

60/40 (AOR) Relative to the Bloomberg Commodity Index

The 60/40 proxy (AOR) broke key relative support below the ratio’s declining 50-day moving average at the highlighted zone over the past week of trading, leaving the door open for a test of the June relative lows. It’s important to note that Commodities have been unexempt from the selling pressure as of late, and this relationship continues to suggest that Commodities have been a “less bad” asset class. While RSI has not been oversold since June, the series of lower highs in the indicator gives credence for yet another potential leg down.

60/40 (AOR) Relative to Multi-Strategy Alternatives (QAI)

The 60/40 proxy (AOR) continues its descent relative to Multi-Strategy Alternatives (QAI) after breaking relative support at the highlighted zone and the June relative lows over the past month of trading. The sheer distance between the relationship and the ratio’s declining 50-day moving averages leaves the door open for a potential countertrend rally, but the bias remains with the bears. RSI confirms the downtrend as it tests the upper bound of a bearish regime. Note the inability to achieve an overbought reading and complete a bearish to a bullish reversal in the summer; it will likely take time to repair the damage here as Alternatives take the lead.

60/40 (AOR) Relative to Top 3 Cryptocurrencies by Market Capitalization

After a strong run from the fall of last year into the summer, the 60/40 proxy (AOR) continues trading in consolidation relative to the top three cryptocurrencies (Bitcoin, Ethereum, and Tether). The relationship is fighting with the ratio’s rising 50-day moving average as it struggles to gain a directional bias. Bulls will look for the consolidation to resolve to the upside, while the bears will look for a breakdown from the relative trading range. While the 60/40 has struggled relative to other asset classes, given the current market environment, it has held up well relative to the top three cryptocurrencies by market capitalization. Bulls with cite the inability of RSI to become oversold over the past year, while the bear will note the series of lower highs and waning momentum in the relationship since the summer. In either case, investors will look for a resolution from the relative trading range to have confidence in the trend.

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