Key Points
- High Beta vs. Low Volatility Can’t Break the Moving Averages
- Discretionary vs. Staples Rear a Key Support Level
- Copper/Gold Shows Signs of Life
- Lumber/Gold Powers Higher
- Growth Weakens Further vs. Value
Key Themes and Relationships
High Beta vs Low Volatility
The High Beta to Low Volatility ratio has not done much to improve its position over the past week. The ratio continues to trade below the 50 and 200-day moving averages but above support at the Summer 2020 lows. The 14-day RSI is turning lower and remains in a bearish regime after becoming oversold in December. For now, the trend remains in consolidation, but bias, based on momentum, is for a move to the downside.
Consumer Discretionary vs Consumer Staples (Equal Weight)
The ratio of Consumer Discretionary stocks relative to Consumer Staples stocks remains below the declining 50 and 200-day moving averages and is now approaching support. The 14-day RSI is trading near an oversold level and has not become overbought since the early days of 2021. Breaking support would send a message of a shift to risk-off positioning.
Lumber vs Gold
The Lumber/Gold ratio powered higher again this week, riding the rising 50-day moving average, which is moving further beyond the 200-day moving average. Momentum confirms the bullish price action as the 14-day RSI is near overbought levels.
Copper vs Gold
The Copper/Gold has begun to show some signs of life thanks to a strong move higher for Copper this week. The ratio has held the price and moving average support, while the 14-day RSI tries to shift to a bullish regime. While we are hard-pressed to say that the bullish trend that began in March 2020 is set to continue, the improvement this week does have our attention.
Small vs Large
Small Caps are beginning to stabilize relative to Large Caps, but it is too early to say that the tide has turned in their favor. The ratio is below the declining 50 and 200-day moving averages and resistance, while the 14-day RSI continues to make lower highs. We are watching this ratio closely, but we have not changed our view on the trend yet.
Growth vs Value
Last week, the title of this note highlighted that the trend was shifting for the Growth vs. Value theme as the ratio broke support and the 50-day moving average. This week, the theme has moved further against growth as the ratio continued to move lower and has now broken below the 200-day moving average. The bearish shift is confirmed by momentum as the 14-Day RSI moves to oversold levels.
Take-Aways
In terms of risk appetite in the market, the picture remains cloudy based on themes such as High Beta vs. Low Volatility, Discretionary vs. Staples, and Small Caps vs. Large Caps. However, the bearish development in the Growth vs. Value theme became clearer this week as the ratio broke down further. There is a level of confirmation here as the Copper vs. Gold ratio improved while the Lumber vs. Gold ratio continues to strengthen.
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