Key Points

  • The Rest of the World is Lagging the U.S.
  • Discretionary on the Verge of a Breakout vs. Staples
  • Lumber Remains in a Free Fall Against Gold
  • Growth vs. Value Holds Above Support
  • The Small Cap/Large Cap Debate Still Rages

Chart in Focus:

The Dow Jones Global ex-U.S. Index relative to the S&P 500 has been building a base since March of 2020 but has recently made an aggressive move toward the lows, trading below the 50 and 200-day moving averages. The ratio has not been able to sustain momentum to the upside. The 14-day RSI has yet to become overbought during the consolidation process and has now moved into an oversold position. There may come a time to favor the rest of the world over the United States, but now is not that time.

Key Themes and Relationships

We update our views on the key relationships that we track across the market to get a sense of investor’s willingness to take on risk. We also highlight the trends playing out in major factors such as Growth, Value, Large Cap, and Small Cap.

High Beta vs Low Volatility

The ratio of the S&P 500 High Beta Index relative to the S&P 500 Low Volatility Index remains in the choppy consolidation that we have been highlighting for the past few weeks. For now, it appears that this is a pause in the uptrend that began in March 2020 as the ratio holds support at the rising 50-day moving average. The rising 200-day moving average is well below. The 14-day RSI failed to confirm the most recent high for the ratio but remains in bullish ranges, keeping momentum to the upside for now.

Consumer Discretionary vs Consumer Staples (Equal Weight)

The ratio of Consumer Discretionary stocks relative to Consumer Staples stocks moved further to the upside this week and is now testing the top end of the consolidation zone that has been in place since March. There is a cluster of support levels just below, made up of the 50-day moving average, the 2018 high, and the 200-day moving average. The 14-day RSI has not become oversold as the consolidation plays out, increasing the odds that the ratio will resolve to the upside.

A breakout would be a signal that investors are willing to take on more risk.

Copper vs Gold

The Copper/Gold ratio continues to trade between the support and resistance levels that we have laid out over the past two weeks. The ratio is below the 50-day moving average which is still rising for now. The 14-day RSI has not reached oversold levels but remains in a clear downtrend. The jury is still out on how this consolidation will resolve.

Lumber vs Gold

The Lumber/Gold ratio remains in a free fall, moving further below the 200-day moving average which is now turning to the downside as well. The 14-day RSI is in a deeply oversold position, highlighting the momentum behind the decline in price. While a rebound cannot be ruled out, we note that there will be a fair amount of resistance at the moving average and the level that marked a breakout on the move to the upside.

Growth vs Value

The Growth/Value ratio for the S&P 500 remains above the 200-day moving average after crossing it last week. There is also price-based support at the breakout level. At the same time, the 50-day moving average is beginning to move to the upside, highlighting a shift in the trend as of late. Thus far, the ratio is absorbing the first overbought reading since last September as well.

Further weakness in the commodity themes mentioned above would likely serve as a catalyst for a continuation of outperformance on the part of growth themes in the market.

Small vs Large

The ratio of Small Caps to Large Caps is in the same position as last week, stuck in the support zone but below the 50-day moving average. The 200-day moving average continues to rise. Perhaps the ratio is simply pausing after a strong run, giving the longer-moving average “time to catch up.” The 14-day RSI remains in the middle of the range. The bullish divergence is still in play and would be confirmed with a break of the interim peak made in early June. A break of support would likely lead to a test of the 200-day. We are watching and waiting.


We continue to monitor the trends in the commodity themes as they are likely a “tell” on how investors will position for the second half of the year. Further weakness could point to Growth leading Value and Large leading Small. Copper and Lumber tend to be economically sensitive, making today’s nonfarm payrolls report the key highlight in front of the long weekend in the U.S.

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.