Key Points

  • Semiconductors Reach a Key Inflection Point
  • Risk Themes Point to Indecision on the Part of Investors
  • Copper Remains in a Sloppy Consolidation vs. Gold; Lumber is Free Falling
  • Small Caps Complete a Bullish to Bearish Reversal vs. Large Caps
  • Growth vs Value Hits the Next Resistance Point

Chart in Focus:

Long time readers of my work know that I place a lot of importance on the performance of semiconductors as a “tell” for the health of the equity market. The S&P 1500 Semiconductors & Semiconductor Equipment Index is now at an inflection point as it tests the breakout level above the 50-day moving average. Holding support and moving higher would be a bullish development. Breaking support would signal that the recent peak was a false breakout.

At the same time, the relative ratio is testing the 50-day moving average within a choppy consolidation that has been in place since February.

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 under pressure this week, below the 50-day moving average. The ratio is above support and the 200-day moving average, keeping it in a consolidation after the strong move from the 2020 lows. After failing to confirm at the highs, the 14-day RSI is moving toward oversold conditions.

A break of support would serve to change the structure of the larger trend from bullish to bearish.

Consumer Discretionary vs Consumer Staples (Equal Weight)

The ratio of Consumer Discretionary stocks relative to Consumer Staples stocks is consolidating above support at the 2018 highs and the 50-day moving average. The 200-day moving average continues to move steadily higher and will soon enter the price-based support level. The 14-day RSI is in the middle of the range, confirming the consolidation that is playing out in the ratio.

A breakout would be a signal that investors are willing to take on more risk. A break of support would send the opposite message.

Copper vs Gold

The Copper/Gold ratio remains in a range between the support and resistance levels that we have been highlighting for weeks. While the ratio trades below the 50-day moving average, note that the 14-day RSI has yet to reach oversold levels. A break of support would signal that the trend has turned to the downside and would bring the 200-day moving average into play. In the near-term, a sloppy consolidation remains the base case.

Lumber vs Gold

The Lumber/Gold ratio continues to move to the downside, further below the 200-day moving average. The 14-day RSI remains in an oversold position and at its lowest level in more than three years. The moving average and the former breakout level are now likely to serve as resistance to any oversold rebound that develops.

The themes and relationships that are highlighted above provide a compelling rational for much of the choppy rotation that is playing out under the surface of the market. Despite the S&P 500 trading near record highs, there is a lot of indecision on the part of investors in the near-term.

The themes below can show us where investors are allocating capital within the equity market.

Growth vs Value

The Growth/Value ratio for the S&P 500 is consolidating just below the next resistance level, absorbing the overbought condition of the 14-day RSI. The ratio is above the 50 and 200-day moving averages. Near-term pullbacks in the ratio are likely to find support at the interim high set in April of this year. Above this support level, the path of least resistance is to the upside.

Small vs Large

The ratio of Small Caps to Large Caps remains below broken support and the 50-day moving average. This week, we can also add a break below the 200-day moving average to the list of bearish developments for this theme. The 14-day RSI is in an oversold condition, confirming the change in the trend from bullish to bearish.


While the S&P 500 trades near record levels, held aloft by the biggest of the Mega Cap stocks, under the surface there is a lot of choppiness. Much of this chop can be explained by the rotations playing out in the relationships mentioned here. Perhaps we are heading toward a market environment like what was seen in the 2018 & 2019? Time will tell and these themes will be important in guiding the way.
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.