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Key Points

  • High Beta/Low Volatility Fades from Resistance
  • Discretionary/Staples is Rejected at the 50-Day Moving Average
  • Copper/Gold Breaks Support
  • Small Caps Give Some Ground vs. Large Caps
  • New Cycle Lows for High Yield vs. Treasuries

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Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility Ratio has faded from resistance after failing to hold above the declining 50-day moving average, which is below the declining 200-day moving average. The ratio is moving toward support, and the 14-day RSI is still in a bearish regime.

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

Consumer Discretionary vs Consumer Staples (Equal Weight)

The Discretionary/Staples ratio has moved through support once again after being rejected at the declining 50-day moving average and trades well below the declining 200-day moving average. The ratio is below the levels that were seen prior to the COVID crash, while the 14-day RSI trades in a bearish regime.

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

Lumber vs Gold

The Lumber/Gold ratio is trading in line with the levels that were seen last week as it attempts to reverse a month of declines. The ratio is below the 50 and 200-day moving averages but does have support near the 2021 lows. The 14-day RSI is moving out of oversold conditions but remains in a downtrend. More time is needed for this theme to build a base.

Lumber / Gold chart for March 25th research.

Copper vs Gold

After stalling last week, the Copper/Gold ratio has broken support as it trades below the declining 50 and 200-day moving averages. Below support, odds favor a continuation to the downside, a trend that highlights slowing economic growth conditions. Momentum confirms this trend as the 14-day RSI remains in a bearish regime.

Copper / Gold chart for March 25th research.

Small vs Large

The ratio of Smalls Caps to Large Caps has come under pressure this week after outperforming for the past two months. The 50 and 200-day moving averages are now being tested as support. Should they hold, the next step will be to break above the October/November peaks to solidify a leadership position. Thus far, the 14-day RSI is holding above 40, the lower bound of a bullish regime.

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

Growth vs Value

The Growth/Value ratio is holding below broken support and the declining moving averages, a trend that continues to favor Value. Below the broken support level, there is room for the ratio to fall to the 2019 consolidation zone. Momentum remains in a bearish regime, confirming the price trend.

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

High Yield vs Treasuries

After a head fake move above resistance and the 50-day moving average, the High Yield to Treasuries ratio has moved lower for a second consecutive week. The move down has produced a lower low for the cycle, indicating that investors are shunning risk. The 200-day moving average is also moving lower. The bearish trend is confirmed by the 14-day RSI, which is near oversold levels.

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

Take-Aways

With stocks on track for one of their worst weeks since March 2020, it is not a surprise to see the key themes and relationships that we use to gauge risk appetite under pressure. Many are trading at or near their lows for the current cycle and will require time to repair the damage.

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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.