The S&P 500 traded to the 3,900 level that we have highlighted and promptly backed off. At the same time, many of the themes that we track have shown a slight decrease in risk appetite over the past week. We continue to believe a focus on leadership is key. Value remains an outperformer relative to growth, while Small Caps have the edge over Large Caps.
Key Themes and Relationships
Semiconductors vs. S&P 500
Semiconductors remain below broken support relative to the S&P 500 and remain below the declining 50 and 200-day moving averages. Equity bulls want to see this ratio back above resistance and the 50-day moving average to have confidence that rallies will have staying power.
The 14-day RSI is holding in a bearish regime, supporting the downtrend for the ratio.
High Beta vs. Low Volatility
The High Beta/Low Volatility ratio remains stuck between support and resistance as it trades below the declining 50 and 200-day moving averages. We still need to see the 200-day moving average broken to the upside to have confidence that risk appetite is returning to the market.
The 14-day RSI remains in a bearish regime, but we note that it has not become oversold this year.
Consumer Discretionary vs Consumer Staples (Equal Weight)
The Discretionary/Staples ratio remains below the 50-day moving average while holding below the 200-day moving average. There is price-based resistance at the pre-COVID levels that must be overcome before we can claim that the trend has turned in favor of risk-on.
The 14-day RSI is holding in a bearish regime but has not become oversold since June. This is a sign that downside momentum may be waning as a base is forming in price.
Growth vs Value (Large Cap)
The Growth/Value ratio remains below the 50 and 200-day moving averages and has fallen further below resistance. The ratio has taken out the May lows, putting the 2018-2019 consolidation zone in play.
The 14-day RSI is in a bearish regime and remains oversold, confirming the weak trend for the ratio.
Small Caps vs Large Caps
The Small Cap/Large Cap ratio remains above a short-term resistance level but must still contend with the peaks from October/November 2021. Breaking above this level would put the Small Caps in a strong leadership position.
The 14-day RSI has broken a short-term downtrend to move toward an overbought level after failing to become oversold. A shift in momentum to a bullish regime could be a sign that Small Caps are going to continue to outperform.
High Yield vs Treasuries
The High Yield to Treasuries ratio continues to trade between support and resistance and has moved between the moving averages. We are waiting on a clear directional break.
The trend here remains neutral, confirmed by the 14-day RSI trading in the middle of the range.
Lumber vs Gold
The Lumber/Gold ratio has moved below support and the 50-day moving average. The ratio remains below the declining 200-day moving average, which bulls want to see overcome to make a more compelling case.
The 14-day RSI is fading after failing to become overbought. It is more likely time needed for a base to build.
Copper vs Gold
The Copper/Gold ratio continues to trade in a neutral position between support and resistance and between the moving averages. The trend is confirmed by the RSI sitting in the middle of the range. However, there have been small improvements over the past two weeks.
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