Very Subtle Signs
of Life

by | Jan 28, 2022

Key Points

  • High Beta vs Low Volatility Holds Support
  • Discretionary vs. Staples Does Not Make a Lower Low This Week
  • Lumber/Gold Finally Cracks
  • Small Caps Remain Ugly vs. Large Caps
  • Growth Still Weak vs. Value, Remains Oversold

Key Themes and Relationships

High Beta vs Low Volatility

The High Beta to Low Volatility has held support this week despite equities coming under pressure. The ratio remains below the 50 and 200-day moving averages so there is still a lot of work to do, and the 50-day moving average is below the 200-day moving average. The 14-day RSI is moving lower in a bearish regime.

Consumer Discretionary vs Consumer Staples (Equal Weight)

Another curious event this week is the fact that EW Discretionary did not break down further vs. EW Staples. The trend remains to the downside and the 50-day moving average is crossing below the 200-day moving average, so there is not an all clear at this point. Additionally, the 14-day RSI remains oversold in a bearish regime.

Lumber vs Gold

The Lumber/Gold ratio cratered this week, moving below the 50-day moving average, which has turned lower. The flat 200-day moving average will likely come into play next. This week’s selling pressure takes place as the 14-day RSI made a lower high last week.

Copper vs Gold

The Copper/Gold ratio remain in the range, holding support and the moving averages. The 14-day RSI confirms listless trading as is sits in the middle of the range.

Small vs Large

Small Caps remain under pressure relative to Large Caps this week below the declining 50 and 200-day moving averages and broken support (now resistance). Momentum confirms this weakness as the 14-day RSI continues to trade in a bearish regime.

Growth vs Value

The Large Cap Growth vs. Value theme also remains under pressure this week, moving further below the 200-day moving average. The 50-day moving average is moving to the downside but remains above the 200-day moving average for now. The 14-day RSI is oversold, confirming the bearish price trend. Odds favor a test of support near the 2021 lows.

Take-Aways

Risk remains pinned to the mat with equites under pressure this week. The Lumber/Gold ratio has finally begun to succumb to the pressures that have been evident across the other themes that we track. Keeping an open mind, the fact that High Beta vs. Low Volatility and the Discretionary/Staples Ratio did not weaken further has our attention, but there is still a lot of work to do.

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.