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Copper/Gold!

Key Points

Chart in Focus:

With the holiday shopping season in full swing, we note that the S&P 500 Specialty Retail Index traded to a new 63 and 126-day relative high yesterday. On an absolute basis, the index is above the rising 50-day moving average and in a clear uptrend after breaking resistance in October. Odds favor a continuation of these bullish trends.

The following relationships can help give us a sense of the level of risk appetite on the part of investors.

High Beta vs Low Volatility

The High Beta to Low Volatility ratio refuses to give us something different to write as it remains in a consolidation. The ratio is below the 50-day moving average and is now testing the 200-day moving average. Resistance is at the 2021 highs. The 14-day RSI has not become oversold during the current pullback, which give us an upside bias when combined with the rising moving averages. However, we are not willing to go out on a limb until the moving averages are breached to the upside.

Discretionary vs Staples

The ratio of Consumer Discretionary stocks relative to Consumer Staples stocks has checked back to price-based support that lines up with the rising 50-day moving average. For now, the 200-day moving average is not a factor. The 14-day RSI has not become overbought or oversold of late. Above support and the moving averages, we must give higher odds to a continuation of the bullish trend.

Lumber vs Gold

The Lumber/Gold ratio has proven the base case to be wrong as it has broken above the 200-day moving average after earlier, surpassing the 50-day moving average. Recent strength is confirmed by momentum as the RSI has moved into an overbought position and broken the downtrend line from the May peak.

Copper vs Gold

The Copper/Gold ratio is stuck in the middle of the 2021 range after rebounding from support. It is also trapped between the 50 and 200-day moving averages, which are pinching. The 14-day RSI is in the middle of the range, confirming the price consolidation after a bearish divergence at the recent high.

While this is arguably one of the most important trends that we track from an Intermarket perspective, there is not a clear message right now. We are content to watch this battle from the sidelines until a clear trend develops.

Small vs Large

Small Caps have broken support relative to the Large Caps as the ratio remains below the declining 50 and 200-day moving averages. The only positive thing we can say about this situation is that the 14-day RSI did not become oversold on the recent move lower in price. However, we find it hard to favor the Smalls until the ratio moves above the October and November peaks to break the series of lower high and lower lows.

Growth vs Value

Higher highs and higher lows are how we classify the Growth vs. Value theme. The ratio is above the rising 50 and 200-day moving averages and the breakout level. The 14-day RSI is in a bullish regime, confirming the bullish price trend.

Take-Aways