by SIACharts.com
Markets are showing signs of a shift this week, with a noticeable selloff in higher-risk segments and a move toward relatively safer assets. The NASDAQ Composite (NASD.I) and Russell 2000 (RLS.I) declined by -2.49% and -2.52%, respectively, which may indicate mounting pressure on growth and small-cap stocks. Broader indexes such as the S&P 500 (SPX.I) and S&P/TSX Composite (TSX.I) also posted losses, while the Dow Jones Industrial Average (DJI.I) managed a slight gain of 0.04%, suggesting some rotation within equity markets.
At the same time, volatility measures rose sharply after an extended period of subdued readings. The CBOE NASDAQ-100 Volatility Index (VXN.I) increased by 19.55%, and the CBOE SPX Volatility Index (VIX.I) rose 8.28%. The VIX is often referred to as the market’s “fear gauge,” reflecting expectations for near-term volatility in the S&P 500. A rising VIX may indicate growing investor unease or uncertainty, while prolonged low readings could suggest complacency or overconfidence. The recent uptick could point to a recalibration of risk perceptions following a stretch where markets had largely priced in stability.
In today’s report, we will review an important equal-weight growth vs. value comparison chart (EWIXCG.TO vs. EWIXCV.TO) to see if it can glean any further insights on potential shifts. We will then take a closer look at the BMO Low Volatility Canadian Equity ETF (ZLB.TO), which is showing signs of outperformance within the SIA BMO Asset Management ETF Report.
Interpreting Market Rotation via Growth–Value Point and Figure Analysis
An advanced way to analyze the stock market is by examining the relationship between higher-risk and lower-risk investments, using proxies to better understand this dynamic. Proxies are indirect measurements used when direct measurement is difficult, often due to the volume of data or other constraints, and are effective when they strongly correlate with the variable being measured.
Comparison charting is a hallmark of the SIA Charts platform, where millions of comparisons are generated daily to deliver clear and concise data on relative movements and trend developments. This approach becomes especially powerful during times of market transition or during sector and asset class rotations. Common comparisons include cash versus equity, bonds versus equity, and international versus domestic markets. But what about risk?
In an environment where capital remains within the equity space but rotates from a risk-on to a risk-off posture, SIA offers several tools to help identify these changes quickly and clearly. These tools are available under the Reports tab, specifically within the Style sub-tab, which includes daily ranking reports for DJ Canada Select Growth and DJ Canada Select Value stocks.
Included in this report are two key proxies: equal-weight growth (EWIXCG.TO) and equal-weight value (EWIXCV.TO). In the attached chart, these symbols are charted against each other using point and figure charting to assess which style is currently favored. While this relationship can fluctuate when viewed on a standard line chart, the point and figure method allows users to more clearly identify trend direction, as well as key support and resistance levels. These are valuable reference points for advanced SIA users.
SIA’s Equal Weight Indexes also offer an additional layer of insight beyond traditional Market Capitalization Indexes, which can be influenced by a small number of large-cap names. The equal-weight approach provides a more balanced perspective on overall market behavior and leadership.
Looking at recent data, the post-COVID period appears to have been defined by cautious investing, where value outperformed growth. This is reflected by the red arrow and red negative trend line. As 2022 progressed, however, there were several distinct moves back in favor of growth. The second of these moves broke through the red point and figure downtrend line, followed by a clear reversal that established a new positive trend in favor of growth, shown by the green arrow and green trend line.
Over the past year, growth stocks have experienced several sharp selloffs. On the comparison chart, key resistance has appeared around the 170 level, with a lower low near 169. This has historically marked points where growth corrects in favor of value. The most recent movement may be more significant, as the comparison chart has now reversed again into a negative trend for growth.
While this is only one piece of data and should not be used in isolation, it may reflect broader market challenges currently underway. This type of signal could be integrated by SIA advisors into their portfolio management decisions, potentially prompting a shift toward lowering the overall risk profile of their equity holdings. This might include adjusting allocations to lower beta stocks, selecting names with lower standard deviation, focusing on higher dividend-paying stocks, moving into safer sectors, tightening stops on growth positions, seeking value opportunities, or adapting hedging and financial planning strategies to account for a more defensive market posture.
Turning Market Data into Strategy: BMO Low Volatility Canadian Equity ETF (ZLB.TO) Through the SIA Lens
The BMO Low Volatility Canadian Equity ETF (ZLB.TO) is designed to deliver equity growth by providing exposure to Canadian equities while reducing overall market sensitivity. The fund follows a rules-based approach to construct a portfolio of large-cap Canadian stocks with lower beta, making it less sensitive to broad market movements. It is well-suited for investors seeking diversified Canadian equity exposure with reduced volatility and who are comfortable with low to medium investment risk. The portfolio is rebalanced annually in June and reconstituted in December to maintain its low-volatility profile.
ZLB.TO has delivered strong recent performance, with a year-to-date return of 17.64%, a quarterly gain of 6.14%, and a one-month increase of 2.39%. This performance has contributed to a high SMAX ranking of 8 out of 10 within SIA’s near-term comparative model, which evaluates ETFs against five asset classes using ten different comparison charts. In the SIA BMO Asset Management ETF Report, ZLB.TO currently ranks #10 out of 175 ETFs, trailing only a few high-performing sector and country ETFs such as those focused on Gold, Banks, Technology, and Japan. Notably, ZLB.TO would rank #1 if standard deviation were the primary measure, as it holds an exceptionally low standard deviation of just 2.64%, reinforcing its reputation as a low-volatility performer.
We hope this analysis highlights how the SIA platform can be used quickly and easily to turn real market data into practical portfolio management techniques, offering a truly tactical experience for today’s dynamic investment environment.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.
