RRG Charts

Responding to comments and answering questions from MWL last week

 

Last week Wednesday (29 November) I was the guest of Tom and Erin in the Market Watchers Live show.

During the show, we talked a lot about RRG, Relative Rotation Graphs, covering some basics and some new(er) techniques and interpretations that I have been working on.

If you missed the show you can watch the recording on the MWL youtube channel here.

MARKET WATCHERS LIVE 11.29.17

As you may know, people can post comments or pose questions in the sidebar during the show. I have tried to answer questions and respond to comments during the show, but I was not able to catch all of them at that time.

So I copy-pasted a number of questions and remarks from the show to get back to at a later stage. That stage is now in this article.

For clarity, I have broken down the article into two sections. One that deals with the "comments" that are not really questions and one section that answers the "questions."

 

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GE in freefall while WMT is shooting for the stars on Relative Rotation Graph for $INDU

Above is the Relative Rotation Graph for the DJ Industrials index, comparing the relative rotation of all members around $INDU.

On this chart, a few stocks stand out because of their clear directional moves.

Inside the leading quadrant, INTC, CSCO, and WMT are pulling away from the crowd further into positive territory. Inside the lagging quadrant, on the other hand, PG, MRK, and especially GE are heading in the opposite direction.

Continue reading "GE in freefall while WMT is shooting for the stars on Relative Rotation Graph for $INDU" »

Energy sector bursting into leading quadrant on Relative Rotation Graph, strong potential for EOG and COP

The Relative Rotation Graph above shows all the members of the S&P 500 Energy sector against XLE, the ETF that tracks the Energy sector price index.

The main reason for looking at this universe at the moment is the fact that the sector (XLE) on the RRG for US sectors is about to burst into the leading quadrant (chart further down in the article).

The chart above highlights a few areas of interest which I will dive into a bit deeper.

We will investigate the cluster of stocks inside the weakening quadrant as well as the cluster of stocks on the opposite side, inside the improving quadrant. Also inside the improving quadrant, ESV draws attention at the high JdK RS-Momentum level and its long tail.

Inside the lagging quadrant KMI, WMB, and SLB show (further) weakness, while there are a number of stocks inside leading that are powering ahead.

 

Continue reading "Energy sector bursting into leading quadrant on Relative Rotation Graph, strong potential for EOG and COP" »

Once again, strong rotation for SPY vs other asset classes on RRG

 

The Relative Rotation Graph above holds six ETF that represent various asset classes.

The picture gives you the big picture of what is going on at asset class level on a relative basis against VBINX which is a Vanguard balanced index fund (60% equity / 40% bonds).

This one frame immediately makes crystal clear that, from a relative point of view, there is only one asset class that is outperforming the benchmark and that is equities (SPY).

 

Continue reading "Once again, strong rotation for SPY vs other asset classes on RRG" »

RRG suggests sector rotation out of Real Estate (XLRE) into Industrials (XLI)

The Relative Rotation Graph for US sectors shows seven sectors clustered around the benchmark in the middle of the graph (SPY) and three of them further away.

XLE is more or less detached from the rest of the universe while XLP and XLY are breaking away together and heading deeper into the lagging quadrant.

Within the cluster of sectors closer to the center of the chart, Real Estate (XLRE) and Industrials (XLI) are showing interesting rotational patterns backed by long(er) tails.

 

Continue reading "RRG suggests sector rotation out of Real Estate (XLRE) into Industrials (XLI)" »

INTC and PFE expected to dominate relative rotation in $INDU while NKE, DIS, and TRV are lagging

Plenty of actionable rotation towards the edges of the Relative Rotation Graph above. The RRG holds the 30 members of the Dow Jones Industrials index. Scanning around the outside of the chart the following stocks draw the attention.

In the weakening quadrant, MCD is at the lowest JdK RS-Momentum reading and heading lower on the JdK RS-Ratio axis, towards the lagging quadrant. Also, MSFT and UNH have just rotated into the weakening quadrant from leading. Already inside the lagging quadrant, the weakest rotations are seen for DIS, NKE, TRV, and UTX. 

Close to the benchmark, inside the improving quadrant are a few stocks that have long(er) tails while rotating at a positive RRG-Heading. These can be seen inside the blue shaded oval.

Inside the leading quadrant are BA, CAT, and VZ showing nasty negative hooks down. At the moment only CVX seems to be holding up a positive RRG-Heading, pointing deeper into the leading quadrant.

Continue reading "INTC and PFE expected to dominate relative rotation in $INDU while NKE, DIS, and TRV are lagging" »

Pair trade opportunity in XLV/XLK and potentially strong (rare) rotational pattern for XLI

The Relative Rotation Graph above holds the ten sector SPDR ETFs that make up the complete S&P 500 index (SPY). 

At the moment the positioning of the various sectors and their rotational patterns are relatively evenly spread over the RRG canvas except for XLE which is far away from the center of the chart inside the improving quadrant.

The Utilities (XLU) sector, which I looked at more in depth in my previous blog, continues to do well and push further into the leading quadrant.

And finally, Technology (XLK) and Health Care (XLV) continue their almost perfect opposite rotational pattern, worth a further inspection.

 

Continue reading "Pair trade opportunity in XLV/XLK and potentially strong (rare) rotational pattern for XLI" »

"Boring" Utilities moving up to main stage

Bringing up the Relative Rotation Graph that holds all members of the Utilities sector (XLU) gives the picture above. With NRG all the way up in the top-right corner of the leading quadrant and SCG in the lower left-hand corner of the lagging quadrant, the remaining stocks in the sector are getting a bit squeezed around the center of the RRG.

It means that we definitely have to inspect those two stocks on the outside of the universe a bit closer and then zoom in on the stocks around the benchmark to find out what is going on there.

Utilities are often characterized as a "boring" sector, but as you can see on the RRG, there's a lot going on under the hood, and given the position and rotational pattern of XLU on the sector RRG against SPY it is a sector to watch closely at the moment.

Continue reading ""Boring" Utilities moving up to main stage" »

Is TECHNOLOGY now a defensive sector?

The Relative Rotation Graph above shows the US sector universe based on S&P 500 indices (ETFs).

Two sectors stand out on this chart. These are Energy (XLE) inside the improving quadrant but at low levels on the JdK RS-Ratio axis, and Financials (XLF) inside the Leading quadrant which has just lost a bit of relative momentum (JdK RS-Momentum scale).

Inside the lagging quadrant both Consumer sectors, -staples and -discretionary are moving lower on the RS-Ratio scale more or less in tandem and recently picked up a bit of JdK RS-Momentum.

The remaining sectors are clustered around the center (benchmark) of the chart.

Inside the weakening quadrant, two sector pairs draw the attention these are XLK and XLV (furthest to the right) and XLI and XLU (close to 100 on the RS-Ratio axis). Both pairs are moving in opposite direction and are at almost the same spot on the Relative Rotation Graph. Worth a further look.

 

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PG and PFE at similar location on RRG but one of them looks much stronger

 

The Relative Rotation Graph above holds the 30 stocks that make up the Dow Jones Industrials Index and compares their relative rotation to $INDU.

From the first observation of this chart, a few tails/stocks catch the eye. First, there is BA in the top-right, leading, quadrant still powering further on both axes. Also inside or just entering the leading quadrant are NKE and JPM. Both seem to have a strong RRG-Heading but last week's price action does not look very supportive. I prefer a wait and see approach in such cases.

Inside the Weakening quadrant, AAPL attracts attention as it has stopped moving lower on the JdK RS-Momentum axis and started turning back up. This could be the start of another relative leg higher and deserves a closer look.

Within the boundaries of the lagging quadrant, IBM and GE are to the far left of the spectrum, and after a move higher on the JdK RS-Momentum axis they started heading further left again which is not a strong sign.

Crossing into the improving quadrant from lagging we find PG and PFE close together; I am interested to look at the charts of those two stocks and see if we can find a preference for one or the other.

 

Continue reading "PG and PFE at similar location on RRG but one of them looks much stronger" »