We Can See More Than “Just” Sector Rotation on Relative Rotation Graphs | RRG Charts

I had deliberate to take a look at some lesser-known Relative Rotation Graphs in this week’s episode of Sector Spotlight, however I used an excessive amount of time on asset class and sector rotations to make that occur. So I’m going to publish them right here and provides a quick description and interpretation.

Dow Composite

Within the drop-down choice listing, we now have much more RRGs accessible than simply the one exhibiting the US sectors. Additional down the listing, under the breakdown of the sectors into particular person shares, you will see “US Markets”, which holds the DJ Composite 65, DJ Industrials 30, DJ Transportation 20, DJ Utility 15.

The Composite 65 exhibits the three teams contained in the DJ Composite: Industrials, Transport, and Utilities. Though it’s a quite simple RRG, it can provide robust pointers.

Within the RRG above, the Danger OFF rotation could be very seen. Transports are already properly inside lagging and Industrials are rolling over contained in the main quadrant, whereas Utilities are taking pictures off into the main quadrant.

On the value chart, $DJA has simply bounced off the previous excessive of round 11,750. The help degree to look at within the coming weeks, IMHO, is 11,130. If that offers method to the draw back, a double-top sample might be accomplished with an accompanying worth goal round 10,500, and presumably decrease in the direction of the previous breakout degree between 9,500-9,750.

The PPO and RSI indicators which might be plotted under the value chart are clearly pointing decrease and exhibiting (semi-) destructive divergence. The peaks on the value chart aren’t larger, which is what you’d ideally wish to see in case of destructive divergence, however on the identical degree whereas the symptoms are pointing decrease. They’re positively NOT confirming the highs and lows on the value chart.

Commodities

One other RRG we don’t take a look at too typically is the one exhibiting the rotations for the Commodity sub-indexes towards the S&P GSCI Commodity index.

There are 5 teams on this index. Industrial Metals simply entered the main quadrant at a powerful RRG-heading whereas Vitality ($GJX) rotated out of the main quadrant into weakening during the last weeks and has now began heading in the direction of the lagging quadrant. The rotation for Vitality occurred after a really robust rotation, pushing Vitality costs larger because the finish of final 12 months. Given the power of $GJX on the value chart, there’s a good alternative that this rotation represents a pause within the relative uptrend, and $GJX can curl again up earlier than hitting the lagging quadrant.

Contained in the lagging quadrant, we discover the tail for Livestock which has simply turned again down after transferring larger on the JdK RS-Momentum scale. Measured on the JdK RS-Ratio scale, Livestocks is the weakest group on this universe.

Inside enhancing, Treasured Metals is rolling over and beginning to head decrease on the RS-Momentum scale, transferring again in the direction of the lagging quadrant and selecting up its relative downtrend once more.

The lengthy tail on the Agricultural sub-index exhibits a powerful transfer relative to the S&P GSCI Commodity index, however continues to be low on the RS-Ratio scale. Which means that there’s nonetheless the chance for the tail to roll over, as Treasured Metals has already began doing. A fast take a look at the value chart for Agri reveals {that a} potential H&S prime is within the making, which would definitely help a rollover inside enhancing and a renewed transfer again in the direction of the lagging quadrant.

Livestock

Livestock exhibits a accomplished H&S reversal, which rejected resistance within the 310-320 space (2017 and 2019 peaks). This chart leaves little or no room for upside. There’s some help round 290 now for Livestock, however, when that offers means, there’s loads of draw back earlier than any significant help might be met.

Industrial Metals

The tail on Industrial Metals has simply damaged out of a triangle-like consolidation. This consolidation shaped after Industrial Metals broke above the 400-410 barrier at the beginning of the 12 months, pushing the sub-index to its highest degree in 10 years. Nonetheless, the index is now pushing towards a 10-15-year-old resistance degree, as you’ll be able to see within the month-to-month chart under.

Observe on the chart above how Industrial Metals are actually coming into the resistance zone that’s provided by the peaks courting again to 2007-2008 and 2011. Breaking from the consolidation was the primary constructive signal. However the actual deal might be a break past 500 and ideally 525. Such a break will very doubtless be the catalyst for a a lot additional rise and relative outperformance for industrial metals.

#StaySafe, –Julius