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Watchers of my present Sector Spotlight will know that I’ve been watching the event of commodities as an asset class that is going by way of an extended turnaround. Current developments proceed to bolster that view.
The Relative Rotation Graph exhibits the rotation for a universe of asset class ETFs vs. VBINX, the Vanguard Balanced Index Fund. The longest tails are for GSG and DJP, the 2 commodity ETFs that I observe on this RRG/Universe. These tails entered the main quadrant in September/October 2020 after coming from an extended rotation by way of bettering, after a multi-year interval of underperformance.
Nearly instantly after coming into the main quadrant, these tails began to roll over downward and lose relative momentum. That restoration from the depths of relative power was taking its toll and wanted time to refuel. In December ’20/January ’21, the tails curled again up and entered the main quadrant at a robust RRG-Heading, setting off a brand new leg larger within the just-established relative uptrend. That course of repeated once more from April to October, when each tails as soon as once more rotated again into the main quadrant from weakening, once more at a robust RRG-Heading, after which once more from November till now.
As soon as once more, the DJP and GSG tails are coming into the main quadrant from weakening, underscoring the robust relative uptrend that is happening.
DJP
GSG
Each DJP and GSG are displaying breakouts above main resistance ranges this week, which opens up the best way for rather more upside motion on this asset class.
Within the drop-down checklist on the RRG web page, we even have an RRG universe for Commodity teams that enables us to enter the breakdown of the commodity universe.
What we see right here is an attention-grabbing rotation between the totally different commodity teams. The tails are seven weeks lengthy and, in the mean time, solely $GJX (Power) is popping again into the 0-90 diploma heading, whereas all different teams are handing over the other way. What this implies is that, till now, the rally in commodities has been pushed by all teams besides vitality. That’s now altering.
It seems to be as if Power would be the group driving the subsequent wave larger for commodities.
S&P GSCI Power Index
The worth chart of the underlying Power index is supporting such a rotation, as it’s simply taking out its earlier excessive and setting as much as proceed its rally larger. Making a connection to the inventory market brings us to the chart of the Power sector index.
XLE
Right here, we additionally see an try to take out a serious overhead resistance degree. This week, it was an excessive amount of and XLE failed simply wanting 65.
When $GJX will be capable to observe by way of on this week’s upward break, it appears solely a matter of time earlier than XLE will observe in its tracks and push larger as properly.
#StaySafe and have an incredible weekend, –Julius
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Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
Creator, Relative Rotation Graphs
Founder, RRG Research
Host of: Sector Spotlight
Please discover my handles for social media channels underneath the Bio beneath.
Suggestions, feedback or questions are welcome at Juliusdk@stockcharts.com. I can’t promise to answer every message, however I’ll definitely learn them and, the place fairly attainable, use the suggestions and feedback or reply questions.
To debate RRG with me on S.C.A.N., tag me utilizing the deal with Julius_RRG.
RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered emblems of RRG Analysis.
Julius de Kempenaer is the creator of Relative Rotation Graphs™. This distinctive technique to visualise relative power inside a universe of securities was first launched on Bloomberg skilled providers terminals in January of 2011 and was launched on StockCharts.com in July of 2014.
After graduating from the Dutch Royal Navy Academy, Julius served within the Dutch Air Power in a number of officer ranks. He retired from the navy as a captain in 1990 to enter the monetary trade as a portfolio supervisor for Fairness & Regulation (now a part of AXA Funding Managers).
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