This post looks at the rotation of US sectors again. The Relative Rotation Graph above holds the ETFs that track the performance of US sectors.
Pretty much immediately the attention goes out to the Energy sector (XLE) and the Financials sector (XLF) as they stand out because of the length of their tails.
Another combination worth keeping an eye on is the opposite rotation of Technology (XLK) versus Materials (XLB).
Inside the improving quadrant, we find four sectors which are all slowing down their advance on the JdK RS-Momentum scale or already declining, Real-Estate being the most prominent.
XOM rotated negatively while inside the lagging quadrant and CVX just crossed over into the lowe-left part coming from weakening. These are the two names to avoid in this universe.
They are closely followed by the stocks in the red-shaded area, VZ, INTC, and GE.
Inside the improving quadrant, there are a few names that stand out. These are V and CSCO inside the blue circle. Both show good RS-momentum and improvement on the RS-Ratio scale.
This week HD crossed over from improving to leading which makes it a stock to investigate further, but V and CSCO are also worth looking at.
In the leading quadrant, besides AAPL, which was covered in the previous RRG article on the $INDU universe, BA and DD are worth a further look as they are re-entering the leading quadrant from weakening.
Within the weakening quadrant, financials continue to dominate, in a negative way, and they are nicely lined up for a further rotation towards lagging.
Double divergence building up in SPY:IEF ratio and commodities need another rotation through lagging.
- Opposite rotations for Equities and Bonds on both weekly and daily RRGs
- Rapid weakening of commodities over past six weeks
- Current positioning of SPY suggests some short-term weakness before resuming trend
- IEF in consolidation pattern after breaking long-term uptrend
- Double divergence in SPY:IEF ratio points to potential corrective move ahead
- Commodities need to complete another full rotation before getting back in favor as an asset class again.
The Relative Rotation Graph above holds a set of ETFs that represent various asset classes. Using RRG to get a handle on the rotation around a balanced benchmark (VBINX) helps investors to get a handle on the relative strength of various asset classes vis-a-vis each other.
The first thing that I am looking at on the RRG above is the opposite directions for the rotations of SPY and IEF.
- XLK only sector inside leading quadrant for S&P 500 universe
- QCOM nosediving inside Lagging quadrant
- NVDA rapidly losing its top position within the sector
- WDC tracking MU lower into the weakening quadrant
- GLW providing excellent example of stable uptrend (price and relative)
- ADBE pushing into leading from improving
- AAPL and SWKS rotating back into leading from weakening
The Relative Rotation Graph above holds the members of the S&P 500 Technology Index as included in the XLK sector ETF.
A few observations that can be made right from the start studying this graph. On the far right-hand side of the plot, we see three stocks, sharply, heading lower from the leading quadrant into the weakening quadrant. These are WDC, MU, and NVDA. Reading the RRG chart and looking at their position and rotational pattern we can immediately make the assumption that these three have been very strong stocks leading the sector but now losing pace.
- NO sectors inside the lagging quadrant and only one in leading
- Sector rotation suggests market in transition
- Financials continue to loose ground vs Healthcare
- Technology picking up against Materials
- Sector rotation from Energy to Utilities starting to shape up
A first look at the Relative Rotation Graph above triggers two interesting observations.
First of all, there are NO sectors inside the lagging quadrant... not even one! And there is only one (materials) inside the leading quadrant.
Secondly, the tails of the sectors in this universe (S&P 500 index) are predominantly showing vertical (momentum driven) movement.
- Inside Financials, money is shifting from GS & JPM to V
- AAPL turning back up towards leading quadrant, makes it leading stock in technology
- XOM and CVX confirm weak rotation for Energy sector
- Opposite rotations for DIS and WMT inside Staples sector
The Relative Rotation Graph above holds the 30 components of the Dow Jones Industrials Index ($INDU). The two stocks that immediately stand out are GS and JPM at very high JdK RS-Ratio levels but heading sharply down on the JdK RS-Momentum scale.
The Relative Rotation Graph holding a number of asset class ETFs is showing a strong push of commodities (DJP) into the leading quadrant. Together with Real Estate (VNQ), these two asset classes are showing the most powerful headings in combination with the longest tails.
They deserve a further investigation.
The Relative Rotation Graph above holds the constituents of the XLV (Health Care) ETF. In this post, I want to follow up on my previous article which pointed at the potential rotation from Financials into Health Care and take a look at the relative rotation of individual stocks that make up the sector, against XLV as the benchmark.
Over the past week, the relationship improved a little bit for Health Care, but it still is a somewhat "gutsy" view. Not yet a trend that is well underway, so beware.