RRG Charts

Something cooking in commodities?

We live in interesting times... or maybe I should say: We live in confusing times.... Because, really, markets are throwing some serious curve balls here and there. It is time to look at some asset class rotations again.

The Relative Rotation Graph shows the rotation of a number of asset classes against VBINX (Vanguard Balanced Index Fund) which is the benchmark that I use for this universe. The RRG uses weekly data which means that it is looking to detect a bit longer term trends in relative rotation, and it will take away the noise that can clutter the day-to-day movements in financial markets.

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Stock rotation inside Industrials (XLI) sector

The Industrials sector, XLI, itself is positioned near the center of the Relative Rotation Graph holding all the sector ETFs that make up the S&P 500 index. This means that XLI is moving more or less in line with the S&P 500 and that there is, at the moment, not much to gain on a sector level.

In this article, I will take a look at the individual stocks that make up the Industrials sector and see if there are any opportunities, positive or negative, on an individual equity level. 

The Relative Rotation Graph above holds the top-50 (by market cap) stocks inside XLI. Based on the relative position of the sector the positioning of the individual equities is pretty much what one would expect; fairly evenly spread out over the plot.

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Strong sector rotation inside S&P 500 suggests more weakness in Financials

Since the beginning of the year, the internal characteristics of the S&P 500 universe are characterized by strong sector rotation. The Relative Rotation Graph below shows the sector rotation over the past five weeks. A few sectors are standing out and worth a further inspection.

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Trouble in DIS(neyland) and renewed energy for XOM

Over the past few days I have been looking at the Relative Rotation Graph of the 30 Dow stocks and its individual charts, and quite frankly I don't even know where to begin. Big swings all over the place, from +6% in DD to -9% in MSFT and anything in between. Long tails and short tails, clusters of stocks rotating towards and into the leading quadrant and vice versa etc. etc.

The RRG of the $INDU stocks shows (some of) these big moves and there are plenty of stocks that are begging to be examined in more detail. I ill try to pick a few interesting ones.

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Price target for SPY at $ 165 ?

Big bounces all over the place, not just in equities. In this article I want to take a look at relative rotation at an asset class level, of course, using an RRG lens.

The Relative Rotation Graph below shows the relative trends in play for several asset classes over the past six weeks.


  • Commodities (DJP) and High Yield (HYG) stand out on the RRG
  • DJP fulfills price target. End of the down-move?
  • Equities (SPY) heading lower on JdK RS-Momentum axis while Government bonds (IEF), IG Corporate bonds (LQD) and Real Estate (VNQ) are pushing higher into the leading quadrant
  • Equities / Bonds ratio (SPY:IEF) suggests $ 165 target for SPY

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Picking stocks inside XLP

The sector rotation inside the S&P 500 index is getting more and more pronounced.

The Relative Rotation Graph holding the sector ETFs that make up the entire S&P 500 index clearly shows the recent improvement for Health Care (XLV), Utilities (XLU) and Consumer Staples (XLP). I have been looking at the developments in the Consumer Staples sector in the past two blogs as well and especially the relationship against its counterpart Consumer Discretionary (XLY).

This XLP/XLY ratio has now really shifted in favor of XLP with XLP rotating back up into the leading quadrant while XLY, although still in weakening, continues to move towards the lagging quadrant. The difference in tail length over the past two to three weeks indicates the strength of XLP over XLY.

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Price targets for SPY based on the relative strength of XLP.

Wow, what a start of the new year! Increased volatility sounds like an understatement.

In my previous blog on sector rotation in the US equity market, the Consumer Staples sector (XLP) popped up as potentially interesting, especially in relation to its counterpart consumer discretionary. Since the start of the new year, it looks as if this improved sector rotation is beginning to materialize for XLP in general and more specifically against Consumer Discretionary (XLY).

In this post, I want to build on the further improvement of XLP and use developments on the XLP price chart and the relative strength of the sector to arrive at a price target for the broader market as represented by SPY.

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Staples or Discretionary?

The Relative Rotation Graph for US sectors is once again showing us some interesting rotational patterns at the moment. Clearly XLE is showing us a very long tail moving from improving back to lagging again. Then there are XLU, XLV and XLB also showing long tails but sending different messages. XLK is pretty lonely inside the leading quadrant but holding up well there.

XLP and XLY are an interesting pair to look at from a rotational point of view. They are expected to move more or less opposite of each other, and they usually do, but not at the moment...

Around the center of the chart XLF, XTL and XLI are hovering close to the benchmark with very short tails.

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AAPL up to no good?

The Relative Rotation Graph with the Dow Jones Industrials stocks once again shows some interesting moves. There are a few long tails that catch my attention for a quick inspection but in this article, I want to pay a closer look at some stocks with remarkably short tails. One of them being Apple Inc. (AAPL).

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