Don't Ignore This Chart!

JP Morgan deteriorates further on Relative Rotation Graph

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One of the choices in the drop-down selection on the Relative Rotation Graphs page is the DJ-industrials (Dow 30 Industrials). This RRG shows the rotation of all 30 Dow stocks against the $INDU.

The RRG above shows the daily rotation and highlights the rotation of JP Morgan Chase & Co. (JPM), a heavyweight in the financials sector.

This rotation caught my attention as it is moving strongly lower on the JK RS-Ratio scale and pushing further into the lagging quadrant.



The reason for bringing up the daily version of the RRG for Dow stocks and looking for JPM was the rotation for JPM that I observed on the weekly version of the RRG, which is my usual starting point.

Weekly Rotation

The weekly version of the RRG above is shown below.

This weekly image shows the longer term, 13 weeks, rotation of JPM and as you can see this tail completed a rotation completely at the left-hand side, Lagging-Improving-Lagging, of the graph. This is the type of rotational pattern that occurs when strong negative trends are in play.

When I see a rotation like this on a weekly RRG I want to see how it interacts with the daily, hence the daily RRG at the top of this article as it shows how JPM rotated from improving through leading and weakening and then back into lagging over a period of 30 days and is now heading in a similar direction as the tail on the weekly RRG.

Lots of pieces of the puzzle that are pointing to more weakness, ie relative underperformance for JPM, in the weeks/months ahead.

Final Check

The final check is and always has to be, the price chart.

The relative strength against the DJ Industrials index already started to set in halfway through 2018. When the price broke below the important horizontal support zone between $100-$105 in December, relative strength managed to hold up but the recent rally in JPM was not strong enough to keep up with the pace of the recovery in $INDU, causing relative strength to lag behind and eventually break below its horizontal support recently.

This happens while the price is struggling to move higher and is running into resistance in the $100-$105 zone and seems to be putting in a new high.

I am watching a break below support near $100 for an acceleration lower in price which will very likely fuel a further weakening of relative strength and thus a push deeper into the lagging quadrant on the Relative Rotation Graph.


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Julius de Kempenaer | RRG Research
RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered TradeMarks ®; of RRG Research

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Announcement from the Author

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Julius de Kempenaer
About the author: is the creator of Relative Rotation Graphs™. This unique method to visualize relative strength within a universe of securities was first launched on Bloomberg professional services terminals in January of 2011 and was released on StockCharts.com in July of 2014. After graduating from the Dutch Royal Military Academy, Julius served in the Dutch Air Force in multiple officer ranks. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers). Learn More
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