The Greatest 5 Sectors, #26 | RRG Charts

The previous week has been comparatively secure by way of sector rankings, with no new entrants or exits from the highest 5. Nonetheless, we’re seeing some fascinating shifts inside the rankings that warrant nearer examination. Let’s dive into the small print and see what the Relative Rotation Graphs (RRGs) are telling us concerning the present market dynamics.

Sector Rankings Shuffle

The highest three sectors, know-how, industrials, and communication providers, stay firmly entrenched of their positions. However the actual motion is going on slightly below them. Financials climbed to the quantity 4 spot, consequently pushing utilities all the way down to fifth place. This shift is critical, because it signifies a transfer in the direction of extra cyclical sectors within the prime rankings.

These adjustments recommend a possible shift in the direction of extra economically delicate and offensive sectors, which helps a bullish state of affairs or no less than a transfer away from defensive positioning.

1. (1) Know-how – (XLK)
2. (2) Industrials – (XLI)
3. (3) Communication Providers – (XLC)
4. (5) Financials – (XLF)*
5. (4) Utilities – (XLU)*
6. (8) Supplies – (XLB)*
7. (7) Client Staples – (XLP)
8. (6) Actual-Property – (XLRE)*
9. (10) Client Discretionary – (XLY)*
10. (9) Power – (XLE)*
11. (11) Healthcare – (XLV)

Weekly RRG

The weekly Relative Rotation Graph continues to point out energy within the know-how sector inside the main quadrant. Industrials can be sustaining its place within the main quadrant, with a really quick tail, indicating a constant relative uptrend.

Communication providers, financials, and utilities are at the moment within the weakening quadrant. Nonetheless, communication providers have rebounded and seem like making their means again in the direction of the main quadrant once more.

Financials and utilities, then again, are exhibiting destructive headings, with utilities displaying the weakest momentum (longest tail).

Day by day RRG

Switching to the day by day RRG, we get a extra granular view of latest sector actions:

• Know-how stays the strongest sector, with a excessive RS ratio and a brief tail
• Communication providers are rotating at a barely destructive heading however nonetheless inside the main quadrant
• Financials and industrials are exhibiting promise within the enhancing quadrant
• Utilities continues to rotate inside the lagging quadrant, confirming its weak spot

The positioning of those sectors, significantly the energy of know-how and enhancements in financials and industrials, suggests a shift in the direction of extra cyclical and fewer defensive sectors out there.

Know-how

Tech continues its rally after breaking above the $240 resistance space. The uncooked RS line can be climbing, having damaged out of its falling channel. This sector stays the market chief and reveals no indicators of slowing down.

Industrials

The commercial sector has cleared its overhead resistance and is pushing larger. Its RS line is placing in new highs, reflecting robust relative efficiency. The RRG strains stay within the main quadrant and could also be turning up once more, a bullish signal.

Communication Providers

Comms have damaged above their resistance round 105. Whereas nonetheless on the decrease boundary of its rising RS channel, it is beginning to choose up steam. Each RRG strains are climbing, with RS momentum approaching the 100 degree. A cross above that degree would put it again within the main quadrant.

Financials

Financials broke by overhead resistance final week, which is a big constructive growth. It is now above each horizontal resistance and its former help line. The relative energy line wants some work, however with the present worth breakout, enchancment appears doubtless within the close to future.

Utilities

The weak hyperlink within the prime 5, utilities, stays range-bound. It is nonetheless above help, however not by a lot. With the broader market rising, utilities’ sideways motion is inflicting its RS line to drop. The RRG strains are rolling over, and we might quickly see this sector rotate into the lagging quadrant on the weekly RRG.

Portfolio Efficiency Replace

I need to admit, our portfolio continues to be underperforming. The present drawdown is slightly over 8%, which is not very best. Nonetheless, that is the character of trend-following methods. We’re sticking with our method by this era of underperformance, assured that historic outcomes help our endurance.

If market traits proceed as they’re, we should always see extra offensive sectors rotate into the highest 5. This shift, in flip, ought to assist us overcome the present drawdown and ultimately deliver us forward of the S&P once more.

Bear in mind, investing is a marathon, not a dash. Durations of underperformance are regular and to be anticipated. The secret is to remain disciplined and belief in your technique.

#StayAlert and have a fantastic week. –Julius