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Sector Shuffle: Similar Gamers, New Positions

The previous week introduced an uncommon shake-up within the RRG sector rating mannequin. Whereas the composition of the highest 5 sectors, and thus the underside six, remained unchanged, each single place in the complete rating shifted — a uncommon prevalence that units the stage for what’s prone to be one other fascinating week forward.

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

Weekly RRG

On the weekly Relative Rotation Graph, we’re seeing some fascinating actions:

• Staples, Utilities, and Actual Property stay within the main quadrant, however are dropping some relative momentum.
• Financials and Communication Providers have moved into the weakening quadrant, however with excessive RS ratio values and room to probably curl again up.

Each day RRG

Shifting to the every day RRG, the image appears to be like a bit completely different:

• Communication Providers stands alone within the main quadrant, shifting with a robust RRG heading.
• Staples, Utilities, Actual Property, and Financials are all within the lagging quadrant. Importantly, although, they’re beginning to curl again up.

This mix of weekly and every day RRG tails helps these sectors sustaining their top-five standing regardless of some short-term weak spot.

Utilities

It is fascinating to see Utilities, arguably probably the most defensive sector, take the highest spot in opposition to a backdrop of sturdy total markets. The worth chart exhibits ongoing struggles with overhead resistance, however relative energy continues to rise, cementing Utilities as the present sector chief.

Communication Providers

This sector made a powerful leap from fifth to 2nd place. Value motion exhibits a robust rally, now holding nicely above the previous support-turned-resistance degree just under 95. Relative energy stays inside its rising channel and, whereas the RRG traces are pushing by way of the weakening quadrant, there’s nonetheless room for a possible curl again up.

Client Staples

Staples stays range-bound between roughly 77.5 and 82.5. This sideways motion is mirrored in each relative energy and RRG traces. The RS ratio is at its highest degree in over two years — we might have to return to Might/June 2020 to see comparable energy for this sector.

Financials

The Financials sector is holding up nicely, although it is approaching the previous rising assist line that would now act as resistance. Relative energy stays upward inside its pattern channel, holding the RRG traces secure. The RS ratio stays close to 103, positioning Financials on the fitting aspect of the RRG.

Actual Property

Actual Property noticed a slight drop final week, stalling its current rally. This impacts relative energy, with the uncooked RS line shifting sideways and momentum rolling over. The RS ratio line’s rise is slowing in consequence.

Portfolio Efficiency

Our mannequin portfolio composition stays unchanged this week. We’re monitoring about 3% behind the S&P 500 year-to-date, which isn’t uncommon, wanting on the backtest outcomes. And it has not modified since final week. Evaluating this technique over longer durations is essential to figuring out its true potential.

I’m planning to jot down a separate article diving a little bit deeper into this mannequin and its historic outcomes, displaying durations of over- and underperformance and the way it has managed to outperform the S&P 500 over prolonged timeframes.

#StayAlert. –Julius