Tuesday, November 20, 2018

A Thanksgiving Week sector review

Mid-week market update: In light of the US holiday shortened week, I thought I would do one of my periodic sector reviews to analyze both sector leadership and the implications for stock market direction.

As a reminder, Relative Rotation Graphs, or RRG charts, are a way of depicting the changes in leadership in different groups, such as sectors, countries or regions, or market factors. The charts are organized into four quadrants. The typical group rotation pattern occurs in a clockwise fashion. Leading groups (top right) deteriorate to weakening groups (bottom right), which then rotates to lagging groups (bottom left), which changes to improving groups (top left), and finally completes the cycle by improving to leading groups (top right) again.

The latest RRG chart shows the defensive sectors firmly in the lead, while technology, which were the former market darlings, mired in the lagging quadrant.

While current leadership provides a useful snapshot of the current market, it does not tell the entire story.

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