A Relative Report
A brief note on my favourite relative trends within the markets - May 9th, 2021
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Do you like to have 10 indicators on your charts or even those complex indicators people are making over in trading view?
I want to keep things clean and straightforward with 1 or 2 indicators.
I find by using only a few indicators, I am getting better information from the charts.
One of my favourite tools to use is Relative Strength…
I’m not bringing anything new to the game here.
This type of analysis has been around forever… but if you're not using Relative Strength Comparisons (A/B), you are missing out on some important information!
It’s really easy math...
I promise!
So, all you need to do is divide the price of Asset A (numerator) by the price of Asset B (denominator).
The information that this provides us is when the line is rising, Asset-A is outperforming Asset-B. When the line is falling, Asset-B is outperforming Asset-A. When it moves sideways, both Assets are rising and falling equally percentage-wise.
I told you it was simple math!
Let's get stuck into some charts…
S&P 500 relative to the World ex-US is a sideways hot mess...
US Stocks have been outperforming Emerging Markets for the past decade.
EEM tried to take a leadership role in early 2021, but that was a failed attempt.
World Ex-US continues its outperformance relative to Emerging Markets which started in February. The critical level to watch is 0.87
The rotation of cap-weight back into equal-weight stocks has been an impressive move and an important theme over the past 6-8 months. The key level to watch is 2.78
Large caps have lagged small caps by a wide margin over the last year.
The reopening theme is highly bullish for small-cap stocks. However, over the last month, we have seen a reversal/failed breakdown, and now large caps are starting to outperform…
Same story here in mid-caps but less pronounced.
The story of 2021.
Critical support is broken, will we now see its role reversed and now will begin to act as resistance. Leadership is in favour of value at the moment. The key level to watch is 1.69
High Beta stocks outperformed Low Volatility names in 2020 by a wide margin.
We have seen short term weakness from High Beta but the primary trend is still intact. Leadership remains within High Beta names.
High momentum stocks have had a strong run and clearly outperformed the broader market for years now, but that trend reversed early this year. The key level to watch 0.386
Technology had a fantastic year in 2020!
The ratio has been a sideways mess for the past 8 months and now looks to have broken to the downside.
Discretionary stocks broke above multiple key support levels in 2020 relative to Staple stocks, however, the ratio has since gone sideways in 2021.
Tech vs Financials or Growth vs Value, take your pick…
Financial stocks are looking to cement their leadership role for 2021.
The ratio of stocks to bonds continues to grind to new highs. People are still willing to put their money to work where it’s treated best!
International debt has seen a trend reversal type of move from an important level of prior support and resistance.
Inflation expectations continue to rise, this ratio to treasuries has been grinding (face-ripping even?) higher since its March 2020 lows.
Currently at new 6 year highs.
High yield grinding higher versus treasuries... Credit spreads continue to tighten.
People continue to be looking for risker assets… but is that theme slowing?
The long- to short-duration bond ratio has been moving lower. Short duration bonds took on a leadership role but have we seen a failed breakdown and trend reversal?
Emerging Market bonds grinding higher relative to US treasuries. This continues to fits the current market's theme.
Gold and Bonds have been terrible investment since mid-2020, but relative to each other Gold is hitting new highs.
Multi years lows for Gold relative to Stocks…
US stocks have outperformed commodities for the better part of a decade.
The shift in the leadership role is real, and the key level I am watching is 2.
The rotation back into base metals has been a swift move since peaking in August last year.
No one clearly wants Gold in their portfolio when you can buy Copper or Lumber. The key level I am watching is 8.
The impressive move over the past months in copper relative to gold continues.
Copper likes its new leadership role, and so does global growth.
Lumber… face ripper of a move.
The highest level in 16 years!
Euro keeps headbutting this resistance level.
3rd time lucky? maybe…
AUD continues its move to its 2018 highs. ‘Risk On’.
Highest level since 2018… This is a global ‘Risk On’ environment!
Emerging market currencies taking a leadership role since the covid crash… now sitting below a considerable level of resistance, one to watch moving forward!
When it comes to identifying opportunities in the markets, the most straightforward solution can sometimes be the most effective.
My question to you… What information did you get out of my charts?
I would love to hear from you, so please get in contact with me on Twitter @granthawkridge.
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Stay safe, and good luck out there…
GH
DISCLAIMER: The information included in this report are obtained from sources which Jotting on Charts believes to be reliable, but we do not guarantee its accuracy. All of the information contained herein should be independently verified and confirmed. All opinions expressed by Jotting on Charts are for informational purposes only. Jotting on Charts is not a financial advisor. This does not constitute investment advice, nor any opinions expressed, constitute a solicitation of any securities or related financial instruments' purchase or sale. Jotting on Charts is not responsible for any losses incurred from any use of this information. Do not trade with money you cannot afford to lose. It is recommended that you consult a qualified financial advisor before making any investment decisions.
What a great set of charts! Thoroughly enjoyed reading this post. Great compilation, Grant! 👌🏻
Good morning Grant from sunny Madrid, Spain. First of all thank you so much for your work; i enjoy the way you look and read the markets. You have my respect as a profesional and gratitud for sharing all this knowledge with us your "followers". HUGE THANK YOU !!! =)