My Bespoke Charts
A primer on my bespoke charts that i made and look at daily...
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I post charts regularly on X, and I get asked the same questions ALL the time when I post one of my custom charts…
“What's behind the curtain?”
“How do you interpret the chart?”
So, I thought writing a blog giving you a run-down on what’s what would be beneficial!
This will be a living and breathing blog updated with more charts as time goes by… So don’t forget to bookmark this page!
1. Core Market Model
Behind the chart: This model includes three of the most important areas I look at daily
Breadth (e.g. 20-day highs, % Above 50-day average and so on)
Liquidity (e.g. Stocks vs Bonds, Nominal Treasuries vs High Yield & Bond Yield Momentum)
Sentiment (e.g. NAAIM, Investors Intelligence, VIX)
Each component has key levels that I want it above or below.
Then, I add them all together and smooth the data with a 5-day average.
My takeaway: Firstly, I try to identify what type of range the indicator is currently in.
A bullish range is when it reaches overbought levels during rallies and finds support near 0 during corrections. The strongest markets tend to stay above 0.
Great examples of bullish ranges are seen during 2017 & 2020
On the flip side, A bearish range is when it reaches oversold levels during sell-offs and finds resistance near 0 during counter-trend rallies. The weakest markets tend to stay below 0.
A great example of a bearish range is seen throughout 2022
Secondly, I look for bullish or bearish divergences in the indicator depending on what range the indicator is in… These types of divergences signal, at a minimum, a possible change in the trend.
A great example of bullish divergence is seen in the 2022 low.
Lastly, When the indicator hits EXTREMELY overbought or oversold, it will alert me (not a tradeable signal) for a possible top or a bottom incoming.
2. Core Leadership Model
Behind the chart: This model is all about breadth!
This model includes many breadth readings from S&P 500 20-day highs to global markets above their 200-day average)
The primary purpose of this model is to make a composite that looks at all timeframes:
Short-Term Breadth
Intermediate-Term Breadth
Long-Term Breadth
Each breadth metric has key levels that I want it above or below.
I then add them all together and then smooth the data with a 5-day average.
My takeaway: I try to identify the current type of range the indicator is in.
A bullish breadth range is when it reaches strong leadership levels during rallies and finds support near 0 during corrections. The strongest markets tend to stay above 0.
Great examples of bullish breadth ranges are seen during 2017 & 2020
On the flip side, A bearish breadth range is when it reaches weak leadership levels during sell-offs and finds resistance near 0 during counter-trend rallies. The weakest markets tend to stay below 0.
A great example of a bearish range is seen throughout 2022
3. Risk-On Risk-Off Indexes
Behind the chart: These are just equal-weighted indexes…
Risk-On (green line): Copper (HG1), High Yield Bonds (JNK), Aussie Dollar (AUDUSD), Semiconductors (SOXX/SPY) & High Beta (SPHB/SPY).
Risk-Off (red line): Gold (GC1), US Treasury Bonds (TLT), Yen (JPYUSD), Utilities (XLU/SPY) & Staples (XLP/SPY).
Risk-On/Risk-Off Ratio (black line).
My takeaway: I am not here to anticipate a turn with this chart. I am most interested in following the index trends.
My first question is whether the indexes (green or red lines) are in an uptrend (higher highs and higher lows) or a downtrend (lower highs and lower lows).
My second question is how the indexes behave to my resistance or support levels.
If an index moves above a specified resistance level, there could be a breakout or a breakdown if it moves below a support level.
It's really just the same concept I employ with standard stock charts.
I ask the same questions as above when I look at the ratio chart (black line).
However, with the ratio chart, I am also looking for the location of the leadership or weakness. Is the line rising because of the risk-on strength, or is the risk-off weakness… and vice versa when the ratio line is falling.
4. Risk-On Risk-Off Indicator
Behind the chart: This indicator comprises 20 (intermarket and intramarket) ratios that pair various risk-on and risk-off assets.
Here are some examples:
Copper / Gold
High Beta / Low Volatility
S&P 500 / Utilities
S&P 500 / Staples
Discretionary / Staples
This indicator is calculated based on where these various asset ratios are relative to their 52-week trading range.
My takeaway: My Risk On Risk Off Indicator is NOT a specific market signal but is the accumulated message across multiple pair comparisons within and across asset classes.
I use this indicator to let me know what type of environment the market is operating within.
Green = A bullish environment.
If improvement is being seen to persist, then these intermarket relationships should tilt in favor of the higher-risk (Risk-On) assets.
Red = A bearish environment.
If weakness is being seen to persist, then these intermarket relationships should tilt in favor of the lower-risk (Risk-Off) assets.
It is a fantastic way to combine many areas of the financial market into one line… utilising the weight of the evidence approach.
5. Sentiment Composite (Coming Soon)
6. Relative Strength Ranking (Coming Soon)
Before I finish up, always remember:
Remain flexible.
We can only work with the information that is available today.
Keep an open mind.
“I can't change the direction of the wind, but I can adjust my sails to always reach my destination.” — Jimmy Dean.
P.S. For any terminology you don’t understand, I would highly recommend you get your hands on a copy of this
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I would love to hear from you, so please contact me on X.
As always, 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.
Are these available for all ?
Nice read.