KEY
TAKEAWAYS
- Commodities and USD rotating deep inside the lagging quadrant indicating weak relative strength
- BitCoin is in a strong relative uptrend vs all other asset classes but going through a corrective phase
- Stocks are the clear winner in this asset allocation battle
The RRG above shows the rotation of various asset classes against VBINX (Vanguard Balanced Index Fund) as the benchmark.
The long red tails pushing deep into the lagging quadrant are for Commodities (DJP&GSG) and $USD. And the long Green tail deep inside the leading quadrant and moving lower is for BTC.
The first takeaways from this RRG are:
- BTC is in a very strong relative uptrend vs. all other asset classes but is currently going through a setback, potentially offering a “buy-the-BIT-dip” scenario in the next few weeks.
- The long red tails deep inside the lagging quadrant are for Commodities (DJP&GSG) and $USD. These asset classes are in a strong relative downtrend. The slight pickup in relative momentum (JdK RS-Momentum) is not meaningful enough (yet) to warrant any action.
Zooming in on the center of the RRGm highlights the rotations for Stocks and Fixed-income asset classes and shows a strong rotation for stocks, and it has been doing that for weeks already.
The tail on SPY rotated through weakening, after a sting through leading, and is now moving back into the leading quadrant. As you know, this is one of the strongest possible rotations as it signals the start of a new up-leg within an already rising relative trend.
The Fixed-income tails are moving in the opposite direction, except for Corporate bonds.
- Government Bonds (GOVT) rotated back into the lagging quadrant from improving and is now back at a negative RRG-Heading, moving further into the lagging quadrant.
- High-yield bonds (HYG) have just crossed back into the lagging quadrant after a full rotation through leading and weakening, starting a new relative downtrend.
- Corporate Bonds is currently the strongest asset class in the fixed-income domain. Crossing into leading but doing so at a negative RRG-Heading.
All in all, these rotations present a very clear picture in favor of stocks over bonds.
The direct comparison of SPY against IEF underscores this strength with a solid breakaway from the consolidation period in play since Q4-2023. The break to new highs unlocks fresh upside potential for more outperformance of stocks.
#StayAlert, –Julius
Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
Creator, Relative Rotation Graphs
Founder, RRG Research
Host of: Sector Spotlight
Please find my handles for social media channels under the Bio below.
Feedback, comments or questions are welcome at Juliusdk@stockcharts.com. I cannot promise to respond to each and every message, but I will certainly read them and, where reasonably possible, use the feedback and comments or answer questions.
To discuss RRG with me on S.C.A.N., tag me using the handle Julius_RRG.
RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered trademarks of RRG Research.
Julius de Kempenaer is the creator of Relative Rotation Graphs™. This unique method to visualize relative strength within a universe of securities was first launched on Bloomberg professional services terminals in January of 2011 and was released on StockCharts.com in July of 2014.
After graduating from the Dutch Royal Military Academy, Julius served in the Dutch Air Force in multiple officer ranks. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers).
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