A Fairly Clear Message From The Dow Idea | RRG Charts

Typically much less is extra. When issues are messy and there are lots of issues which are shifting markets I often wish to take a step again and have a look at a number of the very fundamental stuff to do away with all of the noise and muddle.

On this event, I believed to have a fast have a look at what we are able to probably be taught from the Dow Idea, or what takes we are able to get from it with regard to the present scenario available in the market.

The RRG above exhibits the three indexes that make up the Dow Jones Composite Common. The DJ Industrials (30 shares), the DJ Transportation (20 shares), and the DJ Utilities (15 shares).

The rotational image as proven in that RRG is fairly clear. Utilities are main the pack. Deep contained in the main quadrant, persevering with to realize on the JdK RS-Ratio axis and steady to barely greater on the Jdk RS-Momentum scale. Clearly the strongest phase on this universe.

The alternative goes for the Industrials. This tail has simply rotated again down in direction of the lagging quadrant over the previous weeks and is now as soon as once more shifting deeper into it at a adverse RRG-Heading, which means that this phase is shedding on each scales.

The Transportation phase is considerably in between. Simply inside lagging however selecting up when it comes to relative momentum. However extra importantly, the traditional Dow principle states that the indexes should verify one another. And that we are able to clearly see, is NOT the case in the intervening time.

Even after we plot the identical universe on a each day RRG we are able to see the blended picture the place Industrials and Transportation are shifting in reverse instructions and right here additionally Utilities rotating again into the main quadrant after a brief stint by means of weakening.

So my foremost takeaway from these RRGs is that Industrials and Transportation will not be in sync which principally signifies that there isn’t a significant major pattern. And Utilities are clearly main. Everyone knows utes are a defensive play.

So the dearth of a transparent major pattern and a choice for defensive shares by the market makes me very cautious in the intervening time.

A fast have a look at the weekly chart of the Dj Industrials exhibits {that a} sequence of decrease highs and decrease lows appears to be underway for the reason that begin of this 12 months. The three decrease lows are confirmed, the third decrease excessive not but. It’s nonetheless potential that the present rally will take out the earlier excessive at 36k and violate this sequence.

However even when that might occur it doesn’t imply that we’ve a full-fledged uptrend again in our fingers. At greatest some extra consolidation.

Please observe that I’m on no account “predicting” a crash or a serious turnaround, I’m simply attempting to take steerage from data that the market is sending us. And in the intervening time I do see lots of “issues” that aren’t supportive of a broad-based (continuation of the) up-trend.

As typical, there are definitely pockets of alternatives, like utilities in the intervening time, however my total takeaway is that warning remains to be wanted and the market will very possible want extra time to digest the two-year rally that was in play since early 2020.

#StaySafe, –Julius