- US shares are lagging the world on RRG
- The Indonesian inventory market seems to be prepared to leap
- The iShares EIDO (MSCI Indonesia) ETF can be utilized to play that market
Let’s check out the rotation of inventory markets around the globe. The Relative Rotation Graph above exhibits the rotational patterns for some main inventory market indices worldwide. An attention-grabbing factor we see right here is that there’s a excessive focus of tails contained in the main and the lagging quadrant, whereas there are solely a handful inside enhancing and weakening.
Shift in Management
This sort of rotation is typical for a shift in management. The sturdy strikes in India, Brazil, Japan, and the US have now rolled over, and all 4 markets are exhibiting a tail that’s shifting decrease on the JdK RS-Momentum axis. Not a lot (but) on the JdK RS-Ratio axis.
The lagging quadrant is a bit cluttered, however after we isolate the tails (you are able to do that by choosing the image within the desk under the RRG chart), you’ll be able to see that solely the Korean $KOSPI index is constant additional into the lagging quadrant at a unfavorable RRG-Heading. All others have curled upward, or are within the strategy of doing so, and are subsequently heading in direction of enhancing.
Hong Kong ($HSI), Australia ($AORD), and Indonesia ($IDDOW) have simply crossed over into the enhancing quadrant. Indonesia exhibits the extra attention-grabbing rotation, as its tail has quickly rotated again from a unfavorable RRG-heading right into a optimistic one. Out of the indices on the right-hand aspect, it is clearly the S&P 500 we need to keep watch over.
In all probability a Momentary Setback within the S&P
On the RRG, the tail for the S&P 500 continues to be contained in the main quadrant, however is rolling over and near crossing into weakening.
The chart above exhibits the S&P on a weekly scale, together with uncooked Relative Energy and the RRG-Strains. To this point, the technical help and resistance ranges are revered fairly nicely. After breaking 4.325 in an upward path, $SPX rallied to the extent of the March 22 peak close to 4.600, the place a brand new excessive was put into place, indicating that offer obtained the higher hand in that space.
For the time being, the market is again to the breakout degree and beginning to take a look at the realm round 4.325 as help. The overhead stress has triggered relative power to lose momentum and flatten out a bit over the previous few weeks, which is inflicting the RRG-Strains to roll over. With the RS-Ratio nonetheless at pretty excessive ranges, this tail nonetheless has the room to finish a rotation leading-weakening-leading.
In a really perfect situation, the market ought to now discover help close to 4.325 and begin constructing a brand new base (larger low), out of which a brand new rally can begin for a brand new try to maneuver previous 4.600. With out damaging the present pattern, it could even be attainable for $SPX to maneuver again to the 4.200 space and discover help there. Under 4.200, the present pattern will get into critical bother.
From a relative perspective, a break of relative power above the late 2023 excessive will put the US again on the worldwide map as one of many main markets. This might want to occur within the subsequent few weeks, say 4-6, to ensure that the RS-Ratio line to place in a brand new low above 100 and trigger that leading-weakening-leading rotation.
Indonesia Able to Rally?
The tail on the DJ Indonesia index on the left-hand aspect of the graph exhibits a fast rotation again right into a optimistic RRG-Heading and a push into the main quadrant. This means that extra enchancment is underway. The massive query is whether or not this can even solely be a brief transfer or be extra sustainable.
Trying on the worth graph above exhibits that the Indonesian market has been buying and selling in an ascending triangle formation because the begin of the 12 months, with the horizontal (resistance) aspect round 1.360. As quickly as that barrier offers means, new upside potential will likely be unlocked that would push $IDDOW as much as the realm between 1.450-1.500.
That space is especially essential, as it’s the area the place main highs have been fashioned since 2018. Which means that, for greater than 5 years now, large provide has hit the market between 1.450-1.500. Think about what might occur when the market has absolutely absorbed that offer…
I all the time examine these setups with a spring that has been put underneath stress for a very long time. Plenty of vitality is then contained, and when that spring will get let free, it’ll unleash quite a lot of energy. In different phrases, as soon as $IDDOW is ready to clear the 1.450-1.500 vary, quite a lot of upside potential will get unlocked. Undoubtedly a market to look at.
US buyers can use the iShares MSCI Indonesia ETF (EIDO) to get publicity to the Indonesian market.
#StayAlert and have an ideal weekend, –Julius
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Suggestions, feedback or questions are welcome at Juliusdk@stockcharts.com. I can not promise to answer each message, however I’ll definitely learn them and, the place fairly attainable, use the suggestions and feedback or reply questions.
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RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered emblems of RRG Analysis.
Julius de Kempenaer is the creator of Relative Rotation Graphs™. This distinctive technique to visualise relative power inside a universe of securities was first launched on Bloomberg skilled providers terminals in January of 2011 and was launched on StockCharts.com in July of 2014.
After graduating from the Dutch Royal Army Academy, Julius served within the Dutch Air Power in a number of officer ranks. He retired from the navy as a captain in 1990 to enter the monetary trade as a portfolio supervisor for Fairness & Regulation (now a part of AXA Funding Managers).
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