STA Blog

Yesterday, Thursday the 16^th May 2019, founder of RelativeRotationGraphs.com introduced viewers to this interesting system comparing the relative performance of equity groups. This is not the Relative Strength Index (RSI) that we all know and many use, but a way of plotting the relative performance of share prices relative to their index.

A rectangle is divided into four quadrants, the horizontal line the Relative Strength ratio, the vertical Relative Strength momentum. Into this he plots a scatter gram of shares that are improving relative to their index – in this case the FTSE 100 which lies at the cross-hairs – the leading shares, weakening ones and the laggards. It is a circle of movement plotting sector rotation.

The arrows denote the relative movement, with long tails measuring the strength of the current run – longer is stronger. Julius was surprised by the weakness of the utility sector, something Jeremy suggests has been caused by the Labour Party’s threat to re-nationalise without compensation.

His second chart includes how the FTSE100 index compares to holdings of a wealthy investor’s balanced portfolio of medium risk assets. Underneath that he plots the absolute amounts of ratio (red line) and momentum (green line).

He carries out this same exercise with G10 currencies against sterling where, unsurprisingly, the latter has weakened against all. He also mentions the fact that one could also compare asset classes, say equities versus bonds.

An interesting tool, especially for those who must work with a large number of shares or other groups.

Click here to view.