TPA's RRG Analysis - What's Hot and what's not. 3/7/22
Updated: Mar 8, 2022
What is hot and what is not -TPA-RRG captures the inevitable movement of stocks into and out of favor.
Scores and ranking - Clients can quickly see which stocks are showing the best and worst relative strength characteristics. TPA found that using RRG’s was very beneficial, but cumbersome, so we simplified the process by creating a score for each stock and sector.
The best of both worlds – RRG & TPA
Now, clients can use TPA-RRG scores and rankings to identify stocks that are not only moving into favor, but are also technically positive.
TPA-RRG analyzes every stock in the Russell 1000 and 25 major sector & subsector ETFs
Find more in-depth explanations and links to instructional videos below.
TPA-RRG TOP 20 AND BOTTOM 20 STOCKS (from the Russell 1000)
Relative Rotation Graph for Top 20 and Bottom 20 is provided below.
Use the following link that shows RRG over time - how stocks move in and out of favor over time. OR use this link: https://vimeo.com/685195049
Once again, each outperforming sector has benefited from either the Pandemic or Russia/Ukraine.
· Russia/Ukraine – Defense, Industrials by way of Defense, and commodity (Agri and Metals)
· Covid – Healthcare & Pharma
On the flipside, Growth continues to be punished. The worst sectors are:
· Consumer Discretionary
Top 20 & Bottom 20:
Top 20: Financials are still strong and AXP seems like a buying opportunity
Bottom 20: Be wary of TECH and Consumer stocks that have, thus far, escaped the carnage.
TOP 25 MAJOR SECTOR & SUBSECTOR ETFS
Relative Rotation Graph for 25 major sector & subsector ETFs provided below.
Use the following link that shows RRG over time - how stocks move in and out of favor over time. OR use this link: https://vimeo.com/685187358
What are RRG’s?
Julius de Kempenaer developed Relative Rotational Graphs (RRG) in 2004 and thousands of investors use RRG’s. “Relative Rotation Graphs, commonly referred to as RRGs, are a unique visualization tool for relative strength analysis. Chartists can use RRGs to analyze the relative strength trends of several securities against a common benchmark, and against each other. The real power of this tool is its ability to plot relative performance on one graph and show true rotation. We have all heard of sector and asset class rotation, but it is hard to visualize this “rotation” sequence on linear charts. RRGs use four quadrants to define the four phases of a relative trend. True rotations can be seen as securities move from one quadrant to the other over time.” - Stockcharts
What are TPA-RRG scores?
TPA recognizes the power of RRG’s to highlight stocks and sectors moving in and out of favor, but also notes the shortcoming of having to examine many RRG’s to decide where to invest. TPA has developed TPA-RRG Scores to be able to rank stocks and sectors in terms of relative strength. TPA-RRG scores are constructed to focus on stocks and sectors as they move from negative to positive and positive to negative. Scoring also allows ranking so investors can focus on the best and worst areas of the market.
How are TPA-RRG scores created?
TPA uses not only the RS Ratio and RS Momentum of each stock to make its forecast, TPA also uses certain characteristics on each stock’s RS to calcultate its score. The following measures are used to calculate the TPA-RRG score:
1. RRG ANGLE - Represents the current position of the security on the RRG chart based on the points of the compass:
Ø 0-90 Degrees = Leading Quadrant
Ø 90-180 Degrees = Weakening Quadrant
Ø 180-270 Degrees = Lagging Quadrant
Ø 270-360 Degrees = Improving Quadrant
2. RRG DISTANCE - This number represents how far away the security is from the centre of the RRG chart (ie the benchmark). One of the observations is that higher alpha comes from those components that make bigger arcs around the benchmark. We will ignore those closest to the centre.
3. RRG ANGLE ROC - The Angle Rate of Change measures the distance of the angle of the current data point of a security, to the previous data point. The greater the value, the larger the distance between the two data points.
4. RRG HEADING - This is the direction that the arrow is pointing to (where the RS is headed), again based on the points of the compass, and is one of the most useful measures:
Ø 0 degrees = North (up) - positive
Ø 45 degrees = Northeast – less positive
Ø 90 degrees = East (right) - positive
Ø 180 degrees = South (down) - negative
Ø 270 degrees = West (left) - negative
5. RRG VELOCITY This is the vector difference – or distance – between the last two data points on the line; with the longest having the highest relative momentum:
How investors can use TPA-RRG
1. The Sector analysis lets clients focus on the best and avoid the worst areas of the market
2. TPA-RRG ranks the entire Russell 1000 and provides the Top 20 and Bottom 20 stocks so investors can see the best and worst stocks to make sure they are taking advantage of opportunities and not getting into trouble.
3. We also look at the top and bottom stocks through a standard technical analysis to avoid stocks that are overbought, oversold or at other technical trouble spots.
4. Finally, we provide TPA-RRG Scores and rankings for the stocks in the most used 25 sector and subsector ETFs. This analysis is especially helpful for investors who are focused on specific areas of the market.
You can learn more about RRG’s with these links:
Relative Rotation Graphs (RRG) – explanation video
Included in the Weekly TPA-RRG Report
1. The weekly TPA RRG Report will provide RRG Scores, Rankings, RRG’s and a RRG Video for:
· 25 Major Sector and Subsector ETFs
· Top 20 & Bottom 20 stocks in the Russell 1000 - based on TPA’s RRG and Trend-Range analysis
2. The report will also include:
· TPA RRG scores and rankings for the focus stocks in the 11 major sectors ETFs and 14 major subsectors ETFs. Provided in a separate PDF
3. Finally, TPA will provide a weekly commentary on TPA-RRG Scores and Rankings
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