BETA

One of many Threat ON/OFF metrics I prefer to regulate is BETA.

From Investopedia:

Beta (β) is a measure of the volatility—or systematic threat—of a safety or portfolio in comparison with the market as an entire (normally the S&P 500). Shares with betas larger than 1.0 will be interpreted as extra unstable than the S&P 500.

I’ve up to date my spreadsheet with final yr’s information for this text. And I need to check out the present (sector) rotations with the BETA for every sector.

On the Relative Rotation Graph above, one can find the 12-month BETA values for all sectors.

Earlier than diving into the sector rotation half, a fast have a look at the BETA values. As stated the RRG on the high exhibits the 12-month BETA values.

The tables beneath present 12- and 36-month BETAs facet by facet.

Notice that there are solely minimal place switches amongst sectors. There could also be some vital variations in BETA values over time. Most notably, the power sector which has a BETA of 1.39 over 36 months however “solely” 1.14 over 12 months.

However, the highest three sectors didn’t change. The identical goes for the underside three sectors.

My expectation concerning rotations is that I might anticipate the high-BETA sectors to indicate robust rotations throughout robust durations for $SPX and powerful rotations for low-BETA sectors throughout weak durations for $SPX.

No Dominance On Both Facet

that RRG, I don’t see a dominant route for both high-BETA or low-BETA sectors as a gaggle.

The very best BETA sector (1.23) has the very best studying on the RS-Ratio scale and simply dropped into the weakening quadrant, whereas Power (1.14) is deep inside, lagging however beginning to curl again up. Discretionary (1.15) is clearly inside, lagging and heading additional into that quadrant.

Within the low-BETA group, we see Utilities (0.73) nose-diving deeper into the lagging quadrant, whereas Staples (0.52) is static at a low RS-Ratio studying. Well being Care (0.65) is the exception right here, with a robust trajectory into the bettering quadrant at a robust RRG-Heading.

The RRG picture is blended, with no clear desire for both group.

Bringing that commentary to the SPY chart (every day) helps interpret the index’s latest worth motion.

SPY Outlook

Breaking the earlier all-time excessive (January 2022) was clearly a bullish signal. New ATHs are usually not an indication of bear markets, proper?

And so was the rally that adopted after the break. An everyday rhythm of upper highs and better lows took SPY to a brand new ATH at 503.50. Even the shock decline final Tuesday has not broken this up-trend but.

Nonetheless, the blended rotations on the RRG, mixed with a unfavorable divergence increase between SPY and its RSI, sign some hesitation. No less than one thing to concentrate on.

Draw back threat appears restricted, with the previous resistance at 480 now anticipated to return as strong help in case of a decline.

Clearly, a push past 503.50 will once more be a bullish sign for the market. On the draw back, I’m watching the decrease boundary of the brand new short-term channel and the earlier low at 490. Breaking these ranges subsequently will very possible set off a decline again to the breakout degree close to 480.

What occurs there can be essential for additional improvement within the coming months.

In the interim, the uptrend remains to be intact, with restricted near-term threat. (4-5%)

#StayAlert. –Julius