• 654 days Will The ECB Continue To Hike Rates?
  • 655 days Forbes: Aramco Remains Largest Company In The Middle East
  • 656 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,056 days Could Crypto Overtake Traditional Investment?
  • 1,061 days Americans Still Quitting Jobs At Record Pace
  • 1,063 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,066 days Is The Dollar Too Strong?
  • 1,066 days Big Tech Disappoints Investors on Earnings Calls
  • 1,067 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,069 days China Is Quietly Trying To Distance Itself From Russia
  • 1,069 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,073 days Crypto Investors Won Big In 2021
  • 1,073 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,074 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,076 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,077 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,080 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,081 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,081 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,083 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Relative Strength Indicator: Remains in Danger Zone

Figure 1 is a weekly chart of the SP500. The indicator in the lower panel is a composite that looks at the relative strength of the 9 SP500 sectors: Materials, Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Technology and Utilities.

Figure 1. Relative Strength Indicator
Relative Strength Indicator Chart 1

As can be seen in the graph, all sectors have a high relative strength, which puts the indicator at its highest reading. During this rally, a rising tide has lifted all boats. There is little to suggest imminent danger.

Figure 2 is the same as figure 1, but the indicator in the lower panel is now smoothed with a 39 week exponential moving average. When looking at the data this way, we note that the indicator is very extreme, and such extremes tend to coincide with intermediate market tops.

Figure 2. Relative Strength Indicator
Relative Strength Indicator Chart 2

The bottom line: This indicator goes along with our current thesis that this time won't be different, and that the market rally is very late in the price cycle. At best, the market will be range bound for the next couple of months as it works off the overbought condition. The best thing to happen would be a sell off resulting in bearish investor sentiment, but I doubt investors or the Fed will allow that to happen.

 


Want more TacticalBeta? See our pricing chart and upgrade today. Get Started Now

 

Back to homepage

Leave a comment

Leave a comment