Tue. Nov 30th, 2021

For the past few weeks I have been overseeing the rotation between large, medium and small capital segments.

In the various graphs of relative rotation, the deterioration of uppercase and, to a lesser extent, uppercase and uppercase letters is clearly seen.

Over the past 13 weeks, uppercase letters have entered the main quadrant while uppercase and lowercase letters have entered the backward quadrant. Recently, small capital letters have managed to pick up some relative momentum, but continue to decline in terms of JdK RS-Ratio. And capital letters are by far the lowest readings on the RS-Ratio scale.

While there is no “defined” relationship (is there such a thing?) Between the performance of small-cap stocks and the direction of the “market,” we often see that small-caps are the big drivers of rallies while they are the first to stop rising and / or start declining when the market is in trouble. And that’s what we’ve been seeing for a few weeks now.

Growth / Value

Another great relationship for controlling and controlling general market conditions is Growth vs. Value. And right now, when plotted on a relative rotation chart, this gives a pretty clear preference for growth over value.

However, when I present the RRG that divides growth and value into size segments, an interesting observation also appears.

By the way, this RRG is available in the drop-down selection for universes on the RRG page

In the red circle are all the size segments of value stocks, which confirms the general trend to the relative downward trend in value relative to the market. In the green circle are all size segments for growth stocks, EXCEPT for capital letters.

Small capitalization growth stocks are within the improvement circle of the orange circle and are clearly an atypical value in this image. This suggests that the small capitalization segment of growth stocks does not participate or has stopped participating in the relative upward trend of growth in general. I will take this as a warning sign.

At the sectoral level.

Finally, we can make the comparison between large and small capitalization actions at the sectoral level by presenting the RRGs for both.

In general, the rotations of small-cap sectors are more or less in line with their large-cap counterparties. However, there is an interesting exception.

The consumer discretionary sector is one of the most important growth sectors in the market

The first previous RRG shows the rotation for XLY, the S&P 500 discretionary sector (= large limit). The second RRG shows the rotation of PSCD, the S&P Small-Cap discretionary sector.

The almost opposite rotations show very clearly that the improvement in the consumer’s discretionary sector comes from large-cap stocks, while small-cap stocks in this sector are clearly lagging behind.

However, I continue to be cautious when it comes to stocks in general.

#StaySafe, –Julius


Julius de Kempenaer
Senior technical analyst, StockCharts.com
Creator, Graphs of relative rotation
Founder, RRG Research
Host of: Focus of the sector

Please look for my handles for social media channels below the Bio below.

Comments, comments or questions are welcome at [email protected]. I cannot promise to respond to each and every one of the messages, but I will certainly read them and, where reasonably possible, use the comments and comments or answer questions.

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RRG, Relative Rotation Graphs, JdK RS-Ratio and JdK RS-Momentum are registered trademarks of RRG Research.

Julius de Kempenaer

About the author:
Julius de Kempenaer is the creator of Relative Rotation Graphs ™. This unique method for visualizing relative strength within a universe of stocks was first launched at Bloomberg Professional Services Terminals in January 2011 and published on StockCharts.com in July 2014. After graduating at the Royal Dutch Military Academy, Julius served in the Netherlands. Air Force in various ranks of officers. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers). Learn more

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