This week we will follow up on the UK 100 (UKX), Australia 200 (AS51) and the Hong Kong index (HSI) covered last week, and look at the Japan 225 (NKY). We also look at assets with commodities still dominating and, for the first time, we look at G7 currencies versus the US dollar.
The Relative Rotation Graph (RRG) above shows the rotation for a group of major world (stock) market indices against the MSCI world. We see some clear messages from the current weekly RRG. The heavyweight stock index, the SPX, is weak overall but moving closely with the RRG benchmark, the MSCI World Index (MXWO).
We can see how even the drifting NKY is moving in a north-easterly trajectory. It is gaining in JdK RS-Ratio and JdeK RS Momentum. With a long tail, this means the force of the move is strong. The HSI is still deep in the lagging quadrant.
Global indices are weak overall
In this context, the UKX has real potential if it finally makes its break. The ASX 200 (AS51) is also in a relatively good position. The NKY looks set to continue to improve its JdK RS-Ratio and JdeK RS Momentum. The HSI continues to suffer badly on a relative and absolute basis.
UKX's impressive move through long term resistance
Further to the right and holding, there is the UK 100 (UKX). We know from experience that this relatively strongest performer is holding firm.
Zooming in to the daily chart
When we zoom in to the daily timeframe, we find UKX inside the leading quadrant. It is almost as far to the right, with a high JdK RS-Ratio, as the ASX 200 (AS51). The daily rotations are much more detailed than the weeklies, and the current southerly direction indicates a slight hesitation. The weekly and the daily RRGs show a relatively strong position for the UKX that was stalling, but is not yet threatening. The NKY is confirming its strong longer-term move in this shorter timeframe. The HSI is having a bounce inside its longer-term relative weakness.
For context, we take a look at the monthly chart of the UKX (below). We can see how it has moved impressively higher since its 2020 low. The advance through the 2017-2019 consolidation between 6,800 and 7,800 has been surprisingly frictionless. The MACD shows the move has got high momentum even at this stage. This is a decisive advance through to the top of formidable resistance. Through this resistance, there is blue sky. It is testing important highs impressively and could be poised to break up.
Zooming in to the daily timeframe (below), we see a struggle with the high of February at 7,683. Since last week it powered up but stalled at the same level again. The UKX recovery for a second time from the 6,900 lows is impressive inside this long multi-year bull advance.
UKX has shown again it has strong uptrend power behind it. It is knocking on the door of the top of significant long-term resistance. It continues to hesitate at the break-up point, but seems poised to have another shot and attempt to make the break.
The stark message from asset-class performance
The table below shows major assets' performance this year and last year. We have a positive performance from commodities, except for gold. Energy is very, very strong. The dollar is very strong too. But stock indices, developed and emerging, are performing poorly, as are all classes of bonds.
This message shows clearly in the weekly graph (below). This RRG contains the largest US commodity futures, with the CRB index of major futures markets as a benchmark. Right of the 100 JdeK RS-Ratio and, mainly in the leading quadrant, are energy futures. Softs and metals, precious and base, are not looking good, being in the lagging quadrant.
The USD is king
The daily RRG chart below clearly shows the dominance of the USD versus the G7 currencies. There is nothing at all in leading or weakening quadrants. All currencies (except the JPY, which has had a mild bounce) are in the lagging quadrant. The trajectory of the EUR, SEK, and NOK point west – indicating these currencies are weaker. The situation seems stagnant, in that the USD is king and everything else is weak, but it is in your RRG chart you will see the first signs of the breaking of that grip.
This week's report is by Trevor Neil, a director with Julius deKampenaer of RRG Research.