Charts of Interest ; Relative Rotation Graph ;Weekly Perfomances

Date: 21 December 2015

Contents(ctrl+click to follow link):

Charts of Interest

The charts we have included are: Rand, SBK and CPI

The Rand:

The trend for a weaker Rand is still very much in place. The only short term resistance is at 14.70 and then 14.50 (the white line shown) to the Dollar.

Banks:

Banks have had a torrid time of late. We have included a 5 year chart on Standard Bank as an example. We have had a number of head and shoulder formations on SBK, with the larger one having reached its target. We may see a bounce to the neckline but the head winds seem in place for a sideways drift.

Capitec still seems the place to be, though it didn’t escape the last couple of week’s political debacle, it still hasn’t broken its upward trend and is trading at some support.

Below is a chart comparing SBK to CPI and currently there is a very clear trading channel showing the outperformance of CPI.

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Relative Rotation Graph

Below we have a few sectors relative to the Allshare Index.The sectors are based on the Business Day division of sectors.

Out-performance of the Allshare came from the usual suspects, consumer goods, property, financial and consumer service sectors. However, momentum in the financials is negative. There is much improved momentum in the health sector.

Explanation on the RRG:

Note that each symbol on the chart is plotted as a dot with a “tail” extending backwards. The tail shows you the history of the symbol's position in the past. Each dot on each symbol's tail represents one period, in this case a week. The large dot at the end of the tail represents the current relative momentum values for that ticker symbol and the colour represents the current quadrant it finds itself in.

There are four quadrants on the chart:

Leading (Green) - strong relative strength and strong momentum
Weakening (Yellow) - strong relative strength but weakening momentum
Lagging (Red) - weak relative strength and weak momentum
Improving (Blue) - weak relative strength but improving momentum

Typically, indices progress through the quadrants in a clockwise manner.

Interpretation:

The longer the tail, the bigger the move and higher the volatility.
The further the index is from the benchmark (the cross hairs) the bigger the move in relative performance (up or down)
RS-Ratio (relative strength) is more important than RS-Momentum
The rotational patterns are not always perfectly circular and will not always rotate through all four quadrants in a clockwise manner. These are, after all, financial markets driven by fear and greed.
In general, a cross from the left half to the right half signals a new uptrend in relative performance. This means RS-Ratio has moved above 200. Conversely, a cross from the right half to the left half signals a new downtrend in relative performance. This means RS-Ratio has moved below 200.
The underlying trend-following model that powers RRG includes a lag period, as do all trend-following models. This means there will already be upward movement in the price relative before the RRG line actually crosses into the leading quadrant. Similarly, the price relative will peak and move lower before the RRG line actually crosses into the lagging quadrant.
Symbols in the leading quadrant should be on your buy list because they show relative strength. Symbols in the weakening quadrant should be on your watch-list for deterioration. Symbols in the lagging quadrant should be on your avoid list because they show relative weakness. Symbols in the improving quadrant should be on your shopping list as potential buys.
RRGs separate the market leaders from the market laggards and therefore great for channeling your attention to those areas of the market that deserve it.
Keep in mind that these are relative performance indicators, and there is still a risk that the rotation turns back or even reverses.

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Weekly Performances

The week’s best and worst performers:

JSE ALLSHARE:

MIDCAP:

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Compiled by Kevin Barlow-Jones and Simon Hobday

Disclosure

This report provides general information only. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person. Investors should seek financial advice regarding the appropriateness of investing in financial instruments mentioned in this report and should understand that statements regarding future prospects may not be realized. No security, financial instrument or derivative is suitable for all investors. Past performance and technical patterns and analysis is not necessarily a guide to future performance.

This report may contain a short-term trading idea or recommendation, which highlights a specific near-term catalyst, pattern or event impacting the company or the market that is anticipated to have a short-term price impact on the equity securities of the company. Short-term trading ideas and recommendations are different from and may not affect a stock's fundamental equity rating.

Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Constant Capital, trading as Sinayo Securities.Neither Constant Capital, trading as Sinayo Securities, nor any officer or employee of Constant Capital, trading as Sinayo Securities, accepts any liability whatsoever for any direct, indirect or consequential damages orlosses arising from any use of this report or its contents.