Stocks Order Of Rollover

Just a couple of quick charts showing the progression of the “rollover” or roll off in different sectors and a couple of countries.

I’m using EWA, the Australia ETF. The Australian Dollar has dropped against the $US over this time frame, so some of this is currency related, but IMHO that also tells the story as Australia is a big exporter of minerals and coal, so downturn tends to hit it early. This is a 10 year chart, partly just to give a big picture context. Note that Gold GLD had a rocket ride spike, then has been in a long term drop since that top. ALL commodities do that, even gold and sliver. That is part of why they are not particularly good as a monetary base. Highly volatile. (Though paper is, IMHO, an even worse money long term as it lacks the ‘store of value’ feature of real money, making it only suitable as a currency).

Australia vs World and Sectors 10 year

Australia vs World and Sectors 10 year

You can see how ‘after the crash’ Australia recovered, but not nearly as fast and far as US markets. The Fed here pumping them full of paper… About 5 years back, copper (the bottom line) starts to slide. As the commodity space rolls off, Australia gets pulled down with it. Finally taking a clear drop about 1 1/2 years back. (We’ll zoom in on that in the next graph).

The grey line is EEM Emerging Markets. Brazil, China, India and a few more. It starts to roll off about mid 2011 and with that downturn copper demand weakens. EEM moves from being next below gold on the rocket ride to just above Australia now. US$ strength sucking interest away from stocks in depreciated relative value currencies. At the same time that yellow TLT 20 year US Bond fund shows a rise over the period as money flows into it as a ‘safe haven’ and interest compounds. One spike up in the crash, another at the gold rollover that’s more spread out. Lately in sync with Germany, the green line, and the EU rolling off. (EWG is German and it is about the same as EZU the Eurozone fund, so I’ve only plotted one of them).

That just leaves SPY the blue line of the S&P 500 largest US stocks, and RUT, the Russel 2000 small caps holing up into this year. They rolled off in that mid-summer peak (back when I first said it looked like it was done).

Now let’s zoom in a bit in time. Since all charts start at zero, the relative positions of things will move, but we can see the order of roll a bit more clearly and with recent action much clearer.

Gold and Copper both dragging the bottom together, waiting to ‘catch a bid’ and for demand to pick up. Don’t buy things until they have clearly turned around and ‘caught a bid’. Otherwise you are “trying to catch a falling knife”.

Australia and EEM in lock step. Rush to the bottom on currencies and falling commodity prices. For the last 3 years TLT has wobbled, but not really gone anywhere overall. Dropping over this year as talk of The Fed raising rates (that decrease the value of presently held bonds) kicks in. About 1 1/2 years back the German green line rolls down as the EU gets into money troubles. Leaving just the USA moving up both in stocks and currency.

RUT above SPY for most of the run, as it tends to move faster. But below it at this end as it moves faster in both directions… So RUT is saying folks are selling their smaller weaker holdings first.

Australia vs World and Sectors rollover

Australia vs World and Sectors rollover

Now lets look at some particular sectors. Remember you can click the graph for a bigger easier to read one. This is a 3 year graph with weekly tick marks. Just makes it a bit easier to read. The main ticker is IYE the energy sector. It rolls over just about the same time that Germany did. IMHO the Obama Administration desire to crush our energy sector started this when they admitted to planning how to damage it in Paris. Having the Saudis trying to crush Canadian Tar Sands didn’t help. IEO is the Oil and Gas Exploration fund and moves in almost the same way. A bit more volatile but similar. It is the raspberry colored line just above IYE. IYM is the gold colored line next up. That’s Materials. Germany is in grey just above that (as EWG) and you can see how they are moving nearly in sync.

Energy & Materials vs Sectors

Energy & Materials vs Sectors

The next set of three, in the middle of the graph in the last year, are IYF Financials, charcoal color, XRT the Retail Sector in egg yolk yellow above it (but plunging below at the end), and SPY as our major baseline in blue.

Finally, at the top, we have IYT Transports that has taken a big hit lately as folks start to realize the low oil prices can’t prop up profit if volume is delining and IYH Healthcare that has started to realize that Obamacare is NOT a gravy train they were expecting.

For most of these you can see the ‘typical’ jump up for month, then the rapid sell off, an attempt back up that doesn’t make it as far (‘failure to advance’) and then the entry into a persistent drift down. Same pattern, just different phases of the process. Not on the chart is QQQQ the Tech heavy NASDAQ 100. It has the same shape generally, but with the last jump up a little higher than the one in July. Technically an advance, but more likely just a statistical in-distinguished from “failure to advance”.

For what it is worth, Energy is starting to look a little ‘bottomy’. We have “failure to advance to the downside”. The ADX black line has inflected and DMI- the red line is crossed under it. MACD is ‘blue on top’ (but still below zero). We want to see MACD cross above zero, DMI+ blue over DMI- red, and with volume rising on moves up (it presently looks to still be dropping on up moves). On the daily chart MACD is above the zero line, prices have crossed the SMA stack and are touching from above, and the stack is about 1/2 way to rolling back to rising order. It looks like the “return from above” that confirms a reversal of trend, but early in the process. Very similar to last February. So we wait a little to see if it acts like last July and August… or starts a clear up run with confirmed price and volume action.

I’d also start ‘bottom watches’ for those other long declining sectors. Eventually $US will head down and overseas stocks and materials will start up. But wait for it…

UPDATE:

Adding a compararitive currency chart as a discussion came up on ‘rulers’ down in comments. FXF is the Swiss Franc. FXE the Euro. FXA the Australian Dollar. FXY the Japanese Yen. FXS the Swedish Krona. Looks like I forget FXB the British Pound. It drops during the 2009 crash by about 20%, recovers to about -15% and holds that line to the end. These are all relative to the $US. And, of course, you can see the high volatility of GLD gold. Silver, SLV, is the same only worse… You can see how the Swiss Franc has a spike when gold spikes, but over time tries to stay near the Euro and / or Swedish Krona. But failing to trac in the last year as the € fell out of bed. I suspect they use a basket of curencies and gold now for their benchmark. Perhaps SDRs?…

Gold vs various major currencies

Gold vs various major currencies

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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4 Responses to Stocks Order Of Rollover

  1. p.g.sharrow says:

    The big talking head story for this week is that the world is awash in oil! Tanker ships full everywhere, underway slowly because the unloading facilities are full and surrounded by loaded anchored ships. The Congress critters are talking sale of some of the Strategic oil reserve to raise money. Real strategic thinking, fill the reserve when supplies are short and expensive and sell when supplies are high and cheap!. EPA is trying to make American coal supplies cheap to favor the Chinese and make American electric supplies expensive and in shortage. Is there ANYONE working for US? It would appear that oil, now at $40.40, is headed to mid $30s. My guess, the bottom is near $32. won’t stay there long. Mid $40s is about the bottom for real production.
    Retail looks to be slightly better then last years dismal showing. People are getting tired of being thrifty and are spending a bit more, on their credit cards this fall. That won’t last long.
    Ever figure out a non-rubber economic yard stick to compare everything else with?…pg

  2. Larry Ledwick says:

    Yes if they had a clue they would be buying all that cheap oil and filling the reserve to capacity.

  3. E.M.Smith says:

    @P.G.:

    Unfortunately, there is no non-rubber-ruler.

    Best is likely the Swiss Franc, it used to be the Japanese Yen then they started a ZIRP and entered the land of stagnation. The Swissy was great for decades, then they got tired of folks using them as a ‘go to’ currency during inflation scares (huge swings in exchange rate) and took steps to make it less interesting. Now they seem to manage the currency to stay near the € and quasi in a slow peg with gold sometimes. Hard to say. And, of course, the German Mark that was a great standard is now gone. Oh, and the £ has had ups and downs as Britain has wandered the Socialism Lite path, and back, and reversed, and…

    Commodities, as noted, have volatile prices. Tech gizmos have constant value decay. So it goes.

    At one time you could also use a kW-hr, but with the EPA and regulations screwing things over even that “cost to make” that was stable for decades for any one technology has gone off the rails.

    Finally, “one hour of labor” was a decent standard for a long time, then we got the Incredibly Escalating Minimum Wage (and the inevitable inflation from it) and now it isn’t very usable wither. ( It was 35 ¢ /hr first I remember, then went to $3.50 when the nickle stamp headed toward $1/2, but now it’s a patchwork from about $7 to $15 and divorced from reality in many places.)

    Finished Goods were relatively stable when the US was the dominant maker. Then China took over and those prices are now reflective of China, not the USA.

    Once you have crossed off finished goods, energy, commodities, labor, and the more reliable foreign currencies, you are pretty much down in the weeds…

    At this point were I forced to pick something, I’d likely choose potatoes. They seem to be a constant value and price is fairly stable as they don’t have a lot of change in how they are produced nor much excess supply or demand swings. If you can accept seasonal swings and sporadic linkage to corn prices, pork and chicken prices are decent indicators. The chicken that was just under $1 / pound whole (at 88 ¢ for the cheaper places) a few years back is now about $1.40 / pound. During that time the $ has lost about 1/3 of value, IMHO. So it seems on track. So a “meat and potatoes” composite index is pretty good. Unfortunately, you need to make it yourself as it isn’t published anywhere.

    This is a VERY old problem in Economics. “How to measure” is just a pain. Likely part of what caused me ire when I saw what kind of crap was being done with actually decent temperature data. Reminded me of some of the crap statistics games in Economics (but at least in Econ there’s a valid reason… you don’t HAVE a clean standard…)

    @Larry:

    Hey! Good one! Government having a clue!! What a yuk yuk yuk that was!!

    /snarc; /sarc;

  4. E.M.Smith says:

    I’ve added a chart of currencies at the bottom of the posting so you can see why I say the Swiss Franc is likely the best / most stable. This is all measured “against the $US” so when our dollar had a weak period and gold shot up, the Swissy had a spike too. As ours has lost value, there’s has risen by 15% or so relative to us (at the end), but I think the 30% more it had for a long time was more accurate.

    GLD is on that chart, too, so you can see how volatile gold is compared to a basket of currencies. THE major problem with a “gold standard” is that you end up changing prices a lot, both up and down, with the gold market; OR, you have to stabilize gold prices, and that didn’t work out so well for us when spending got out of hand in the ’60s and ’70s. (That the Russians were deliberately selling their mined gold in large batches timed to mess with our exchange rates didn’t help either…)

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