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RSInsight Help

I will update the help file when I get a chance. For now, a quick explanation:
 
RSInsight is a Relative Strength tool I wrote to get a big picture on trends in sectors and industries.  On this site, I mostly use it with the 31 Media General Sector Groups.  It can also be used with the 200 Industries that make up the Sectors, or with individual stocks.
 
Chart 1
RSInsight, 7 week Relative Strength to the S&P500
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The way to read the grid is from left to right, going backward through time.  Each column represents a snapshot of how the sector performed for a period up to that week.  Buy comparing weekly changes in performance, I can get a feel for trends, sector rotation, and money flow.
 
Each column in the grid represents a date backward in history.  The most recent date is on the far left.
 
The number in each cell shows the relative price performance to the S&P500, which is in light blue.  For instance, Tobacco, MG350, performed 10.14 percentage points better than the S&P500 over the past 7 weeks, using a 3 period moving average to smooth the weekly jumps.  Going to the right one column, Tobacco outperformed the market by 4.13 percentage points.
 
The colors represent decile placement.  The top 10% of sectors, or 3 in this case, get bright green.  The next best get a lighter green, and so on through very light green, yellows, light red, red, and dark red.  In the example chart below, the column labeled "10/6" is sorted highest to lowest.  The other columns now show how each group performed over preceding weeks.
 
The pattern that most stands out is that during May and June, the groups that performed worst are now the best performers, and vice versa.  This is classic sector rotation, and using RSInsight you can take advantage of it.
 
Chart 2 shows one of the many ways to take advantage of RSInsight.
 
Chart 2
RSInsight, Finding Sector Strength
 
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At point 1, we see the Drug group has gone from eight weeks of underperformance to slight outperformance on 6/19.  This was your first indication that money was flowing into the Drug group.  Please note that in this particular screen, we are working with relative strength, against an index.  If the market dropped during that period, then it is likely that Drugs also dropped, as well.
 
I usually look for bullish sector strength in bull markets, and bearish rotation in bear markets.  That seems to be the safest way to put the odds in your favor.
 
So what would have happened if you bought the Drug index, based on point 1?  Chart 3 shows the MG510 index overlayed on the S&P500. 
 
Chart 3
MG510, Drugs, vs. S&P500
 
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The yellow vertical line shows where we first saw positive relative strength in RSInsight.  Even though we were in a bear market at the time, this group handily beat the market for the next 2 months.  RSInsight alerted us to the potential outperformance near the June low, before a 10% run to the August high.
 
Let's look now at a bearish rotation.  When a group goes from green to yellow, especially if the move also entails a positive to negative reading, we see the start of what could be money flowing out.  Point 4 shows MG130, Metals and Mining, in mid-July.  Note how the previous 8 weeks were outperforming weeks, relative to the market.  On July 11, we see that MG130 first underperformed.  Chart 4 tells the rest of the story:
 
Chart 4
MG130, Metals $ Mining, vs. S&P500
 
 
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Again, the yellow vertical line represents the first date that we saw (slight) negative RS to the market.  From 7/11 through 10/7, Metals and Mining lost 53.2%.  It has been an absolute smackdown, while the market, also weak, only lost 19%.
 
 One of the key points about using RSInsight for Relative Strength Sector rotation is to be market-aware.  In other words, there should be other reasons why you would want to take the trade, to confirm the RS reading.  For instance, if you felt like defensive stocks may come into favor soon, for economic reasons, you can use RSInsight to monitor the Food, Drugs, and Tobacco groups to time your entries.  Also, the metals and mining short might have made sense if valuations were very high, and you wanted to get short near the top, but only when the relative strength confirmed your idea.
 
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