At a recent seminar hosted by The Technical Analyst in central London, Trevor Neil gave a talk on the methodology behind Relative Rotation Graphs (RRGs). Using traditional relative strength analysis, (not to be confused with RSI analysis), RRGs track the relative strength (RS) of a security or asset in real time against its index or another asset to assess its relative performance. Using both relative strength and momentum of relative strength measures, the charts filter out the very best and worst performing markets. A RRG chart is divided into four sections of performance as follows:
|Leading markets with…||Rising RS and RS momentum|
|Weakening markets with…||Rising RS and falling momentum|
|Improving markets with…||Falling RS and rising momentum|
|Lagging markets with…||Falling RS and falling momentum|
RRGs are often used in equity sector rotation strategies but can be applied to any asset class. As such, they are ideal for use in asset allocation, says Neil.
RRG is available on Bloomberg, Refinitiv, Optuma and StockCharts.