 Hello, traders at CMC Markets. Welcome to a new momentum update by RRG Research for Monday the 25th of July and I'm recording it on Friday the 22nd before the opening of the markets. My name is Julius de Campanar and I'm presenting to you from Amsterdam in the Netherlands. Let's start with a look at the RRG for international stock market indexes against 0% return. As you know that will show us the price direction of those markets in general and this image gives us a clear view of the general direction of stocks over the last week two weeks and what you can see here is that they be moving into the leading quadrant which means that stocks are in a short-term uptrend price-wise and that's good news after long long long declines that we've had. The question is how sustainable are these rallies and we'll try to have a look at that in a minute. The only market that is going against the tide is the Hangsang that's Hong Kong which you see here in the lagging quadrant that is in a short-term downtrend pretty much all the others are on the rise at least in the near term. If we bring this to a relative image and we compare all these stock markets to the MSCI world then we get a different image then we get a different picture. You see the rotations of the various indexes relative to the MSCI world and the ones that are standing out are I think the pretty much the European markets with the DAX, the stocks 50 and the French GAC which are all traveling at a nice positive RRG heading and they're either inside the leading quadrant or traveling towards it and on the opposite side you find that a number of the US indexes the S&P the Dow Jones industrials the NASDAQ are they have turned around and they are now moving at a negative heading either in inside weakening or towards it the NASDAQ here in a Russell 2000 is still doing pretty good. These opposite directions these opposite moves usually give us good trading opportunities it's very well possible to put together price agnostic directional agnostic trades by buying one lag and selling the other and the RRG will help you to pick potential candidates for that. The ones that stands out for me the disconnect between Europe and the US is the thing that I'm watching at the moment and if we look at the stocks that's the Europeans the Euro stocks 50 index and I want to put that against the S&P 500 because that's obviously the biggest US widely traded US index but you could take the DAJs industrials or the NASDAQ if you're very aggressive because that still has a way to go and I want to look at the individual charts for those indexes and if we start with the S&P the Euro stocks 50 index then you see that has bottomed around 3400 where we had that spike dip in March and we've been trying what we've been hovering above that 3400 area since the middle of June and it looks as if we're now getting out of it what we would need to happen preferably next week is breaking above let's say 3600 that will free up more upside potential and give the Euro stocks 50 index a little bit more room to the upside. What you see here are the RRG lines they're continuing to move higher that's what you see on that RRG that's why the Euro stocks 50 index is in that improving quadrant moving towards leaning that's because these lines are pointing higher and you'll see the difference when we move to the S&P chart we look at the S&P 500 chart you see a kind of similar image for price although the S&P dipped a little bit lower we also found a low in June but it was lower than what we had for the Euro stocks 50 index at an earlier date it's coming out of that bottom formation as well so from a price perspective both the S&P and the Euro stocks 50 index are they're not looking fantastic but they have some upside potential but the big difference is when you look at relative strength and you look at these RRG lines you can see that the RRG momentum line that's the stippled green line is already crossed below 100 which means that it is now losing relative momentum and that is starting to drag that RS ratio line lower giving it a weaker outlook from a relative perspective so from a relative point of view I think we are now in a move that favors Europe over the US and that brings me to the next subject that I want to quickly talk to you about for this week's update and that's if you look at the US sectors over the last few days then you can see that the biggest US sectors information technology and consumer discretionary are now strongly moving into the leading quadrant that is these two together are almost 50% of the US market so that is dragging the stock market up if you look at more defensive stuff health care staples utilities to a lesser degree real estate and telecom services they are moving in opposite direction so we're in a move that favors growth information technology because you are discretionary are clearly growth stocks and they are in favor right now however the question is how sustainable is this move how does that fit in the bigger picture and one of the relationships that I'm keeping a close eye on is the relationship between growth and value stocks and you can put that on an RRG and it looks like this this is the Dow Jones US growth index versus the Dow Jones US value index and the center the benchmark of the chart is the Dow Jones US index so this is a closed universe this is everything there is in this universe and you can see the improvements for growth and a weakened weakening for value however if you just look at the RS ratio then value is in a relative uptrend it's losing momentum but it's still in a relative uptrend and growth is in a relative downtrend it's picking up momentum but it's still in a relative downtrend and that you got to keep that in the back of your mind this is a little bit longer term picture than the other RRGs that we've been looking at this is a weekly RRG and if we bring that into one chart if we look at that one on one growth value relationship then I think that's painting us a very interesting and maybe sobering picture if you want this is a real long term chart of growth versus value you can see that it peaked in 2000 obviously off that's the dot-com bubble and you saw that massive decline and the stabilization and then it started to pick up again 2007 2000 day but it really started to take off 2014 and then really here in 2018 and after that for the first time since let's say 2006 I think there's now a massive top formation in place for growth versus value this relationship this ratio has put in in place a massive double top there's something that you cannot negate you can't pretend as if it's not there we had the initial decline and we're now rallying back towards the breakout level that is what you see in that RRG where you see growth picking up and where you see short-term growth sectors and growth stocks picking up but the longer term picture the longer term relationship between growth and value is dangerous I mean we've been used to growth beating value all the time and I think that from a longer term perspective that relationship is now under pressure and it will be very interesting to see what happens once this ratio goes back to 138 maybe 140 in that ratio number and how the growth sectors are then holding up I think we have a long-term turnaround in place we'll have to wait and see what happens but please remember that the from this point of view if you take this into account and if you see what I see and see that this is a big reversal pattern in place then the current rally for growth sectors and growth stocks is only temporary in nature and it will reverse once this growth value relationship hits its breakout level and will meet resistance that potentially start turning around again that's it for this week I hope you enjoyed the show and I'm looking forward to see you again next week same time same place