Editor’s note: This article was originally published at Optuma’s research site and can be downloaded there. Since I was introduced to Relative Rotation Graphs, I have been constantly playing with them and trying to see how they can give me insights into what is happening in the market. I love looking at different Asset Classes, Currencies and Portfolios. My favorite group however will always be the SP500 GICS Level 1 sectors with the SP500 as the benchmark, because I know that the total of the ten sectors must be fully encompassed by the benchmark. The ten sectors embody all the elements that can contribute to the SP500 itself. When I look at the RRG, which measures trends in relative performance of each Sector against the Index, there has to be balance in each of the axis. Consider Figure 1; we can see the ten sectors based on their relative strength against

Editor’s note: This was originally published on July 5, 2016 at CrestmontResearch.com. CURRENT STATUS (Second Quarter 2016) The second quarter was another period of vulnerability and resilience. The net effect of the stock market’s gyration added 1.9% to the year’s total. As a result, normalized P/E increased slightly to 26.7—well above the level justified by low inflation and interest rates. The current status remains “significantly overvalued.” The level of volatility stalled over the past quarter, yet the trend appears to remain upward. The trend in actual and forecast earnings continues to slide. Earnings and volatility should be watched closely and investors should remain cognizant of the risks confronting a vulnerable market. NOTE: Crestmont Research does not analyze the stock market or interest rates with a perspective about near-term direction or trends; Crestmont Research focuses on a longer-term, bigger picture view of market history and its fundamental drivers. Occasionally, the analysis indicates that a