Key Highlights

  • Communication Services (XLC) remains firmly in the Leading quadrant, reinforcing its position as one of the market's strongest momentum sectors.
  • Financials (XLF) have rotated into the Leading quadrant, signalling renewed relative strength and improving market leadership.
  • Energy (XLE) remains in Improving and continues to display one of the strongest momentum profiles, positioning it as the next sector likely to enter Leadership.
  • Health Care (XLV) is the only sector in Weakening, indicating fading momentum despite maintaining positive relative strength.
  • Industrials (XLI) have slipped into Lagging, reflecting a deterioration in relative performance.
  • Technology (XLK), Consumer Discretionary (XLY), Materials (XLB), Consumer Staples (XLP), Real Estate (XLRE), Utilities (XLU), and Industrials (XLI) all remain in Lagging.
  • The latest sector rotation suggests market leadership continues to broaden, with Financials joining Communication Services while Energy steadily approaches the Leading quadrant.

The latest Relative Rotation Graph (RRG) for July 17, 2026, highlights another important shift in US sector leadership. Financials have successfully rotated into the Leading quadrant alongside Communication Services, while Energy continues to strengthen within Improving and appears close to joining the market leaders. At the same time, Industrials have slipped into Lagging, while Health Care remains the only sector in Weakening. The overall rotation suggests investors continue to favour sectors demonstrating improving relative strength while reducing exposure to several underperforming groups.

US Sector Relative Momentum Chart

US Sector Relative Momentum Chart (at the closing price of 17/07/2026). Powered by: amibroker.com

Key Market Theme

The Leading Quadrant (The Market Leaders)

  • Communication Services (XLC) remains firmly positioned within the Leading quadrant and continues to exhibit strong relative strength and momentum. The sector's persistent north-east trajectory reflects sustained investor demand for media, internet, and communication-related companies.
  • Financials (XLF) have rotated from Weakening into Leading, representing one of the most significant developments on the latest chart. The move suggests renewed institutional buying and confirms improving relative strength following several weeks of consolidation.

The Improving Quadrant (Emerging Leaders)

  • Energy (XLE) remains firmly positioned within Improving and continues to display one of the strongest momentum profiles across the market. Its consistent north-east trajectory indicates strengthening investor confidence, and the sector appears well positioned to rotate into the Leading quadrant should current momentum persist.

The Weakening Quadrant (Losing Momentum)

  • Health Care (XLV) remains the only sector in Weakening. While relative strength continues to hold above market averages, declining momentum suggests investors have become more selective toward defensive growth sectors after their earlier period of leadership.

The Lagging Quadrant (Underperformers)

  • Industrials (XLI) have rotated from Weakening into Lagging, signalling further deterioration in relative performance and suggesting investors continue reducing exposure to economically sensitive stocks.
  • Technology (XLK) remains firmly positioned within Lagging despite showing some signs of stabilisation. The sector continues to underperform stronger market groups.
  • Consumer Discretionary (XLY) continues to reside in Lagging after its recent deterioration in both momentum and relative strength.
  • Materials (XLB) remain in Lagging despite modest improvement in momentum. The sector continues to trail the broader market.
  • Consumer Staples (XLP) remain within Lagging, with relative performance continuing to lag despite recent attempts to recover.
  • Real Estate (XLRE) continues to recover gradually but remains in Lagging. Further improvement in momentum will be required before the sector can rotate toward Weakening.
  • Utilities (XLU) also remain in Lagging. Although downside momentum has moderated, relative strength remains below the broader market.

Strategic Summary

The latest RRG highlights an improving leadership structure within the US market. Communication Services (XLC) continue to lead, while Financials (XLF) have joined the Leading quadrant, confirming renewed relative strength. Energy (XLE) remains the strongest sector in Improving and appears well positioned to become the next market leader if its current trajectory continues.

Meanwhile, Health Care (XLV) remains the only sector in Weakening, while Industrials (XLI) have slipped into Lagging alongside Technology (XLK), Consumer Discretionary (XLY), Materials (XLB), Consumer Staples (XLP), Real Estate (XLRE), and Utilities (XLU). Overall, sector rotation continues to favour Communication Services, Financials, and Energy, suggesting investors remain focused on sectors exhibiting strengthening relative momentum while avoiding those with persistent relative weakness.