Key Highlights

  • Energy (XLE) remains firmly in the Leading quadrant and continues to exhibit the strongest relative strength and momentum across the US market.
  • Real Estate (XLRE) has rotated into the Leading quadrant, confirming a notable improvement in both relative strength and momentum.
  • Communication Services (XLC) remains in Leading despite losing momentum, suggesting leadership is beginning to moderate.
  • Consumer Staples (XLP) continues to strengthen within the Improving quadrant and remains well positioned to become a future market leader.
  • Financials (XLF) and Health Care (XLV) remain in Weakening as momentum continues to soften despite maintaining above-average relative strength.
  • Technology (XLK), Materials (XLB), Consumer Discretionary (XLY), Industrials (XLI), and Utilities (XLU) continue to occupy the Lagging quadrant, although several sectors are showing signs of stabilisation.
  • The latest sector rotation suggests leadership remains concentrated in Energy and Real Estate, while Consumer Staples continues building positive momentum.

The latest Relative Rotation Graph (RRG) for 23 July 2026 highlights another important shift in US sector leadership. Energy continues to dominate the Leading quadrant, while Real Estate has successfully rotated into Leadership after several weeks of strengthening momentum. Communication Services also remains in the Leading quadrant, although its trajectory suggests momentum is gradually fading. Meanwhile, Consumer Staples continues advancing within the Improving quadrant, whereas Financials and Health Care remain in Weakening. Most cyclical sectors continue to occupy the Lagging quadrant, indicating that sector rotation remains selective rather than broad-based.

US Sector Relative Momentum Chart

US Sector Relative Momentum Chart (at the closing price of 23/07/2026). Powered by: amibroker.com.

Momentum Breakdown by Quadrant

Leading Quadrant

  • Energy (XLE) remains the strongest momentum sector in the US market. Its position deep within the Leading quadrant confirms that both relative strength and momentum remain firmly positive, indicating sustained institutional demand for energy-related companies. Although its trajectory has flattened slightly, the sector continues to exhibit the strongest leadership characteristics across the market.
  • Real Estate (XLRE) has rotated into the Leading quadrant after previously residing in Improving. This transition reflects strengthening relative strength and improving momentum, suggesting investors continue increasing exposure to property-related companies. If this positive trajectory persists, Real Estate could become one of the market's primary leadership sectors.
  • Communication Services (XLC) continues to reside within the Leading quadrant. However, its south-easterly rotation indicates momentum is gradually fading despite maintaining above-average relative strength. Continued moderation could eventually result in a rotation into the Weakening quadrant if buying momentum continues to slow.

Improving Quadrant

  • Consumer Staples (XLP) remains firmly positioned within the Improving quadrant and continues strengthening following its earlier rotation from Weakening. The sustained improvement in relative momentum suggests investors are gradually increasing exposure to defensive consumer companies, positioning the sector as a potential future market leader.

Weakening Quadrant

  • Financials (XLF) remain within the Weakening quadrant. While relative strength continues to outperform much of the broader market, declining momentum suggests the sector may require additional consolidation before leadership resumes.
  • Health Care (XLV) continues to occupy the Weakening quadrant. Although the sector has stabilised in recent sessions, its relative momentum continues to deteriorate following an earlier period of leadership, indicating investors continue favouring sectors with stronger momentum profiles.

Lagging Quadrant

  • Technology (XLK) remains in the Lagging quadrant despite showing signs of improving momentum. Additional strengthening in both relative strength and momentum will be required before the sector can rotate into Improving.
  • Materials (XLB) continue to reside within the Lagging quadrant. While downside momentum has moderated, the sector continues to underperform stronger areas of the market.
  • Consumer Discretionary (XLY) also remains in the Lagging quadrant. Although its recent trajectory indicates gradual stabilisation, the sector continues to trail the broader market in terms of relative performance.
  • Industrials (XLI) remain in Lagging despite exhibiting some stabilisation in momentum. A sustained improvement in relative strength will be necessary before a rotation into Improving becomes likely.
  • Utilities (XLU) continue to occupy the Lagging quadrant. However, the recent north-easterly rotation suggests downside momentum is easing, indicating the sector could eventually transition into the Improving quadrant if current trends continue.

Strategic Summary

The latest Relative Rotation Graph confirms that Energy (XLE) remains the dominant leadership sector within the US market, supported by exceptional relative strength and sustained momentum. Real Estate (XLRE) has strengthened further by rotating into the Leading quadrant, while Communication Services (XLC) continues to lead despite showing signs of moderating momentum. Consumer Staples (XLP) also remains well positioned within the Improving quadrant, reinforcing its potential to become a future market leader.

Conversely, Financials (XLF) and Health Care (XLV) continue to lose momentum within the Weakening quadrant. Technology (XLK), Materials (XLB), Consumer Discretionary (XLY), Industrials (XLI), and Utilities (XLU) remain in the Lagging quadrant, although several sectors are gradually stabilising. Overall, sector rotation continues to favour industries exhibiting strengthening relative momentum while investors remain cautious towards sectors that continue to underperform.