Key Momentum Shifts

  • Energy (XLE) remains within the Leading quadrant, although its south-easterly trajectory suggests relative momentum continues to moderate despite maintaining above-average relative strength.
  • Materials (XLB), Consumer Staples (XLP), and Real Estate (XLRE) continue to occupy the Leading quadrant, reflecting sustained institutional preference for sectors exhibiting both positive relative strength and momentum.
  • Technology (XLK) and Industrials (XLI) remain in the Improving quadrant, signalling strengthening relative momentum and positioning both sectors as potential candidates to rotate into market leadership.
  • Utilities (XLU) has rotated into the Lagging quadrant, indicating both relative strength and momentum have deteriorated as investors continue favouring growth-oriented sectors.
  • Financials (XLF) and Health Care (XLV) remain in the Weakening quadrant, suggesting that while both sectors continue to outperform the broader market on a relative basis, their momentum has continued to soften.
  • Communication Services (XLC) and Consumer Discretionary (XLY) remain in the Lagging quadrant, although Communication Services continues to display an improving trajectory towards the Improving quadrant.
  • The latest RRG highlights continued rotation towards growth sectors, with Technology and Industrials strengthening while several defensive sectors gradually lose momentum.

The latest Relative Rotation Graph (RRG) for 4 August 2026 shows US sector leadership becoming increasingly balanced as growth-oriented sectors continue rebuilding momentum. Materials, Consumer Staples, Real Estate and Energy remain within the Leading quadrant, while Technology and Industrials continue strengthening in Improving. Utilities has rotated into Lagging, reflecting weakening relative performance, while Financials and Health Care continue to lose momentum in Weakening. Overall, sector rotation suggests investors are gradually increasing exposure to growth sectors while reducing allocations to traditional defensive areas.

Momentum Breakdown by Quadrant

US Sector Relative Momentum Chart (at the closing price of 04/08/2026). Powered by: amibroker.com.

Leading Quadrant

  • Energy (XLE) remains within the Leading quadrant and continues to exhibit superior relative strength. However, its south-easterly trajectory indicates relative momentum is gradually fading, suggesting leadership may continue to moderate.
  • Materials (XLB) remain firmly positioned in Leading, confirming sustained relative strength following continued institutional buying across commodity-related companies.
  • Consumer Staples (XLP) continue to hold within the Leading quadrant, highlighting persistent demand for defensive companies with resilient earnings and stable cash flows.
  • Real Estate (XLRE) remains comfortably within Leading, maintaining above-average relative strength despite momentum beginning to level off.

Improving Quadrant

  • Technology (XLK) remains within the Improving quadrant and continues to strengthen. Its north-easterly trajectory confirms improving relative momentum, reinforcing the view that technology stocks are becoming increasingly well positioned to rotate into market leadership.
  • Industrials (XLI) remain in the Improving quadrant. Continued gains in both relative strength and momentum suggest industrial and capital goods companies remain attractive candidates to enter the Leading quadrant in coming sessions.

Weakening Quadrant

  • Financials (XLF) remain in the Weakening quadrant. Although the sector continues to outperform the broader market on a relative basis, moderating momentum suggests institutional buying has become more selective.
  • Health Care (XLV) also remains in Weakening, indicating relative strength persists despite continued deterioration in momentum.

Lagging Quadrant

  • Communication Services (XLC) remain within the Lagging quadrant, although the recent north-easterly trajectory indicates downside momentum continues to fade. Further improvement in both relative strength and momentum would be required before rotating into Improving.
  • Consumer Discretionary (XLY) continues to reside within Lagging, reflecting ongoing relative underperformance despite signs of stabilisation.
  • Utilities (XLU) has rotated into the Lagging quadrant, representing one of the most notable changes in the latest RRG. The move indicates both relative strength and momentum have weakened as investors rotate away from defensive sectors and towards growth-oriented industries.

Strategic Summary

The latest Relative Rotation Graph shows Materials (XLB), Consumer Staples (XLP), Real Estate (XLRE), and Energy (XLE) continuing to occupy the Leading quadrant, confirming these sectors remain the market's strongest relative performers despite moderating momentum in Energy.

Meanwhile, Technology (XLK) and Industrials (XLI) continue strengthening within the Improving quadrant, reinforcing the view that growth-oriented sectors are steadily rebuilding momentum and could emerge as future market leaders. At the same time, Financials (XLF) and Health Care (XLV) remain in Weakening as momentum continues to soften, while Communication Services (XLC), Consumer Discretionary (XLY), and the newly rotated Utilities (XLU) reside in the Lagging quadrant.

Overall, the latest sector rotation suggests market leadership is gradually shifting from traditional defensive sectors toward cyclical and technology-related industries, with Technology and Industrials remaining the sectors most likely to drive the next phase of market leadership.