A Sector Rotation Abstract

A fast evaluation of present sector rotation on the weekly Relative Rotation Graph:

XLB: Nonetheless on a powerful trajectory contained in the bettering quadrant and heading for main. The upward break of overhead resistance on the value chart appears to be stalling in the meanwhile, which might trigger its relative energy in comparison with the S&P 500 to decelerate. Total, the development, each when it comes to worth and relative, continues to be up.

XLC: Continues to lose relative energy and momentum contained in the weakening quadrant and rotates towards lagging at a adverse RRG-Heading. On the value chart, XLC is battling resistance, which causes its relative efficiency to decelerate.

XLE: Is on the strongest rotation on this universe. Effectively contained in the bettering quadrant on the highest RS-Momentum studying and powered by the longest tail within the universe. The upward break within the worth chart is holding up nicely, and the sector may even deal with a small setback in direction of the previous resistance space (slightly below ~95) with out harming its uptrend.

XLF: Was on its manner again to the main quadrant after curling again up inside weakening, however this week’s dip is inflicting the tail to deviate from that path. This implies we should watch this sector intently going into the shut of this week and the start of subsequent week to see if it is a non permanent hiccup or an actual change of path. The nasty dip on the value chart pushes XLF again beneath its former resistance ranges, which is often not a powerful signal. Warning!!

XLI: That is the one sector contained in the main quadrant in the meanwhile, touring at a powerful RRG-Heading, taking the sector greater on each axes. The rally within the worth chart is absolutely intact however appears to stall at present ranges for 3 to 4 weeks. Loads of room on the chart for a corrective transfer on this sector with out damaging the uptrend.

XLK: The sluggish efficiency, primarily sideways, of the sector for the reason that finish of January has precipitated relative energy to flatten and for the sector to roll over and rotate into the weakening quadrant on the RRG. The soar immediately (Thursday, 4/11) precipitated an uptick in relative energy, however way more is required to deliver this sector again to the forefront.

XLP: Didn’t make all of it the way in which as much as horizontal resistance round 77.50 however set a decrease excessive after a nasty reversal final week. The uncooked RS-Line continues steadily decrease, inflicting the tail on the RRG to stay quick and on the left-hand aspect of the graph, indicating a gentle relative downtrend.

XLRE: After a rally on the finish of final yr, XLRE ended up in a sideways sample that might transform a double high after that rally. Such a high shall be confirmed on a break beneath 37, which is the bottom low that was set within the week beginning 2/12. When that occurs, a decline all the way in which again to the late 2023 low turns into potential. The relative development reversed again down after a really temporary stint by means of the main quadrant on the finish of January.

XLU: Simply moved into the bettering quadrant from lagging however stays at a really low RS-Ratio degree. The uncooked RS-Line continues to point out a gentle downtrend, making it exhausting for the tail to make all of it the way in which to the main quadrant. Worth managed to interrupt above a falling resistance line however shortly thereafter stalled within the space of Sept-23, Dec-23, and Jan-24 highs. Stress stays in each worth and relative phrases.

XLV: After a brief rotation by means of the bettering quadrant that lasted roughly two months, XLV has now returned to the lagging quadrant and is pushing deeper into it on a adverse RRG-Heading. On the value chart, XLV accomplished a (double) high formation and broke again beneath its former overhead resistance degree, opening important draw back danger.

XLY: Is hesitating in a sideways sample since mid-February, however nonetheless in a really shallow, uptrend. Relative energy continued to say no however is now nearing its late 2022 relative low, and the RRG-Strains are displaying early indicators of enchancment.

Cap-weighted vs Equal-weighted

The RRG above exhibits the relative rotation of the relationships between the cap-weighted sector ETFs and their equal-weighted counterparts.

The extra attention-grabbing data is coming from the tails which are distant from the benchmark. On this case, these are the Communication providers sector, which is rolling over contained in the main quadrant, and Shopper Discretionary, which has simply turned up contained in the lagging quadrant.

This means that the big(er) cap communication providers shares at the moment are beginning to underperform the lower-tier market capitalizations. The other is true for Shopper Discretionary, the place the other is occurring, and bigger market cap shares are taking up from decrease tier market caps.

An identical remark might be made for the Expertise sector which is heading straight into the lagging quadrant, which means that large-cap tech is giving option to smaller names.

This data shall be useful when RRGs for particular person shares contained in the sectors.

#StayAlert: –Julius