Key Highlights

  • Energy (XLE) remains firmly in the Leading quadrant and continues to exhibit the strongest relative strength and momentum across the US market.
  • Communication Services (XLC) remains in Leading, although its south-easterly rotation indicates momentum is beginning to fade.
  • Real Estate (XLRE) and Consumer Staples (XLP) continue to reside in the Improving quadrant, reinforcing their potential to become future market leaders.
  • Financials (XLF) and Health Care (XLV) remain in Weakening, reflecting continued deterioration in momentum despite maintaining above-average relative strength.
  • Technology (XLK), Materials (XLB), Industrials (XLI), Consumer Discretionary (XLY), and Utilities (XLU) continue to occupy the Lagging quadrant, although several sectors are gradually stabilising.
  • The latest sector rotation suggests Energy remains the dominant leadership sector, while Real Estate and Consumer Staples continue strengthening as potential future leaders.

The latest Relative Rotation Graph (RRG) for 22 July 2026 highlights a largely unchanged leadership structure within the US equity market. Energy continues to dominate the Leading quadrant, while Communication Services remains a market leader despite showing signs of moderating momentum. Real Estate and Consumer Staples continue strengthening within the Improving quadrant, whereas Financials and Health Care remain in Weakening. Most cyclical sectors continue to occupy the Lagging quadrant, reflecting ongoing selective sector rotation rather than broad-based market leadership.

US Sector Relative Momentum Chart

US Sector Relative Momentum Chart (at the closing price of 22/07/2026). Powered by: amibroker.com.

Momentum Breakdown by Quadrant

Leading Quadrant

  • Energy (XLE) remains the strongest momentum sector in the US market. Its continued position deep within the Leading quadrant confirms that both relative strength and momentum remain firmly positive, indicating sustained institutional demand for energy-related companies.
  • Communication Services (XLC) continues to reside within the Leading quadrant. However, the sector's south-easterly rotation suggests momentum is gradually fading despite maintaining strong relative strength. If this trajectory persists, XLC could rotate into the Weakening quadrant in the coming sessions.

Improving Quadrant

  • Real Estate (XLRE) remains firmly positioned within the Improving quadrant and continues strengthening. The sector's constructive trajectory suggests investors are steadily rebuilding exposure, positioning it as a potential future market leader.
  • Consumer Staples (XLP) continues advancing within the Improving quadrant after its recent rotation from Weakening. The sustained improvement in relative momentum indicates growing investor preference for defensive consumer companies.

Weakening Quadrant

  • Financials (XLF) remain within the Weakening quadrant. Although relative strength remains above the broader market, the continued loss of momentum suggests the sector may require further consolidation before leadership can resume.
  • Health Care (XLV) continues to occupy the Weakening quadrant, reflecting ongoing deterioration in momentum following its earlier period of leadership. Investor preference remains tilted towards sectors exhibiting stronger relative performance.

Lagging Quadrant

  • Technology (XLK) remains in the Lagging quadrant despite showing signs of stabilisation. Additional improvement in both momentum and relative strength will be required before the sector can rotate into Improving.
  • Materials (XLB) continue to reside within Lagging, although the recent trajectory suggests downside momentum has moderated. Continued improvement could eventually support a rotation into Improving.
  • Industrials (XLI) remain in Lagging and continue to underperform the broader market despite stabilising relative momentum.
  • Consumer Discretionary (XLY) also remains within the Lagging quadrant. Although the sector has gradually improved from recent lows, it continues to trail stronger areas of the market.
  • Utilities (XLU) continue to occupy the Lagging quadrant. However, the recent north-easterly rotation indicates momentum is improving, suggesting the sector may eventually transition into Improving if current trends persist.

Strategic Summary

The latest RRG confirms that Energy (XLE) remains the dominant leadership sector within the US market, supported by robust relative strength and sustained momentum. Communication Services (XLC) also remains in the Leading quadrant, although its weakening momentum suggests leadership may be beginning to fade. Meanwhile, Real Estate (XLRE) and Consumer Staples (XLP) continue strengthening within the Improving quadrant, reinforcing their potential to emerge as future market leaders.

In contrast, Financials (XLF) and Health Care (XLV) remain in Weakening as momentum continues to soften. Technology (XLK), Materials (XLB), Industrials (XLI), Consumer Discretionary (XLY), and Utilities (XLU) continue to underperform in the Lagging quadrant, although several sectors are gradually stabilising. Overall, sector rotation remains selective, with investors continuing to favour sectors demonstrating strengthening relative momentum while reducing exposure to those exhibiting deteriorating leadership characteristics.