The Relative Rotation Graph for US sectors shows four sectors with rotational patterns that catch the eye and deserve a further investigation.
Inside the lagging quadrant, these are Energy (XLE) and Financials (XLF) and inside the leading quadrant, I am looking at Technology (XLK) and Consumer Discretionary (XLY).
The balance of power on the RRG above is shifted to the leading quadrant. Five of the ten sector-ETFs on the RRG are positioned inside the leading quadrant (XLP, XLU, XLV, XLY, and XLK) with one inside the improving quadrant (XLRE). No sectors are currently found in the weakening quadrant, and four are inside the lagging quadrant (XLE, XLF, XLB, and XLI).
An interesting observation that can be made from this RRG is the clustering of eight sectors, all but XLE and XLF, in the top-right area and two that are more or less "detached" in and towards the bottom-left.
A quick take from such a rotation is that by simply avoiding the Energy and the Financials sector a portfolio manager already has a very good chance of outperforming the S&P 500. In this case, the situation is even more pronounced because of the fact that XLE and XLF are much further away from the center (benchmark) of the chart than the other sectors which are much more positioned around and closer to, the benchmark.
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