Don't Ignore This Chart!

This Sector Just Returned to the Leading RRG-Quadrant AND Shows an Outperformance 71% of the Time in July


I do not believe that there is just one single tool, strategy, method, etc. that fits all our needs as investors or traders. For me, the power of research and analysis lies in combining information from various sources and subsequently putting all that together into a market-view, strategy, system, etc.

That is why I always encourage people to NOT use RRG as a standalone tool, but to always combine it with information from other sources and embedding their use into an investment process.

Today I was looking at seasonality charts that compared the performance of sectors to the performance of the S&P 500. What I noticed is that there is only ONE sector that shows an outperformance percentage for the month of July over 70% - the Real Estate sector.

XLRE outperformed the S&P 500 in 71% of the last 19 years, which is a pretty high number. For reference, the average outperformance comes in at 1.9%. When I look at the Relative Rotation Graph for US sectors below, I see the tail for XLRE rotating back into the leading quadrant following a stint through weakening. 

Real Estate entered the leading quadrant back in November 2018 and rotated further into it until February 2019, which is when it dropped into the weakening quadrant, gaining 5.8% while the S&P 500 showed a gain of 1.9%. From mid-February until the present, XLRE returned 5.3% while the S&P 500 picked up 5.7%.

A rotation back into the leading quadrant is usually a good sign, as it means the sector is gaining again on both the JdK RS-Ratio and the JdK RS-Momentum.

With the combination of a tail rotating (back) into leading from weakening AND a 71% outperformance in July, I believe things are looking good for Real Estate in the month to come.

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Julius de Kempenaer
Senior Technical Analyst,
Creator, Relative Rotation Graphs
Founder, RRG Research

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RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered trademarks of RRG Research.

Julius de Kempenaer
About the author: is the creator of Relative Rotation Graphs™. This unique method to visualize relative strength within a universe of securities was first launched on Bloomberg professional services terminals in January of 2011 and was released on in July of 2014. After graduating from the Dutch Royal Military Academy, Julius served in the Dutch Air Force in multiple officer ranks. He retired from the military as a captain in 1990 to enter the financial industry as a portfolio manager for Equity & Law (now part of AXA Investment Managers). Learn More
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