Key Momentum Shifts

  • Energy (XEJ) remains firmly in the Leading quadrant and continues to exhibit the strongest combination of relative strength and momentum across the ASX.
  • Financials (XFJ) remain in the Leading quadrant, although momentum continues to soften, suggesting leadership is gradually moderating.
  • Communication Services (XPJ) has rotated into the Improving quadrant, signalling strengthening relative momentum after an extended period of underperformance.
  • Materials (XMJ), Real Estate (XJR), Utilities (XUJ), and Technology (XTJ) remain in Improving, reinforcing the constructive outlook for several cyclical and growth-oriented sectors.
  • Consumer Staples (XSJ) has rotated into the Lagging quadrant, reflecting further deterioration in both relative strength and momentum.
  • Consumer Discretionary (XDJ) and Health Care (XHJ) remain in Weakening, with momentum continuing to fade despite still maintaining above-average relative strength.
  • Information Technology (XIJ) and Industrials (XNJ) continue to reside in Lagging, indicating persistent relative underperformance.

The latest Relative Rotation Graph (RRG) for 23 July 2026 highlights another important shift in ASX sector leadership. Energy continues to dominate the Leading quadrant, while Financials remain leaders despite gradually weakening momentum. Meanwhile, Communication Services has successfully rotated into the Improving quadrant alongside Materials, Real Estate, Utilities, and Technology, suggesting that market leadership is gradually broadening. In contrast, Consumer Staples has slipped into Lagging, joining Information Technology and Industrials as the weakest relative performers. Overall, sector rotation continues to favour sectors demonstrating strengthening momentum while investors reduce exposure to areas exhibiting persistent relative weakness.

ASX Sector Relative Momentum Chart

ASX Sector Relative Momentum Chart (at the closing price of 23/07/2026). Powered by: amibroker.com.

Momentum Breakdown by Quadrant

Leading Quadrant

  • Energy (XEJ) remains the strongest momentum sector on the ASX. Its position deep within the Leading quadrant continues to confirm robust relative strength and sustained momentum, indicating that institutional investors remain committed to energy-related companies. Although the sector's trajectory has started to flatten slightly, it continues to dominate overall market leadership.
  • Financials (XFJ) continue to reside within the Leading quadrant. However, the sector's south-westerly rotation indicates that momentum is gradually fading, although relative strength remains above the broader market. Financials continue to provide an important source of market leadership despite the moderation in momentum.

Improving Quadrant

  • Communication Services (XPJ) has rotated into the Improving quadrant after spending an extended period in Lagging. The move signals strengthening relative momentum and suggests investors are gradually rebuilding exposure to communication-related companies. If this trajectory continues, the sector could emerge as a future market leader.
  • Materials (XMJ) remain firmly positioned within the Improving quadrant following their recent rotation out of Lagging. Continued improvement in both momentum and relative strength suggests investor confidence in resource-related companies is steadily increasing.
  • Real Estate (XJR) continues to strengthen within the Improving quadrant. Its constructive north-easterly trajectory reflects improving investor sentiment toward property-related companies and indicates that institutional capital continues to rotate into the sector.
  • Utilities (XUJ) remain firmly within the Improving quadrant and continue exhibiting strengthening momentum. The sector remains well positioned to challenge for Leadership should its current momentum persist over the coming weeks.
  • Technology (XTJ) continues to reside in the Improving quadrant. Although its upward trajectory has moderated slightly, the sector continues to exhibit improving relative momentum and remains one of the stronger growth-oriented industries on the ASX.

Weakening Quadrant

  • Consumer Discretionary (XDJ) remains within the Weakening quadrant. Although relative strength continues to outperform weaker sectors, declining momentum suggests investors are becoming increasingly selective toward consumer-related companies.
  • Health Care (XHJ) continues to occupy the Weakening quadrant and remains one of the weakest sectors on the Relative Rotation Graph. Both momentum and relative strength continue to deteriorate, reflecting ongoing investor preference for cyclical industries over defensive healthcare stocks.

Lagging Quadrant

  • Consumer Staples (XSJ) has rotated into the Lagging quadrant after previously residing in Weakening. The move indicates that both relative strength and momentum have deteriorated further, suggesting defensive consumer stocks remain out of favour.
  • Information Technology (XIJ) remains firmly within the Lagging quadrant. Despite experiencing periods of volatility in recent sessions, the sector continues to underperform the broader market and has yet to demonstrate a sustained recovery in relative momentum.
  • Industrials (XNJ) continue to reside in the Lagging quadrant, reflecting persistent relative weakness. Although downside momentum has stabilised somewhat, additional improvement in relative strength will be required before the sector can rotate into Improving.

Strategic Summary

The latest Relative Rotation Graph confirms that Energy (XEJ) remains the dominant leadership sector on the ASX, supported by exceptional relative strength and sustained momentum. Financials (XFJ) continue to lead the market despite gradually weakening momentum. Meanwhile, Communication Services (XPJ) has joined Materials (XMJ), Real Estate (XJR), Utilities (XUJ), and Technology (XTJ) in the Improving quadrant, reinforcing the view that market leadership is becoming increasingly broad-based.

Conversely, Consumer Staples (XSJ) has slipped into the Lagging quadrant alongside Information Technology (XIJ) and Industrials (XNJ), while Consumer Discretionary (XDJ) and Health Care (XHJ) remain in Weakening as momentum continues to fade. Overall, the latest sector rotation suggests investors continue favouring sectors with strengthening relative momentum while reducing exposure to industries exhibiting deteriorating leadership characteristics.