Key Momentum Shifts

  • Health Care (XHJ) remains the market's strongest leader, maintaining a dominant position within the Leading quadrant despite some moderation in momentum.
  • Financials (XFJ) continue to exhibit robust relative strength, remaining firmly in the Leading quadrant and reinforcing their leadership status.
  • Information Technology (XIJ) has entered the Improving quadrant, marking a significant improvement in relative momentum and signalling the potential beginning of a broader recovery.
  • Energy (XEJ) remains the strongest improving sector, continuing its powerful rotation from deep Lagging territory toward market leadership.
  • Technology (XTJ) continues to strengthen within Improving, reinforcing the sector's recovery trend after an extended period of underperformance.
  • Consumer Discretionary (XDJ), Consumer Staples (XSJ), Industrials (XNJ), and Communication Services (XPJ) remain in Weakening, reflecting slowing momentum despite maintaining varying degrees of relative strength.

The Relative Rotation Graph (RRG) for 8 July 2026 highlights a constructive evolution in ASX sector leadership. While Health Care and Financials continue to dominate from a relative-strength perspective, improving momentum across Information Technology, Technology, and Energy suggests that market leadership may broaden in the coming weeks. The most notable development is Information Technology's transition into the Improving quadrant, indicating that investor appetite for growth-oriented sectors is beginning to strengthen again.

ASX Sector Momentum Summary

ASX Sector Relative Momentum Chart (at the closing price of 08/07/2026). Powered by: amibroker.com

Momentum Breakdown by Quadrant

Leading Quadrant

  • Health Care (XHJ) remains the ASX's strongest sector from a relative-strength perspective. Although momentum has eased from recent highs, the sector continues to occupy a commanding position within the Leading quadrant. Its ability to remain well above both RRG benchmark axes reflects ongoing institutional demand for defensive growth businesses with resilient earnings profiles and strong long-term fundamentals.
  • Financials (XFJ) continue to demonstrate leadership characteristics. While recent momentum has softened slightly, relative strength remains firmly positive. The sector benefits from stable earnings expectations, attractive dividend yields, and sustained investor confidence in Australia's banking sector. Alongside Health Care, Financials continue to represent one of the market's most influential leadership groups.

Improving Quadrant

  • Energy (XEJ) remains one of the strongest momentum stories on the ASX. Having recovered from deep Lagging territory, the sector continues to move further into the Improving quadrant. The powerful north-east trajectory suggests increasing investor optimism toward energy and commodity-related opportunities. Energy now stands out as one of the most likely candidates to challenge existing market leaders.
  • Technology (XTJ) continues its constructive rotation within the Improving quadrant. The sector has steadily advanced over recent weeks, reflecting strengthening momentum following a prolonged period of underperformance. If current trends persist, Technology could eventually transition into the Leading quadrant and become a major source of market leadership.
  • Information Technology (XIJ) has entered the Improving quadrant, representing one of the most significant changes in the latest RRG. After spending an extended period in Lagging, the sector has successfully crossed above the momentum benchmark, indicating improving relative momentum. While relative strength remains below market leaders, the rotation suggests that investor interest in technology-related growth themes is beginning to recover. Continued improvement could pave the way for a future move toward leadership.

Weakening Quadrant

  • Consumer Discretionary (XDJ) remains within Weakening but continues to trade close to the Leading quadrant boundary. Relative strength remains healthy, while improving momentum suggests the sector could re-enter Leading if buying pressure persists. The sector's resilience reflects ongoing confidence in consumer-facing growth businesses.
  • Consumer Staples (XSJ) remain positioned within Weakening. Although relative strength remains above market averages, momentum has deteriorated compared with earlier leadership phases. Investors appear to be rotating capital toward sectors offering stronger growth potential.
  • Industrials (XNJ) also remain in Weakening. The sector sits near the centre of the RRG, indicating a relatively neutral outlook. While momentum has improved modestly, stronger relative-strength confirmation will be required before a more constructive trend can develop.
  • Communication Services (XPJ) has migrated into Weakening after previously residing in Lagging. This shift reflects improving relative strength and momentum. Although the sector has yet to establish leadership characteristics, its trajectory suggests investor sentiment is becoming increasingly constructive.

Lagging Quadrant

  • Utilities (XUJ) remain in Lagging despite a gradual improvement in momentum. The sector has not yet generated sufficient relative strength to escape the quadrant, although recent movement indicates underperformance may be stabilising.
  • Materials (XMJ) continue to struggle from a relative-performance perspective. While momentum has stabilised, the sector remains among the weakest areas of the market and requires sustained relative-strength improvement before a more positive outlook can be justified.
  • Real Estate (XJR) remains firmly within Lagging, reflecting ongoing weakness in relative performance. Although downside momentum has moderated, investors continue to favour alternative opportunities elsewhere in the market.

Strategic Summary

The latest RRG continues to confirm that Health Care (XHJ) and Financials (XFJ) remain the ASX's dominant leadership sectors, offering the strongest combination of relative strength and momentum.

However, the most significant development is the strengthening of the Improving quadrant. Energy (XEJ) and Technology (XTJ) continue to build positive momentum, while Information Technology (XIJ) has now entered Improving, signalling a potential recovery in growth-oriented sectors. These three sectors are emerging as the most compelling candidates to challenge the current leaders in the weeks ahead.

Meanwhile, Consumer Discretionary (XDJ), Consumer Staples (XSJ), Industrials (XNJ), and Communication Services (XPJ) remain in Weakening, while Utilities (XUJ), Materials (XMJ), and Real Estate (XJR) continue to occupy Lagging. Overall, the sector rotation picture remains constructive, with signs that market leadership could broaden beyond Health Care and Financials as improving sectors continue to strengthen.