Key Momentum Shifts

  • Health Care (XHJ) remains the dominant market leader, holding a strong position within the Leading quadrant despite a modest decline in momentum.
  • Financials (XFJ) continue to outperform, remaining firmly in Leading and maintaining one of the strongest relative-strength profiles on the ASX.
  • Technology (XTJ) and Energy (XEJ) remain the most promising recovery candidates, both positioned within the Improving quadrant and moving closer to market leadership.
  • Consumer Discretionary (XDJ), Consumer Staples (XSJ), and Industrials (XNJ) remain in Weakening, reflecting fading momentum despite retaining above-average relative strength.
  • Communication Services (XPJ) and Utilities (XUJ) remain in Lagging, although both sectors are showing improving momentum and are gradually moving toward more constructive positions.
  • Materials (XMJ), Real Estate (XJR), and Information Technology (XIJ) continue to lag, with relative strength remaining weak despite occasional short-term rallies.

The Relative Rotation Graph (RRG) for 7 July 2026 highlights an evolving sector rotation landscape across the Australian market. While Health Care and Financials continue to dominate from a relative-strength perspective, improving momentum in Technology and Energy suggests that leadership may broaden in coming weeks. Meanwhile, several sectors remain trapped in Lagging despite signs of stabilization, indicating that investors continue to favour proven leaders while selectively accumulating emerging opportunities.

ASX Sector Momentum Summary

ASX Sector Relative Momentum Chart (at the closing price of 07/07/2026). 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 slightly from recent peaks, the sector continues to occupy a dominant position within the Leading quadrant. The ability to remain well above both RRG benchmark axes reflects ongoing institutional demand for defensive growth businesses with resilient earnings and strong long-term fundamentals.
  • Financials (XFJ) continue to demonstrate robust leadership characteristics. While recent momentum has softened marginally, relative strength remains firmly positive. The sector benefits from stable earnings expectations, attractive dividend yields, and continued investor confidence in Australia's banking sector. Together, Health Care and Financials remain the market's most influential leadership groups.

Improving Quadrant

  • Technology (XTJ) continues its constructive rotation through the Improving quadrant. The sector has steadily advanced north-east over recent weeks, indicating strengthening momentum following a prolonged period of underperformance. If current trends persist, Technology could soon challenge for entry into the Leading quadrant and emerge as one of the market's next major leadership themes.
  • Energy (XEJ) represents one of the most significant momentum improvements on the chart. Having recovered from deep Lagging territory, the sector has successfully transitioned into Improving and continues to build positive momentum. This rotation suggests investors are becoming increasingly optimistic toward resource and energy-related opportunities. Energy now stands alongside Technology as one of the strongest candidates for future leadership.

Weakening Quadrant

  • Consumer Discretionary (XDJ) remains within Weakening but continues to move higher within the quadrant. Relative strength remains above market averages, while improving momentum suggests the sector may eventually re-enter Leading if buying pressure persists. The sector's resilience reflects ongoing confidence in consumer-facing growth businesses.
  • Consumer Staples (XSJ) remain positioned in Weakening. Although relative strength remains positive, momentum has deteriorated noticeably compared with earlier leadership phases. Investors appear to be rotating capital toward sectors offering stronger growth prospects.
  • Industrials (XNJ) also remain in Weakening. The sector is positioned near the centre of the RRG, indicating a relatively neutral outlook. While momentum has improved recently, stronger relative-strength confirmation will be needed before a more constructive trend can develop.

Lagging Quadrant

  • Communication Services (XPJ) remains in Lagging but is displaying one of the strongest positive momentum trajectories among lagging sectors. The upward rotation suggests selling pressure is fading, and the sector may be preparing for a move into Improving if current trends continue.
  • Utilities (XUJ) remain in Lagging despite a gradual improvement in momentum. The sector has not yet generated sufficient relative strength to escape the quadrant, but recent movement indicates that the worst of its underperformance may be behind it.
  • Materials (XMJ) continue to struggle from a relative-performance perspective. Although momentum has stabilised, the sector remains one of the weakest areas of the market and requires a sustained improvement in relative strength before a more positive outlook can be justified.
  • Real Estate (XJR) remains firmly in Lagging, reflecting continued weakness in relative performance. While downside momentum has moderated, investors remain cautious toward property-related stocks compared with other opportunities available across the market.
  • Information Technology (XIJ) remains trapped in Lagging despite delivering the strongest daily sector gain of 2.01%. The divergence between short-term price performance and longer-term relative strength suggests the sector is still in the early stages of a potential recovery rather than a confirmed leadership trend.

Strategic Summary

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

At the same time, Technology (XTJ) and Energy (XEJ) have become the market's most compelling emerging opportunities. Their positions within the Improving quadrant indicate strengthening momentum and increasing investor interest, making them the sectors most likely to challenge existing leaders in the weeks ahead.

Meanwhile, Consumer Discretionary (XDJ), Consumer Staples (XSJ), and Industrials (XNJ) remain in Weakening, while Communication Services (XPJ) and Utilities (XUJ) are showing encouraging momentum improvements despite remaining in Lagging. Overall, the sector rotation picture remains constructive, with signs that market leadership could broaden beyond its current concentration in Health Care and Financials if improving sectors continue their positive trajectories.