Key Momentum Shifts

  • Financials Remain a Key Market Leader: Financials (XFJ) continue to hold a strong position within the Leading quadrant, supported by improving relative strength and renewed buying interest across the sector.
  • Health Care Strengthens Leadership: Health Care (XHJ) remains the strongest sector on the Relative Rotation Graph (RRG), advancing deeper into the Leading quadrant and reinforcing its status as the market's primary leadership group.
  • Utilities Rotate into Lagging: Utilities (XUJ) have moved from Improving into the Lagging quadrant, signalling that the sector's recovery attempt has lost momentum and relative strength.
  • Technology Emerges as the Sole Improving Sector: Information Technology (XTJ) remains firmly in the Improving quadrant and continues to display encouraging momentum characteristics.
  • Consumer and Industrial Sectors Continue to Weaken: Consumer Staples (XSJ), Consumer Discretionary (XDJ), Communication Services (XPJ), and Industrials (XNJ) remain in the Weakening quadrant, reflecting deteriorating momentum profiles.

The Relative Rotation Graph (RRG) for 2 July 2026 highlights an increasingly concentrated leadership structure within the ASX market. Health Care and Financials remain firmly positioned in the Leading quadrant, while Technology continues to improve. In contrast, Utilities have slipped back into Lagging, joining Materials, Real Estate, Energy, and Industrials among the market's weakest relative performers. Meanwhile, several consumer-oriented sectors remain trapped in the Weakening quadrant as investor capital continues to rotate toward sectors demonstrating stronger relative strength and momentum. Based on the style and structure of the reference article.

ASX Sector Momentum Summary

ASX Sector Relative Momentum Chart (at the closing price of 02/07/2026). Powered by: amibroker.com

Momentum Breakdown by Quadrant

The Leading Quadrant (The Market Leaders)

  • Health Care (XHJ) remains the strongest sector on the Relative Rotation Graph, maintaining a dominant position within the Leading quadrant. The sector continues to move north-east, indicating strengthening relative strength and momentum. Investors continue to favour Health Care's defensive earnings profile and long-term growth characteristics amid a mixed market environment.
  • Financials (XFJ) remain firmly established within the Leading quadrant and continue to exhibit positive relative strength. Although momentum has moderated slightly from recent highs, the sector's overall trend remains constructive. Given the sector's significant weighting within the ASX, continued leadership from Financials remains an important source of support for the broader market.

The Improving Quadrant (The Emerging Leadership Candidates)

  • Information Technology (XTJ) is now the only sector positioned within the Improving quadrant. The sector continues to rotate north-east, suggesting momentum is strengthening following a prolonged period of underperformance. If this trend continues, Technology could eventually challenge for a position within the Leading quadrant.
  • The sector's improving trajectory indicates that investors may be gradually rebuilding exposure to growth-oriented technology companies after an extended period of relative weakness.

The Weakening Quadrant (Losing Momentum)

  • Consumer Staples (XSJ) remain within the Weakening quadrant after recently rotating out of Leading. While relative strength remains above benchmark levels, momentum continues to deteriorate, increasing the risk of a future move into Lagging.
  • Consumer Discretionary (XDJ) remains in Weakening but has moved closer to the horizontal axis, suggesting the sector may be attempting to stabilise. Nevertheless, momentum remains below peak levels and investors appear increasingly selective toward consumer-related businesses.
  • Communication Services (XPJ) continue to drift south-west within the Weakening quadrant. The sector's trajectory suggests leadership characteristics continue to fade as capital rotates toward stronger-performing areas of the market.
  • Industrials (XNJ) remain trapped within Weakening and continue to lose momentum. The sector's declining trajectory suggests further relative underperformance remains a risk unless momentum improves materially.

The Lagging Quadrant (The Structural Underperformers)

  • Utilities (XUJ) have rotated from Improving into the Lagging quadrant. This represents one of the most notable changes on the latest RRG and suggests the sector's recovery attempt has stalled. Despite previous signs of improving momentum, relative strength remains insufficient to support sustained leadership.
  • Energy (XEJ) remains one of the weakest sectors on the chart. Although its trajectory has begun turning slightly north-east, the sector remains deeply embedded within Lagging and requires a sustained improvement in relative strength before a meaningful recovery can be confirmed.
  • Information Technology (XIJ) continues to occupy the Lagging quadrant and remains among the market's weakest relative performers. The sector's inability to generate sustained momentum continues to weigh on its relative outlook.
  • Materials (XMJ) remain positioned within Lagging, although recent movements suggest the sector may be stabilising. Continued improvement in momentum will be required before a transition toward Improving becomes possible.
  • Real Estate (XJR) also remains within Lagging despite some recent signs of stabilisation. Investors continue to favour sectors exhibiting stronger relative momentum profiles.

Strategic Summary

The latest RRG highlights a market where leadership is becoming increasingly concentrated in Health Care (XHJ) and Financials (XFJ). Both sectors remain firmly established in the Leading quadrant and continue to attract investor capital. Meanwhile, Information Technology (XTJ) stands out as the market's primary emerging leadership candidate, remaining the only sector within the Improving quadrant.

A significant development during the latest session is the rotation of Utilities (XUJ) into the Lagging quadrant, signalling a deterioration in both momentum and relative strength. At the same time, Consumer Staples (XSJ), Consumer Discretionary (XDJ), Communication Services (XPJ), and Industrials (XNJ) continue to lose momentum within Weakening. Overall, the RRG suggests investors remain highly selective, favouring sectors with proven relative strength while avoiding those exhibiting persistent momentum deterioration.