Key Momentum Shifts

  • Energy (XEJ) remains the only sector in the Leading quadrant, although its south-westerly trajectory indicates that relative momentum continues to moderate despite retaining market leadership.
  • Materials (XMJ), Real Estate (XJR), Utilities (XUJ), Consumer Discretionary (XPJ), and Technology (XTJ) continue to occupy the Improving quadrant, highlighting strengthening momentum across several cyclical and growth-oriented sectors.
  • Financials (XFJ) have rotated from Leading into the Weakening quadrant, signalling that although relative strength remains above average, momentum has begun to fade.
  • Health Care (XHJ) has rotated from Weakening into the Lagging quadrant, reflecting a further deterioration in both relative strength and momentum.
  • Consumer Staples (XDJ) remain in the Weakening quadrant, suggesting the sector continues to outperform the broader market on a relative basis, but its momentum continues to soften.
  • Information Technology (XIJ), Industrials (XNJ), Communication Services (XSJ), and Health Care (XHJ) now occupy the Lagging quadrant, highlighting persistent relative underperformance across these sectors.
  • The Improving quadrant remains the most populated, suggesting sector rotation continues to favour industries exhibiting strengthening relative momentum despite leadership becoming increasingly selective.

The latest Relative Rotation Graph (RRG) for 28 July 2026 indicates a further evolution in ASX sector rotation. Energy continues to lead the market on a relative basis, although its trajectory points to moderating momentum following an extended period of outperformance. Meanwhile, Materials, Real Estate, Utilities, Consumer Discretionary, and Technology remain firmly positioned within the Improving quadrant, reflecting strengthening relative momentum across several cyclical sectors. The most significant developments are Financials rotating into the Weakening quadrant and Health Care slipping further into Lagging, suggesting investors are becoming increasingly selective while continuing to favour sectors demonstrating improving momentum characteristics.

ASX Sector Relative Momentum Chart (at the closing price of 28/07/2026). Powered by: amibroker.com.

Momentum Breakdown by Quadrant

Leading Quadrant

  • Energy (XEJ) remains the sole sector in the Leading quadrant, continuing to exhibit the strongest relative strength versus the broader market. However, its south-westerly trajectory indicates that relative momentum continues to soften, suggesting its period of market leadership may be entering a more mature phase if current rotation persists.

Improving Quadrant

  • Materials (XMJ) remain firmly positioned within the Improving quadrant despite recent weakness in absolute price performance. The sector continues to display improving relative momentum, suggesting institutional investors remain constructive on mining and resource stocks over the medium term.
  • Real Estate (XJR) continues to strengthen within the Improving quadrant. Its north-easterly trajectory reinforces improving relative strength and suggests the sector remains well positioned to rotate into the Leading quadrant should current momentum persist.
  • Utilities (XUJ) remain in the Improving quadrant, maintaining constructive relative momentum despite subdued price performance. Continued defensive demand could support further strengthening in the sessions ahead.
  • Consumer Discretionary (XPJ) continues to reside within Improving, indicating sustained improvement in relative momentum as investor appetite for consumer-related companies gradually strengthens.
  • Technology (XTJ) remains within the Improving quadrant and continues to move closer towards the Leading quadrant. Its improving trajectory suggests investors are gradually rebuilding exposure to technology stocks following earlier periods of underperformance.

Weakening Quadrant

  • Financials (XFJ) have rotated from the Leading quadrant into Weakening, representing one of the most notable changes in the latest RRG. While the sector continues to demonstrate above-average relative strength, its south-westerly trajectory indicates momentum is fading as investors become more selective towards Australia's banking and financial stocks.
  • Consumer Staples (XDJ) remain in the Weakening quadrant. Although the sector continues to outperform the broader market on a relative basis, fading momentum suggests renewed buying interest will be required before leadership characteristics can re-emerge.

Lagging Quadrant

  • Health Care (XHJ) has rotated into the Lagging quadrant, confirming a further deterioration in both relative strength and momentum. The move suggests institutional investors continue reducing exposure to defensive healthcare companies.
  • Information Technology (XIJ) remains within the Lagging quadrant despite recent price improvements. Sustained gains in both relative strength and momentum will be required before the sector can rotate into Improving.
  • Industrials (XNJ) continue to exhibit persistent relative weakness within Lagging, indicating institutional investors remain underweight economically sensitive industrial companies.
  • Communication Services (XSJ) also remain in the Lagging quadrant, highlighting continued relative underperformance despite signs of stabilising momentum.

Strategic Summary

The latest Relative Rotation Graph indicates that Energy (XEJ) remains the Australian market's only leadership sector, although its weakening trajectory suggests momentum continues to moderate. More importantly, Financials (XFJ) have rotated into the Weakening quadrant, while Health Care (XHJ) has slipped further into Lagging, reflecting a narrowing group of leadership sectors. Meanwhile, Materials (XMJ), Real Estate (XJR), Utilities (XUJ), Consumer Discretionary (XPJ), and Technology (XTJ) continue strengthening within the Improving quadrant, positioning them as potential future market leaders if current momentum persists.

Overall, the latest sector rotation suggests investors continue reallocating capital towards sectors demonstrating strengthening relative momentum while reducing exposure to industries exhibiting deteriorating leadership characteristics.