Key Momentum Shifts

  • Health Care (XHJ) remains the market's strongest leader, continuing to hold a dominant position within the Leading quadrant despite a gradual loss of momentum.
  • Financials (XFJ) remain in the Leading quadrant, although their rotational path continues to soften compared with recent weeks.
  • Energy (XEJ) remains the strongest Improving sector, extending its powerful recovery trajectory and moving closer to market leadership.
  • Information Technology (XIJ) continues to strengthen within Improving, maintaining one of the most constructive momentum profiles on the ASX.
  • Technology (XTJ) remains firmly in Improving, with momentum stabilising after a strong recovery from earlier weakness.
  • Real Estate (XJR) and Materials (XMJ) show notable momentum improvement within Lagging, suggesting downside relative performance is beginning to moderate.
  • Consumer Discretionary (XDJ) and Consumer Staples (XSJ) remain in Weakening, with both sectors continuing to lose relative momentum.

The Relative Rotation Graph (RRG) for 10 July 2026 continues to highlight a market characterised by stable leadership and improving breadth beneath the surface. While Health Care and Financials remain the dominant leadership sectors, Energy and Technology-related sectors continue to strengthen and appear increasingly capable of challenging the current leaders. Meanwhile, several Lagging sectors, particularly Materials and Real Estate, are beginning to show signs of recovery despite remaining below market-relative strength benchmarks. This evolving rotational structure suggests investors are gradually broadening exposure beyond the traditional leadership groups.

ASX Sector Momentum Summary

Momentum Breakdown by Quadrant

Leading Quadrant

  • Health Care (XHJ) remains the strongest sector on the ASX from a relative-strength perspective. Although momentum has moderated from recent peaks, the sector continues to occupy a commanding position within the Leading quadrant. The combination of strong relative strength and positive momentum suggests investors remain committed to defensive growth opportunities supported by resilient earnings and favourable long-term fundamentals.
  • Financials (XFJ) continue to demonstrate leadership characteristics despite a gradual loss of momentum. Relative strength remains firmly above market averages, supported by confidence in Australia's banking sector, attractive dividend yields, and stable earnings expectations. While the rotational trend has softened, Financials remain one of the market's key leadership groups.

Improving Quadrant

  • Energy (XEJ) remains the strongest momentum story on the ASX. The sector continues its impressive north-east rotation after recovering from deep Lagging territory earlier in the year. The sustained improvement reflects growing investor confidence in energy and commodity-related opportunities. If current momentum persists, Energy remains one of the sectors most likely to enter the Leading quadrant in the near term.
  • Information Technology (XIJ) continues its powerful recovery within the Improving quadrant. The sector remains one of the strongest positive rotational trends on the chart, signalling renewed investor appetite for growth-oriented investments. Continued improvement in relative strength may allow the sector to challenge the current leadership group over the coming weeks.
  • Technology (XTJ) remains firmly positioned in Improving. Although momentum gains have become more measured, the sector continues to display constructive rotational behaviour. The steady recovery suggests investors are gradually rebuilding exposure to technology shares following a prolonged period of relative underperformance.

Weakening Quadrant

  • Consumer Discretionary (XDJ) remains within Weakening and continues to trade near the boundary separating Weakening and Leading. Relative strength remains favourable, but declining momentum indicates investors have become more selective toward consumer-related opportunities. A renewed improvement in momentum would be required for the sector to re-enter leadership.
  • Consumer Staples (XSJ) remain in Weakening and continue to drift lower within the quadrant. While relative strength remains above average, capital appears to be rotating toward sectors exhibiting stronger momentum characteristics, limiting near-term leadership potential.
  • Industrials (XNJ) continue to occupy a neutral position within Weakening. The sector has stabilised in recent sessions, but stronger evidence of improving relative strength will be required before a more constructive outlook can emerge.

Lagging Quadrant

  • Communication Services (XPJ) remains in Lagging after recently deteriorating from Weakening. Although momentum has stabilised somewhat, both relative strength and momentum remain below market averages. The sector will need to sustain a positive rotational trend before investors regain confidence.
  • Utilities (XUJ) remain in Lagging but continue to rotate steadily toward the Improving quadrant. The sector's north-east trajectory suggests relative underperformance is moderating and that a more constructive phase may be developing.
  • Real Estate (XJR) remains in Lagging; however, the latest rotation shows a meaningful improvement in momentum. The sector's trajectory indicates downside pressure has eased considerably, and continued improvement could eventually lead to a transition toward the Improving quadrant.
  • Materials (XMJ) remain in Lagging but are showing encouraging signs of recovery. Following an extended period of underperformance, the sector's recent rotational behaviour suggests investors are becoming more willing to revisit resource-related opportunities. While relative strength remains weak, momentum is beginning to stabilise.

Strategic Summary

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

However, the most significant development remains the continued strengthening of the Improving quadrant. Energy (XEJ), Information Technology (XIJ), and Technology (XTJ) continue to exhibit the most constructive rotational characteristics and remain the sectors best positioned to challenge the existing leaders in the coming weeks.

Meanwhile, although Communication Services (XPJ), Utilities (XUJ), Real Estate (XJR), and Materials (XMJ) remain in Lagging, the latter two sectors are showing increasingly encouraging signs of recovery. Overall, the sector rotation picture remains constructive, with leadership gradually broadening beyond the traditional defensive sectors as Energy and Technology continue to gain momentum while several previously weak sectors begin to stabilise.