Key Momentum Shifts

  • Information Technology, Health Care, Materials and Real Estate Occupy the Leading Quadrant: Information Technology (XIJ), Health Care (XHJ), Materials (XMJ) and Real Estate (XJR) remain positioned in Leading, indicating relatively strong momentum and relative strength.
  • Telecommunications Remains Improving: Telecommunications (XTJ) is positioned in Improving, suggesting that relative momentum is recovering.
  • Consumer Discretionary Moves into Lagging: Consumer Discretionary (XPJ) has moved from Improving to Lagging, signalling a deterioration in relative momentum.
  • Financials Moves into Lagging: Financials (XFJ) has rotated from Weakening into Lagging, indicating that its momentum remains weak despite some stabilisation in its trajectory.
  • Energy Remains in Weakening: Energy (XEJ) is the only sector currently positioned in Weakening, indicating continued deterioration in relative momentum.
  • Six Sectors Remain Lagging: Utilities (XUJ), Industrials (XNJ), Consumer Staples (XDJ), Communication Services (XSJ), Consumer Discretionary (XPJ) and Financials (XFJ) occupy the Lagging quadrant, highlighting a broad concentration of weaker momentum.

The latest Relative Rotation Graph (RRG) for 12 August 2026 indicates that sector rotation across the Australian Equity market has become more defensive and selective. Information Technology (XIJ), Health Care (XHJ), Materials (XMJ) and Real Estate (XJR) remain in the Leading quadrant, maintaining their positions as the primary sources of relative strength.

At the same time, Telecommunications (XTJ) is positioned in Improving, while Energy (XEJ) remains in Weakening. Consumer Discretionary (XPJ) and Financials (XFJ) have both moved into Lagging, increasing the number of sectors in the weakest quadrant from the previous positioning. This deterioration in the RRG structure suggests that market Leadership remains concentrated despite strong individual daily performances in some sectors. The attached RRG chart shows the latest sector trajectories and quadrant positioning.

Momentum Breakdown by Quadrant

ASX Sector Relative Momentum Chart (at the closing price of 12/08/2026). Powered by: amibroker.com.

Leading Quadrant

  • Information Technology (XIJ) remains in the Leading quadrant, indicating strong relative momentum and favourable positioning within the current sector rotation. Its position near the upper-right area of the RRG highlights continued relative strength.
  • Health Care (XHJ) is also positioned in Leading, reflecting a strong relative momentum profile and continued improvement in sector leadership.
  • Materials (XMJ) remains in Leading, supported by positive relative momentum and sustained strength among resource-related stocks.
  • Real Estate (XJR) continues to occupy Leading, indicating that property-related equities retain relatively strong momentum.

The presence of four sectors in Leading indicates that Technology, Health Care, Materials and Real Estate remain the principal sources of relative strength in the Australian equity market. Compared with the previous RRG positioning, Health Care has strengthened sufficiently to join the Leading group, making the sector an important area of current leadership.

Improving Quadrant

  • Telecommunications (XTJ) is positioned in Improving, indicating that its relative momentum is recovering and that the sector is moving towards a potentially stronger position within the rotation cycle.

The Improving quadrant has become narrower, with Telecommunications now the only sector positioned in this area. This is significant because Consumer Discretionary (XPJ), which was previously in Improving, has now moved into Lagging. The shift suggests that the improvement in broader market participation remains limited and that investors continue to favour a relatively small group of stronger sectors.

Weakening Quadrant

  • Energy (XEJ) remains in the Weakening quadrant, indicating continued deterioration in relative momentum.
  • Energy's position is particularly important because the sector recorded a 2.64% gain in the latest session, the strongest daily performance among all 12 sectors.

The divergence between Energy's strong one-day performance and its Weakening RRG position demonstrates why short-term price performance can differ significantly from broader relative momentum. A sustained improvement in its RRG trajectory would provide stronger confirmation that the sector is undergoing a more meaningful recovery rather than simply experiencing a short-term rebound.

Lagging Quadrant

  • Utilities (XUJ) remains in Lagging despite recording a strong 2.64% gain, highlighting the difference between recent price performance and broader relative momentum.
  • Industrials (XNJ) remains in Lagging, reflecting continued relative weakness.
  • Communication Services (XSJ) is also in Lagging following a 0.76% decline.
  • Consumer Staples (XDJ) remains in Lagging after falling 0.81%.
  • Consumer Discretionary (XPJ) has moved from Improving into Lagging after declining 1.02%, marking a clear deterioration in its relative momentum.
  • Financials (XFJ) has moved from Weakening into Lagging following a 0.59% decline. While this represents a change in quadrant, Financials remains within the weaker portion of the RRG.

The expansion to six sectors in Lagging represents a significant deterioration in overall market breadth. The movement of Consumer Discretionary from Improving to Lagging is particularly notable because it removes one of the sectors that had previously been showing signs of improving relative momentum. Financials also remains an area requiring close monitoring after its rotation from Weakening into Lagging.

Strategic Summary

The latest Relative Rotation Graph highlights a more concentrated sector leadership structure across the Australian equity market. Information Technology (XIJ), Health Care (XHJ), Materials (XMJ) and Real Estate (XJR) occupy the Leading quadrant, making them the primary sources of relative strength.

Telecommunications (XTJ) is the only sector in Improving, while Energy (XEJ) remains in Weakening. The most important changes are the rotations of Consumer Discretionary (XPJ) from Improving to Lagging and Financials (XFJ) from Weakening to Lagging. These movements indicate that relative momentum has deteriorated across a wider portion of the market.

The contrast between the RRG positioning and daily sector performance is also important. Utilities gained 2.64% and Energy rose 2.64%, yet both remain outside the Leading quadrant. This reinforces the importance of distinguishing between short-term price movements and broader relative momentum.

Overall, the RRG suggests that Information Technology, Health Care, Materials and Real Estate currently provide the strongest relative leadership, while Telecommunications is the key sector showing improving momentum. A rotation of sectors such as Consumer Discretionary, Financials or Energy back towards Improving would provide stronger evidence of a broadening market recovery. Until then, the concentration of six sectors in Lagging indicates that sector momentum remains selective and uneven.