Key Momentum Shifts

  • Energy (XEJ) and Technology (XTJ) now occupy the Leading quadrant, indicating both sectors exhibit above-average relative strength and positive momentum. Energy remains the strongest Market Leader , while Technology has completed a notable rotation into Leadership .
  • Materials (XMJ), Real Estate (XJR), Consumer Discretionary (XPJ), Industrials (XNJ), and Utilities (XUJ) remain in the Improving quadrant, highlighting continued strengthening in relative momentum across several cyclical sectors.
  • Financials (XFJ) remain in the Weakening quadrant, suggesting the sector continues to outperform the broader market but is gradually losing momentum.
  • Consumer Staples (XDJ) has rotated from Weakening into the Lagging quadrant, signalling a deterioration in both relative strength and momentum.
  • Health Care (XHJ), Information Technology (XIJ), and Communication Services (XSJ) continue to reside in the Lagging quadrant, reflecting persistent relative underperformance.
  • The Improving quadrant remains the most populated, reinforcing that sector rotation continues to favour industries experiencing strengthening relative momentum.
  • The most significant development is Technology's rotation into the Leading quadrant alongside Energy, while Industrials enters Improving and Consumer Staples slips into Lagging.

The latest Relative Rotation Graph (RRG) for 31 July 2026 shows further evolution in ASX sector leadership. Energy continues to dominate the market, while Technology has successfully rotated into the Leading quadrant, confirming a meaningful improvement in both relative strength and momentum. Meanwhile, Materials, Real Estate, Consumer Discretionary, Industrials, and Utilities continue to strengthen within the Improving quadrant, suggesting investors are steadily increasing exposure to cyclical sectors. In contrast, Financials remain in Weakening, while Consumer Staples has deteriorated into Lagging alongside Health Care, Information Technology, and Communication Services. Overall, the latest rotation indicates investor preference continues shifting towards sectors exhibiting improving momentum while reducing exposure to persistent laggards.

Momentum Breakdown by Quadrant

Leading Quadrant

  • Energy (XEJ) remains one of the market's strongest leaders, continuing to display superior relative strength despite its trajectory gradually flattening as momentum matures.
  • Technology (XTJ) has rotated into the Leading quadrant, representing the most significant development in the latest RRG. The move confirms strengthening relative strength and momentum, suggesting institutional investors have resumed accumulating technology stocks following an extended recovery period.

Improving Quadrant

  • Materials (XMJ) continue to strengthen within the Improving quadrant, reinforcing constructive momentum across Mining and resource companies. Should current momentum persist, the sector appears well positioned to rotate into Leading.
  • Real Estate (XJR) remains firmly established in Improving, with its positive trajectory suggesting investors continue increasing exposure to interest rate-sensitive property stocks.
  • Consumer Discretionary (XPJ) continues advancing within Improving, highlighting sustained improvements in investor sentiment towards consumer-related businesses.
  • Industrials (XNJ) have recently rotated into the Improving quadrant, indicating early signs of strengthening relative momentum after a prolonged period of underperformance.
  • Utilities (XUJ) remain within Improving and continue edging towards the Leading quadrant. The sector's steady trajectory suggests defensive Demand remains supportive despite relatively modest absolute price performance.

Weakening Quadrant

  • Financials (XFJ) remain the sole sector in the Weakening quadrant. While Australia's major banks continue to exhibit above-average relative strength, moderating momentum suggests institutional investors have become increasingly selective towards financial stocks.

Lagging Quadrant

  • Consumer Staples (XDJ) has rotated into the Lagging quadrant, representing a notable deterioration in relative performance. The move indicates that both relative strength and momentum have weakened, suggesting investors are reducing exposure to traditional defensive sectors.
  • Health Care (XHJ) remains deep within the Lagging quadrant and continues to be the weakest-performing sector on the RRG. Significant improvements in both momentum and relative strength will be required before a sustainable recovery can develop.
  • Information Technology (XIJ) continues to reside in Lagging despite showing gradual signs of stabilisation. Additional gains in relative momentum will be required before the sector can rotate into Improving.
  • Communication Services (XSJ) also remain within Lagging, although its recent trajectory suggests downside momentum has begun to moderate compared with previous weeks.

Strategic Summary

The latest Relative Rotation Graph indicates that Energy (XEJ) and Technology (XTJ) now occupy the Leading quadrant, highlighting their position as the market's strongest-performing sectors. More importantly, Materials (XMJ), Real Estate (XJR), Consumer Discretionary (XPJ), Industrials (XNJ), and Utilities (XUJ) continue strengthening within the Improving quadrant, reinforcing the ongoing rotation towards cyclical sectors exhibiting improving momentum.

Meanwhile, Financials (XFJ) remain in the Weakening quadrant, while Consumer Staples (XDJ) has deteriorated into Lagging, joining Health Care (XHJ), Information Technology (XIJ), and Communication Services (XSJ). Overall, the latest sector rotation suggests investors continue reallocating Capital towards industries demonstrating strengthening relative momentum while reducing exposure to sectors exhibiting persistent relative weakness.