September 30, 2023



  • Three Sectors Are Able to Rotate Again In direction of the Main Quadrant
  • Expertise, Discretionary, and Communication Companies Collectively Are Virtually Half Of Complete Market Cap
  • Each day Tails for these sectors are supporting the looming constructive rotation for his or her weekly counterparts

To begin with, for many who are awaiting a brand new episode of Sector Highlight, I’ve simply arrived on the workplace in Redmond, WA, and the airline didn’t enable me to document a video whereas within the air 😉

I’m going to attempt to squeeze a recent episode of SSL on this week, however I am undecided which day will probably be, so keep tuned. I will probably be becoming a member of Dave Keller on The Ultimate Bar on Wednesday the thirteenth. I may also be recording a brand new episode of Charting Ahead this week along with Tom Bowley, Mish Schneider, and Dave internet hosting. So loads of studio time forward for me.

Weekly Sector Rotation

The Relative Rotation Graph at first of this week reveals three essential sectors contained in the weakening quadrant: Client Discretionary (11%), Expertise (28%), and Communication Companies (8%). Collectively, these sectors signify 47% of the entire market capitalization of the S&P 500.

All three have gone by a relative setback during the last 5-10 weeks, however, taking a look at their present tails, it looks like they’re leveling off when it comes to JdK RS-Momentum with sufficient room left contained in the weakening quadrant to curve again up and begin a brand new rotation in direction of main.

Each day Rotation

Zooming in on the every day model of this RRG reveals that each one three of those sectors are enhancing quickly in the meanwhile. XLK is already effectively contained in the main quadrant and nonetheless transferring greater on the RS-Ratio scale whereas barely dropping some relative momentum. XLY has simply crossed into the main quadrant and began to speed up. This may be concluded from the rising distance between the nodes on the RRG-Tail (RRG-Velocity). The weekly tail on XLY wants probably the most work, as it’s nonetheless on a detrimental RRG-Heading, however this speedy enchancment on the every day is encouraging.

Lastly, there’s XLC. On the every day RRG, the tail turned again up aggressively within the final week and that enchancment is now accelerating, leading to a better RRG-Velocity as effectively identical to XLY. This flip ought to gasoline the additional enchancment for XLC on the weekly RRG.

Data Expertise

Since mid-June, XLK has been testing the realm across the all-time excessive, which was set again in 2021, however, to date, there has not been a transparent upward break. Nevertheless, the upward pattern popping out of the 2022 low remains to be absolutely intact, and the market examined and confirmed this rising channel just a few weeks again with a brand new greater low. All in all, issues are nonetheless wanting good from a value perspective. An increase above 180 can be the ultimate affirmation and, most probably, the set off for a brand new acceleration greater.

Relative power moved sideways after its preliminary break above the late-2021 excessive. In consequence, each RRG-Strains dropped again with RS-Momentum sinking beneath 100, pushing the tail into the weakening quadrant. A continued enchancment of relative power on the every day time-frame will probably be wanted to gasoline this enchancment on the weekly RRG and actually push issues ahead upward.

Client Discretionary

On the worth chart of XLY, a rising channel is beginning to grow to be an increasing number of seen. The rising assist line rising out of the late 2022 low simply obtained extra dependable with a brand new contact level just a few weeks in the past. There may be some medium resistance to be anticipated across the degree of the newest excessive, simply shy of 178. As soon as that may be taken out, extra essential resistance will are available in sight round 187.50. All in all, the outlook for value is fairly good.

The relative power chart reveals a pleasant re-test of previous resistance as assist when the newest low was put into place on the degree of the February relative excessive. On this weekly chart, the RRG strains are dropping a little bit of floor. However issues appear to be turning round quickly on the every day chart.

Communication Companies

Out of the three talked about sectors, XLC has already began its rotation again up towards the main quadrant.

On the worth chart, XLC continues to maneuver properly contained in the boundaries of the rising channel that emerged out of the October 2022 low. The current new greater low as soon as once more confirmed the validity of this channel.

Overhead resistance is now coming in round 70, the place a horizontal degree is lining up over the highs of March 2022 and July 2023 and two minor lows again in 2021. When the market can take out that barrier, one other acceleration throughout the rising pattern could also be anticipated. The following goal space is discovered close to 72.50.

The rise in relative power has slowed down barely, however the pattern remains to be up. This slowdown induced the RRG-Strains to dip barely, however, with RS-Momentum already again on the rise, issues are shaping up for a renewed relative rally in XLC within the coming weeks.

With three essential sectors, XLK, XLY, and XLC, prepared to show again up contained in the weakening quadrant, issues appear to be shaping up positively for the market as an entire.

#StayAkert, –Julius

Julius de Kempenaer
Senior Technical Analyst,
Creator, Relative Rotation Graphs
Founder, RRG Research
Host of: Sector Spotlight

Please discover my handles for social media channels beneath the Bio beneath.

Suggestions, feedback or questions are welcome at [email protected]. I can not promise to answer every message, however I’ll actually learn them and, the place moderately doable, use the suggestions and feedback or reply questions.

To debate RRG with me on S.C.A.N., tag me utilizing the deal with Julius_RRG.

RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered logos of RRG Analysis.

Julius de Kempenaer

Concerning the writer:
Julius de Kempenaer is the creator of Relative Rotation Graphs™. This distinctive technique to visualise relative power inside a universe of securities was first launched on Bloomberg skilled companies terminals in January of 2011 and was launched on in July of 2014.

After graduating from the Dutch Royal Navy Academy, Julius served within the Dutch Air Power in a number of officer ranks. He retired from the navy as a captain in 1990 to enter the monetary business as a portfolio supervisor for Fairness & Legislation (now a part of AXA Funding Managers).
Be taught Extra