Guide

How to analyze sector rotation

A practical way to analyze sector rotation: pick a benchmark, plot relative strength and its speed, and read the four quadrants.

Analyzing sector rotation means comparing groups with a benchmark over time, not ranking last month's winners from a table. The chart on the Rotate homepage is built for that comparison. Here is the sequence that matches the picture.

1. Choose the market. India uses Nifty sector indexes against the NIFTY 50. The United States uses US market sectors against the S&P 500. Crypto uses coins against Bitcoin.
2. Keep the default weekly bars unless you have a reason to switch. Weekly data is what this RRG was tuned on. Daily and monthly are in Tune.
3. Read strength first. Strength is the horizontal axis. 100 is the benchmark. A point to the right has been stronger than the benchmark inside the lookback window. A point to the left has been weaker.
4. Read speed second. Speed is the vertical axis. Zero is the middle. Above zero, relative strength is speeding up. Below zero, it is slowing down.
5. Name the quadrant. Right and up is leading. Right and down is weakening. Left and down is lagging. Left and up is improving. The four quadrants are spelled out in RRG quadrants.
6. Press play. A single dot is a snapshot. The tail shows how that snapshot moved. A sector that has just crossed from improving into leading is a different story from one that has been leading for months and is turning down.

Tune is where you change the bar size, drop a sector from the set, or replace the sectors with specific stocks. The Kaufman lengths stay fixed so the picture stays the one described in how this RRG is calculated.

Two limits are worth keeping in mind. The chart uses the closes you can see, so a thin stock can draw a path you cannot trade in size. And a leading quadrant is a description of recent relative strength, not a forecast.