Guide · Sector rotation
How to read a sector rotation map
A sector rotation map shows which parts of the stock market are beating the S&P 500 and which are falling behind, and whether each one is gaining or losing ground.
This guide explains how to read the MomoEdge weekly map, published every Saturday morning.
The map, piece by piece
What each dot is
Each dot is one sector fund measured against the S&P 500 (SPY) at the week's last close. The map shows the 11 SPDR sector funds plus XRT for retail.
The two axes
Left to right is RS-Ratio: a sector's price ratio to the S&P 500 against its own average over the last 60 sessions. Right of 100, its relative strength is above that average; left of 100, below it.
Bottom to top is RS-Momentum: the 10-session change in RS-Ratio against its own average over the last 60 sessions. Above 100, relative strength is gaining faster than usual; below 100, it is fading.
The four quadrants
- Leading stronger than the S&P 500 and still gaining.
- Weakening still stronger, but losing pace.
- Lagging weaker, and still losing ground.
- Improving still weaker, but gaining.
The tails
Point at a dot to draw its tail: a line through its last four weekly closes, so it shows where the sector came from. A long tail is a fast move; a short one means the sector barely moved against the index that week.
The usual path
Sectors tend to travel clockwise: Improving, then Leading, then Weakening, then Lagging. A sector can turn back or skip a quadrant, so the path is a tendency, not a rule.
How the numbers are made
RS-Ratio is 100 plus how many standard deviations a sector's price ratio to SPY sits from its own 60-session average. RS-Momentum is 100 plus the same measure for the 10-session change in RS-Ratio.
What it is not
The map describes where relative strength has been, not where it will go. It is not a forecast and not a trade signal.
Using the weekly map
- Start with the four quadrants: which sectors lead, which lag, and how many sit on each side of 100.
- Then look at what changed: the crossings list names every sector that moved into a new quadrant since the week before.
- Then point at a dot to see its tail, and compare the week with the ones before it in the archive.
See the rotation move every day in MomoEdge
MomoEdge is the analytics engine built to make better traders. Its Pulse dashboard redraws this map through every session, with each sector's path, the sector strip and the market map. MomoEdge Premium is $150/month. Join the waitlist. When your spot opens, your first 7 days are free.
Free weekly market recap
The sector map, the $10K account week and one guide. Unsubscribe anytime.
Educational content, not financial advice.