Sector rotation on Reddit: how to tell which sectors lead
Sector rotation is money moving between sectors as the economy and rates change. Measure each sector ETF against the market, both its trend and its momentum. Sectors with a rising trend and rising momentum are leading; those losing momentum are weakening. Rotation describes what is happening now, not a forecast.
The four phases
Leading: outperforming the market and gaining. Weakening: still outperforming but losing momentum. Lagging: underperforming and losing. Improving: still underperforming but gaining momentum. Sectors tend to move around this cycle, though not on a schedule.
Using it without overreading it
Use rotation to choose where to look, then pick trades on their own charts. A sector can stay leading for months, and a jump between phases can reverse within weeks.
Questions
- Which ETFs track sectors?
- The 11 Select Sector SPDR funds are the usual set: XLK, XLF, XLE, XLV, XLY, XLP, XLI, XLB, XLU, XLRE and XLC.
- Does sector rotation predict the market?
- No. It shows where relative strength is now. It is context for choosing what to trade, not a timing signal.
- Where can I see sector rotation free?
- Obelion's Gyre plots all 11 sectors against SPY with their trails.
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For education only, not financial advice. See the disclaimer.