The Sector Rotation Manual

Research note. A topic Manual — one subject, several gauges. Every figure computed at render from our sector, country and crypto ETF data — the same files behind the live Sector Health dashboard. Methods in How we checked it; editorial standards in How we use AI.

What is sector rotation?

A flat index can hide a violent rotation. The S&P can go nowhere for a month while money quietly pours out of one group of stocks and into another — and that rotation usually tells you more about what the market believes than the index level does. Because the eleven US sectors behave differently across the cycle — cyclicals lead when growth is accelerating, defensives when it's slowing — reading rotation is reading where the money is moving, and whether enough of it is moving for the move to be trusted.

Today's leaders & laggards

As of 2026-08-05, sector health reads 86/100 (Healthy) with 91% of sectors above their 50-day average. Today's leadership character: mixed — no clean tilt either way.

The three reads — in order

Read 1 — Participation: how broad is the rotation? Sector health scores how many of the eleven US sectors are in uptrends. A rotation backed by broad participation is durable; one where the score sags while the index holds is narrowing — fewer blocks carrying it.

Read 2 — Relative strength: where is the money going? Sector relative strength ranks each sector against the S&P 500 — and the character of leadership is the signal. Cyclicals leading is a vote for growth; defensives leading is the market bracing.

Read 3 — The map: see leadership at a glance. Sector performance and the market heatmap show the leadership picture across timeframes, and the XLK dashboard drills into the sector that most often drives the index.

Cyclical vs defensive leadership — the cycle map

The eleven sectors split roughly into three camps. Which one is on top is the rotation's real message — and leadership often rotates before the index turns.

Sector-health bands

The health score (0–100) compresses participation into one number. Today's band is marked.

Global & crypto — the secondary reads, on purpose

The same three-read framework extends past US sectors — and we keep these clearly secondary, because US sector leadership is the cleanest cycle signal. Abroad, country trend health and country relative strength rank 32 single-country markets against the all-world index, and country performance shows where global capital is winning. In crypto, the same relative-strength lens against the Bitwise 10 index reads the risk-appetite frontier. Use these to confirm or question the US picture, never to replace it.

The reading routine

• If health is high but leadership is narrow, count how many sectors are actually carrying it — a top-heavy advance is fragile.
• If defensives are leading, check whether it's a multi-week trend or a single-day flight — one risk-off session isn't a regime.
• If a sector is ripping today, check its relative-strength trend before chasing — one day is noise.
• Cross-check rotation against breadth and the credit read — defensive leadership plus widening credit is a stronger warning than either alone.
• Match the read to your horizon: today's board and short-horizon RS for swings; health + the RS ranking for weeks-to-months; the cyclical-defensive tilt and country rotation for cycle-level positioning.

Where rotation will mislead you

• Defensive leadership can be temporary. A week of utilities outperforming during a wobble is not a late-cycle rotation. Persistence is the tell.
• One big day distorts the ranking. A sector can top today's board on a single earnings or commodity move — the relative-strength trend matters more than one session.
• Narrow leadership can persist. An index carried by one sector can keep rising long before the missing breadth matters — fragility is a condition, not a countdown.
• Sector ETFs are cap-weighted. A handful of mega-caps can drive a sector's reading, so the ETF's move may not reflect the median stock.
• It says nothing about why. Rotation shows where money is going, not the macro reason — pair it with the Economy data and the risk complex. And when leadership narrows into tech, the Bubble Tracker's concentration gauge tells you whether that narrowness is also historically expensive.

How we checked it

Sector reads are computed daily from the eleven GICS sector ETFs — each placed by its actual distance from its 50- and 200-day moving averages, aggregated into the health score, with leaders and laggards ranked by daily change and classed cyclical/defensive/rate-commodity. Country reads use 32 single-country MSCI ETFs benchmarked to ACWI; crypto uses the single-coin spot ETFs benchmarked to the Bitwise 10. Today's leadership character is the majority class of the top three movers. Everything on this page recomputes at render from the same file the dashboard charts.

Frequently asked questions