Sector rotation describes how capital cycles between different parts of the stock market at different points in the economic cycle. Understanding it helps traders fish in the right ponds.
Markets don't move as one monolithic block. At any given time, some sectors of the economy are accelerating while others are stalling. Capital rotates between them — flowing toward growth and away from weakness — in patterns that are partly cyclical and partly sentiment-driven.
The textbook sector rotation model links sector leadership to phases of the business cycle:
The most practical way to track rotation in real time is through relative strength (RS) scores — a measure of how a sector is performing versus a benchmark over a defined lookback period. A sector with an RS score of 80+ is outperforming most of the market. A sector at 20 has been badly trailing.
Trading Awareness displays 0-100 RS scores for all 11 SPDR sectors, updated daily, on the Leaders tab. The top four are highlighted so you can immediately identify where institutional money is rotating.
Capital also rotates between styles — between growth and value, between large-cap and small-cap. In strong risk-on environments, small-cap growth tends to lead. In risk-off or rate-sensitive environments, large-cap value often holds up better.
The Rotation tab shows style boxes (large/mid/small × growth/value) alongside sector cards, all scored 1-day, 1-month and year-to-date versus SPY.
Individual stock momentum tends to be stronger in leading sectors. A stock breaking out in a sector with a 90 RS score has a tailwind behind it; the same setup in a lagging sector has to fight the current.
Track market breadth, sector rotation, and leadership scores across 12,000+ US stocks — start your 14-day free trial, no credit card required.
Try it free →No credit card required · Cancel anytime