 Hello traders at CMC Markets. Welcome to a new update by RRG Research. My name is Julius de Campanar and I am presenting to you from Amsterdam in the Netherlands. This is the weekly update that we usually do and I'm going to take a little different approach because my partner and colleague Trevor Neal has done a few videos on Forex and US Indie Shess This week so for the weekly update I want to take a look at the rotation in US sectors We haven't done that in a while and it's always interesting to look at rotation in US markets using RRG's of course So what we start with is to RRG side by side on the left hand side We have the weekly RRG and on the right hand side We have the daily and I'm using the the sector ETS because these are very tradable Instruments in the US markets We look at the longer term rotation on the left hand side There is a very clear split between consumer discretionary communication services and technology on the right hand side The tails are all green that indicates that they are still in relative uptrends That is a separate algorithm that we're using here at RRG Research and on the left hand side We've got pretty much everything else and all the tails that are red are still in relative downtrends and the one in blue that's the energy sector is actually trying to get out of that uptrend That's the way you need to read the coloring of these tails and What's interesting is to see that all these up moves and especially the ones here in Materials and in the industrial sector. They're already starting to roll over and we know that that is a Not a very good sign when the tails in a sector are already starting to roll over and lose their Positive heading between 0 and 90 degrees While they're still inside the improving quadrant the energy sector actually is a different story That is still at that positive heading It's got actually a pretty long tail which indicates that there is power behind the move So expect a little bit more Positive rather strength for the energy sector while especially industrials and materials are Kind of on the edge for more weakness Financials are still doing pretty well real estate is still doing pretty well Staples and utilities as well and here is Healthcare the only problem is that they are still too far away from the 100 level on the RS ratio scale So it will take a little time before they will Turn for the better if they are going to turn for the better Because you can't say that right now The next thing that I want to do is bring in the daily RIG because the strength is in combining Two time frames. That's that's that's the case in every technical analysis approach If you can find confirmation on different time frames, that's always a better case and with RIGs It's no different you can use the two different RIG time frames in this case a daily and a weekly to see if you can find a confirmation for a move and When I'm looking at let's let's take let's start with XLE with the energy sector because it's so strong inside the improving quadrant You can see why it is strong here That's because of the strong move that the sector went through on the daily chart For the last couple of weeks and that's the rotation that's playing out right here now You can see how this tail is still green So the the RIG algorithm still keeps it as a positive as a relative outperformer And given the fact that it's the highest reading on the RS ratio scale It's very all possible that the XLE tail will curl back up while it's still inside the weakening quadrant And when that happens then we have a confirmation of both tails moving in the same direction So for the XLE for the energy sector, I'll be on the lookout for a turn upwards on the daily tail for the energy sector Another one that is interesting to look at is let's take a look at these three here because these are the stronger sectors If you look at the technology sector XLK We all know it went through a setback for a couple of weeks already actually But you can see how that last that last node here that last segment actually shrunk so the negative momentum is now Declining fading away and we need to look at where technology is on the daily scale And here you can see how the daily tail of of technology is actually moving just move today This is I'm recording this after the close of the US markets on Thursday Moved into the lead in quadrant and that is a strong sign because what we're seeing here is that the daily strength is pushing XLK the technology sector into the lead in quadrant And that will start to help that weekly tail to curl back up so the technology sector seems to be getting back in shape and Probably turn that weekly tail back up towards the lead in quadrant and when that happens and the daily Still is the daily tail is still strong. You will get a strong relative performance from the technology sector if we take a look at XLC communication services and This is actually very interesting because look at how this is a very short tail when you compare it with XLK and Especially with XLE now where a long tail indicates that there is power behind the move We can we know that a short tail indicates that it is a very stable trend And because XLC is on the right-hand side of the graph It means that it's in a very stable relative uptrend versus the S&P 500 now. Where is XLC? on that daily RRG We need to look for XLC and it's right here You can see how it's inside the weakening quadrant But already starting to curl back up now It's gonna be tight whether it will hit the leg in quadrant or remain inside weakening But when the XLC tail actually curls back up and starts to move into that zero to 90 degree heading while this is also happening on the weekly chart that's will give a very strong Indication for further outperformance of the communication services sector So just like XLK is actually you know on the verge of curling back up The same is happening with the communication services sector. So both XLK and XLC are definitely worth our attention For when they start to move in tandem again and a third sector here is consumer discretionary and Where is consumer discretionary on the daily? You can see how consumer discretionary on the daily is actually pushing into that improving quadrant improving and it's picking up strength if you look at how that Tail is actually evolving you can see it's coming down So that was a negative move and now we're picking up again And you can see how this was actually that that tail shrunk It got shorter and shorter and shorter went through the corner curling back up And now it's actually accelerating back up It needs more work than communication services and technology. That's for sure But when this move Continues and XLY consumer discretionary can maintain that short-term strength It's very likely that I'll be able to turn that weekly tail back up and then we've got consumer discretionary Communication services and technology all back up in a relative uptrend And these are the major sectors inside the S&P 500 so that these are very important moves to actually keep an eye on now on the left-hand side, I want to focus on the defense because Staples utilities and healthcare those are the defensive sectors and we know that when Defensive sectors are starting or are in a relative downtrend or showing under performance versus the S&P 500 That's usually a good thing for the market itself. Now when you see XLU, that's the one here XLP is Consumer staples and that just moved let me make this Slightly shorter so we can yeah now we can see it better You can see how that just started to move to the left again this week, which is a negative XLU not so much and then XLV is actually Inside and it just stopped moving higher So when we when we look at the tails for these defensive sectors On the on the daily RRG then we have XLP right here pushing into the lagging quadrant With the weakly just turning left so that is confirming so there's weakness in this in the staple sector if you look at Utilities you can see how utilities actually roll over inside improving and now heading back down Towards lagging. We know that that is a negative sign that suggests further Underperformance further weakness for the utility sector going forward and then finally there is the Health care sector we've got the weekly tail here and here you can see the daily tail how that is actually Rotating rapidly, you know After a short stint through leading and now rapidly heading back down towards that lagging quadrant And if this move continues with the power that it has behind it We can see XLV the health care sector actually Curling back down rolling back down inside the improving quadrant So that's the big picture for these sectors now. Let's have a look at a few of the individual charts Let's let's start with the S&P 500 with spy What we can see here is that that uptrend that we're playing is is still intact and we just touched that overhead resistance area Around 460 a couple of weeks ago And you can see how on the daily chart that series of lower highs and lower lows Actually ended Around 430 where a little bit of horizontal support was found and we're bouncing off that support level higher And you can see how on this daily chart already higher highs and higher lows are emerging And that's not the case on the weekly But you know if you look inside these bars, then this is what you see and actually my shaded area on the right shows you Though what the daily data for that week are meaning and you can see how that series of higher highs and higher lows is emerging Currently running into a bit of horizontal resistance on the daily chart here But the overall picture as far as I can see is still that the series of higher highs and higher lows is still in play 460 is resistance if we take that out It's very likely that we will see more gains for the S&P 500 and as I just explained looking at the rotation of the various sectors It looks as if under the hood The market is actually looking more positive because of the weakness in the defensive sectors If we look at the technology sector, then we can see how Here it's actually you can see how high that reading of the RS ratio scale is That's why it's inside the weakening quadrant because the green is below 100 But it's got plenty of room to actually curl back up before hitting that 100 level here And that's what's happening on that daily charge. You can see how both RRG lines have started to move higher They're crossing over above 100 which is pushing the tail for the Technology sector into the leading quadrant and you can see how here also higher highs and higher lows are emerging We're looking for resistance probably around the current level 176 That's the high that we saw in December 2021 We broke it briefly a couple of weeks ago and we're now testing it again if we can take that out And then subsequently that this is the all-time high here. That's about 181 That'll give the technology sector a real new boost, but for the near term relative stank is still looking pretty good If you look at Communication services, we've got a similar picture here. So you saw that big basing pattern where we came out of A short setback. That's what we saw here This little trend line was broken, but we found support around 64 It looks as if a dip a small double bottom has been completed and communication services now on the way back up there We do need momentum This is flattening here but we need to turn that back upwards and keep the RS ratio line above 100 and It looks as if this is already happening here on the weekly scale You can see how that green line has started to bottom out and move higher And that will very likely keep the RS ratio line above 100 and therefore into the leading quadrant And then finally we have the Consumered discretionary sector on the right-hand side And that is actually, you know, this is a very nice basic pattern and you can see how there is resistance around 175 RS ratio still pretty high Pushing it into the leg in quality. Sorry into the weakening quartered on the weekly ROG as we've seen But on the daily you can already see the improvement taking place and taking shape The small double bottom being completed and looks as if consumer discretionary is on the way back up Towards its resistance area, which is around 174 175 If the market can take that out more positive moves for consumer discretionary are expected And then quickly to wrap it up. Otherwise this video will be way too long and you'll get bored A quick look at the defensive stuff here's utilities breaking below support breaking below support here Look at the weakness in that weekly ROG line in those weekly ROG lines As well as on the daily where it's starting to roll over That's the move on that daily ROG where you can see it moving from improving back into lagging Then we have the consumer staple sector Not as bad as utilities, but not strong either. Look at the daily ROG lines moving rapidly below 100 There is a little bit of support left here around 70 to 20 72 if that gives way Then there is more weakness ahead for the consumer staple sector and you can see How that level and you can see how my cursor is synced on the daily and the weekly How a break of that level will actually open up more downside towards 71 first, but then even to way below 70 if that really materializes especially on a relative strength basis The consumer staple sector is looking not very good And then the last sector that I want to look at is the healthcare sector That's the third defensive sector and you can see how on the weekly chart It's actually in a very broad trading range And how the RS ratio line is really really low picking up a little bit of momentum But not enough to make it go anywhere positive And if you look at the daily version daily chart Then you can see how we got slightly lower highs coming in that indicates Selling pressure and that is reflected in both ROG lines moving steeply lower Pushing the healthcare quadrant back towards the lagging quadrant Which would bring all three defensive sectors into lagging Which is usually a good thing for the market as a whole so all in all A couple of interesting rotations going on in us sectors under the hood things look pretty positive for the SMP as a whole And if we go back to that spy chart resistance around for 60 And good support around for 30, please keep those in mind Thank you for watching. That was it for this week I'm looking forward to seeing you again at a fresh update by rrg research next week same time same place