A clear, data-driven approach to Relative Rotation Graphs is being developed for 2025, turning a visualization concept into a repeatable, rules-based framework. This article lays out the foundational ideas behind Relative Rotation Graphs (RRG), explains why a fixed track record cannot exist for such a tool, and outlines a pragmatic plan to test and publish a version 1 approach using the 11 SPDR sector ETFs. The goal is to move from descriptive visualization to an objective ranking system that identifies the strongest sectors on a weekly basis and allocates a targeted portfolio weight to the top performers, all while remaining transparent about the methods and the limitations inherent in rotational analysis.
Foundational concepts and the nature of Relative Rotation Graphs
Relative Rotation Graphs represent a powerful way to visualize relative performance and momentum across assets by plotting their rotations in a common framework. In essence, RRGs translate complex, multi-timeframe dynamics into a two-dimensional space where each instrument’s movement conveys information about its relative strength and momentum against a chosen benchmark. This approach emphasizes trends, rotations, and shifts in leadership rather than presenting a single, static measure of price destiny. The core value of RRG lies in its ability to reveal the direction and velocity of rotation, helping traders and analysts interpret whether a market leader is gaining or losing momentum, or if another asset is poised to take the lead.
A fundamental point often underscored by practitioners is the absence of a single track record for Relative Rotation Graphs. Because the framework itself is a visualization tool rather than a fixed trading system, any “track record” depends on the rules supplied to interpret the visuals and the particular universe of assets and timeframes being analyzed. This is akin to saying that a bar chart, on its own, does not prescribe a fixed trading protocol; a bar chart merely presents price information, leaving the rules for action to the analyst. In other words, there is no universal set of rules embedded in RRGs that guarantees outcomes, because the same charting surface can yield different conclusions under different rule sets or objectives.
In practice, this distinction matters because it means that claims about long-run performance cannot rest on the visualization alone. If one wants to claim a track record, the pathway must be to define explicit, testable rules—conditions that may trigger decisions and can be repeatedly applied across market regimes. This is the subtle but important shift from “what does the graph show?” to “what rules do we apply to act on what the graph shows, and how do those rules perform over many cycles?” The literature and experience with RRGs suggest that the most robust approaches combine visual insight with a rigorous, rules-based framework that can be backtested or explored over historical data, albeit with careful attention to the risks of overfitting and the changing nature of market dynamics.
Two prerequisites anchor a quantitative, rules-based approach to RRGs. First, there must be testable conditions that specify when an asset’s rotation and momentum justify action or position adjustments. These conditions should be defined with explicit criteria, such as thresholds for rotation speed, level of outperformance relative to a benchmark, or a defined certainty about trend direction. Second, the approach must be repeatable. That is, the same rules should produce consistent outcomes when applied to different periods, markets, or subsets of data, assuming appropriate risk controls and data integrity. Without repeatability, even the most insightful visual interpretation cannot form a credible basis for decision making.
Over the years, the exploration of these prerequisites has led to a pragmatic realization: a “rules-based” version of RRG can be designed by combining carefully selected data signals across different time horizons into a single, composite metric. Such a composite metric can then be used to rank assets and identify the strongest candidates for inclusion in a portfolio. Importantly, this is not a claim that RRGs are inherently predictive; rather, it is an assertion that they can be converted into an objective framework that supports systematic decision making, provided that the data inputs, the combination mechanism, and the risk management rules are coherent and transparent.
For the purpose of the 2025 initiative, the focus is on a disciplined integration of weekly and daily RRG observations to produce a unified ranking for a defined universe: the 11 SPDR sector ETFs. The objective is to determine the “best five sectors” at any point in time and to construct a portfolio that assigns a fixed weight to each of these five sectors. The emphasis is not on selling or shorting every sector at once but on capturing leadership while maintaining a straightforward, transparent allocation scheme. The approach aims to balance clarity and depth: to provide enough depth to understand why certain sectors rise to the top of the ranking, while keeping the methodology accessible and reproducible.
As with any exploration of rotation-based analysis, there are practical considerations. Markets evolve, correlations shift, and structural changes—whether due to macroeconomic shifts, policy changes, or sector-specific dynamics—can alter how well a given rule set performs. The 2025 plan explicitly recognizes these realities and seeks to document outcomes over time, assess robustness across market regimes, and adjust the framework as needed. This emphasis on ongoing evaluation—rather than a one-off demonstration—is central to the ambition of turning RRG insights into a workable, rules-based process that can be shared, reviewed, and refined on a weekly cadence.
Finally, the rationale for choosing the 11 SPDR sector ETFs as the testing ground is twofold. On one hand, these ETFs provide broad exposure to the major sector themes that typically drive market leadership, offering a coherent, liquid, and widely followed instrument set. On the other hand, sector-level analysis allows a focused exploration of relative strength and rotation patterns, which often manifest differently across sectors than in broad market indices. By aggregating weekly and daily RRG signals across these sector ETFs, the ultimate aim is to derive a ranking that reflects a blend of momentum, strength, and stability—an approach intended to support a practical, investable framework while preserving the integrity and interpretability of RRG visuals.
In sum, Relative Rotation Graphs are most valuable when they inform a structured, repeatable decision process rather than stand alone as a narrative of past rotations. The 2025 plan takes this philosophy seriously by seeking a version 1 framework that translates the rich information embedded in RRGs into a transparent ranking system, anchored in the 11 SPDR sector ETFs, and designed to publish weekly insights and a disciplined allocation strategy. The emphasis remains on clarity of method, robustness of the ranking mechanism, and a conservative, rules-driven application that respects the inherent uncertainties of financial markets.
From visualization to a testable, rules-based framework
The transition from pure visualization to a testable, rules-based system hinges on converting qualitative observations into quantitative criteria. Relative Rotation Graphs excel at showing how sectors move in relation to one another and where leadership rotates from one theme to another. To harness this insight for systematic investing, it is essential to define explicit conditions under which a rotation implies a potential allocation or reallocation decision. This requires a careful balance between capturing meaningful rotation signals and avoiding overreaction to short, noisy swings.
A practical way to proceed is to establish a composite metric that blends multiple time horizons. Weekly signals capture medium-term momentum and trend stability, while daily signals can reflect more immediate shifts in relative performance. By combining these two layers, the resulting score or ranking can reflect both longer-duration rotations and near-term accelerations. The composite score then becomes the basis for ranking the 11 sector ETFs: the highest-scoring sectors earn the top five positions in the portfolio, while sectors outside the top five receive no allocation in this construct.
Developing this composite metric involves several key steps:
- Define the constituent signals: identify the core dimensions of RRG that capture relative strength, rotation direction, and momentum. This may include the angle and length of rotation vectors, the distance from key reference lines, or the rate of change in relative performance against a benchmark.
- Normalize the signals: ensure that signals from weekly and daily data are comparable, so that the combined score does not disproportionately favor one time horizon.
- Weight the horizons: assign appropriate importance to weekly versus daily signals within the composite, reflecting the decision horizon of the intended allocation strategy.
- Apply a ranking rule: translate the composite scores into an explicit top-five list of sectors, with deterministic ties broken by predefined rules.
- Incorporate risk controls: include checks for drawdown exposure, concentration, and turnover limits to prevent excessive risk or overfitting to recent rotations.
- Plan for rebalancing: specify the cadence and mechanics of rebalancing to reflect the evolving rankings, including transaction considerations and cost implications.
This approach rests on the premise that a well-constructed, repeatable scoring system can capture the essence of RRG-derived insights while offering a clear, auditable framework for investment decisions. It is crucial to document how each signal contributes to the final score and to provide a rationale for any weighting choices. Transparency in the construction of the composite metric supports reproducibility and enables constructive scrutiny, which is particularly valuable when publishing weekly results and seeking feedback from a broader audience.
Beyond the mechanics, it is important to articulate the expectations and limitations of a rules-based RRG framework. A rotation-based system does not guarantee outperformance in every market environment. Rotations can be sharp and abrupt, and sector leadership can pivot quickly due to unforeseen macro or sector-specific catalysts. A disciplined framework must therefore be paired with prudent risk management, sensible diversification within the constraint of a sector-ETF universe, and a clear understanding of the scenario in which the rules may underperform. The weekly publication cadence is designed not only to communicate outcomes but also to invite ongoing assessment, critique, and iteration, which are essential for refining any emerging systematic approach.
In the end, the evolution from visualization to rules-based methodology centers on clarity, auditable logic, and repeatability. The composite, multi-horizon ranking provides a tractable way to translate the intuitive cues offered by RRGs into actionable positions, while preserving the spirit of the original visualization technique: to illuminate how sector leadership shifts, where momentum reinforces or weakens, and which themes are most likely to drive performance over the near term. The 2025 program embraces this transformation, with a plan to share version 1 findings weekly, demonstrate the mechanics behind the top-five selection, and show how the resulting 20% weight allocation to each of the five leading sectors behaves over time. This approach is designed to be transparent, adaptable, and anchored in the practical realities of investing in sector ETFs, with a focus on robust methodology, thoughtful risk controls, and ongoing refinement.
The 2025 plan: weekly publication of a version 1 approach using the 11 SPDR sector ETFs
The year 2025 is envisioned as a proving ground for a structured, rules-based interpretation of Relative Rotation Graphs, applied specifically to the SPDR sector ETF universe. The central objective is to develop and share the outcomes of version 1 of the approach in a regular, weekly format. By focusing on the 11 SPDR sector ETFs, the project aims to leverage well-known, liquid instruments that collectively cover the major thematic drivers within the equity markets. The weekly cadence is chosen to balance timely insights with the stability required for meaningful evaluation. Regular publication creates a traceable record of how the rules perform across diverse market conditions and allows readers to observe the evolution of sector leadership over time.
A primary component of the plan is the construction of a ranking mechanism that synthesizes multiple data inputs into a single, interpretable score for each sector. This ranking will rely on combining weekly and daily RRG data points into one metric, with the intent of producing a transparent list of the top five sectors at any given time. The selection process is designed to be objective, reducing the influence of subjective judgment while preserving the qualitative signals that RRGs inherently capture. The five sectors deemed strongest by the composite ranking will form the core of a hypothetical portfolio, and each sector within that portfolio will be allocated a 20% weight. The fixed 20% weight per sector plan is purposely simple, creating equal exposure among the best performers and avoiding the complexities of dynamic sizing that could obscure the evaluation of the methodology itself.
In practice, the weekly publication will present several components that together convey how the version 1 framework functions. First, readers will see the overall ranking for the 11 sectors, highlighting the top five and showing how the ranks shift from week to week. Second, a concise narrative will accompany the ranking, describing the rationale behind the moves in leadership. Third, a concise risk and performance snapshot will be provided, indicating how the portfolio would have behaved in the current week, including hypothetical net exposure and how the fixed weights would affect portfolio sensitivity to market movements. This combination of quantitative ranking and narrative explanation helps users understand both the signals driving the decisions and the context of the market environment.
The initial portfolio allocation in the first week of 2025—the starting point for the proposed framework—will be anchored in the top five sectors identified by the ranking, each receiving a 20% allocation. This starting point is not intended to be a definitive, long-term directive but rather a concrete demonstration of how the rules-based approach translates into a simple, investable, and auditable construction. The goal is to reveal how the framework behaves under real market conditions, across a complete calendar year, and through a spectrum of macroeconomic scenarios. By providing a transparent, stepwise depiction of outcomes, the plan invites scrutiny, feedback, and rigorous testing, all of which are essential to refining the model and establishing credibility.
A critical aspect of the weekly publication is the commitment to explain, in accessible terms, the interpretation of RRG signals as they relate to sector performance. The narrative will illuminate the meaning of relative strength, rotation direction, and momentum, translating these concepts into actionable observations about why a sector is rising to the top of the ranking or why it is falling behind. The intention is to strike a balance between technical rigor and readability, ensuring that readers with varied levels of experience can follow the logic, understand the mechanics, and appreciate the limitations of the approach. The weekly cadence also creates an ongoing, real-time feedback loop: as new data come in, the framework updates the ranking, the weights, and the portfolio composition, while preserving a transparent record of changes and the underlying rationale.
In this plan, the 11 sector ETFs are treated as the universe of interest for rotational analysis. Each ETF’s weekly and daily performance contributes to the composite score, and the evolving relative positioning among sectors is tracked to expose leadership dynamics. The emphasis on practical deployment—ranking, selection of the top five sectors, and a fixed 20% allocation—aims to provide a straightforward, repeatable process that can be followed, reviewed, and tested over time. While this approach holds promise for offering a structured way to interpret RRG data, it is equally important to acknowledge its exploratory nature: the outcomes are contingent on the chosen inputs, the weighting scheme, and the market environment. The weekly publication is therefore a live, iterative exercise, intended to demonstrate feasibility, promote dialogue, and foster continuous improvement rather than to claim a guaranteed blueprint for success.
The initial week of 2025, as a practical demonstration, presents five sectors as the starting lineup. These sectors—Consumer Discretionary, Communication Services, Financials, Technology, and Industrials—are evaluated on their RRG signals and on how their weekly and daily rotations converge or diverge. The aim is to illustrate how the composite score can crystallize into a rank order and how the top five sectors can be assembled into a clean, equal-weighted portfolio for illustrative purposes. Readers can expect a transparent account of what the framework identifies as leadership, the factors driving those decisions, and the potential implications for risk and return within the context of sector investing.
Throughout this process, emphasis remains on the need for robustness and caution. A weekly, rules-based approach to RRG must be continuously validated against out-of-sample data, subjected to stress testing, and examined for sensitivity to changes in the input universe, timeframes, and sector composition. The ultimate aspiration is not to present a finished, final product but to document a disciplined, reproducible pathway from RRG visualization to a transparent, testable framework. The weekly publication of version 1 findings is an initial step toward that objective, providing a foundation upon which improvements can be built, questions can be explored, and the methodology can mature in response to real-world market behavior.
Weekly sector indicators and the five-sector lineup
In the weekly updates, the framework will report the ranking positions and provide a compact narrative of how each sector is positioned within the rotation landscape. The top five sectors will be highlighted, and their relative strength, momentum, and rotation characteristics will be described in accessible terms. The discussion will connect the visual interpretation of RRG signals to tangible implications for portfolio construction, including why a sector might receive a higher ranking and what rotational dynamics suggest about potential continuation or reversal. Where appropriate, the weekly notes will also touch on risk considerations, such as concentration risk, sector-specific volatility, and the potential impact of macro developments on rotational patterns. The overarching aim is to offer an informative, actionable, and transparent account of how the rules-based approach translates RRG insights into an interpretable investment framework, while clearly acknowledging the uncertainties and complexities inherent in rotational analysis.
This 2025 program thus represents a structured, iterative effort to move beyond qualitative impressions and toward a reproducible method for translating RRG observations into a disciplined allocation strategy. It is designed to be accessible to readers with varied levels of experience while preserving the technical depth necessary to understand how the top-ranked sectors are identified and how their allocations would work within the stated portfolio framework. By publishing on a weekly cadence, the project seeks to establish a living reference for the evolution of sector leadership, the behavior of the ranking system, and the practical implications of the 20% weighting rule for the selected five sectors.
The ranking framework: combining weekly and daily RRG data into a single composite score
The core of the version 1 approach rests on constructing a single composite score that integrates both weekly and daily RRG data signals. The aim is to convert the qualitative impressions of relative rotation into a numeric ranking that can be applied consistently across the universe of 11 SPDR sector ETFs. To achieve this, several design principles guide the development of the composite metric, ensuring that it remains interpretable, robust, and anchored in the observable dynamics of rotation.
First, the selection of signals is critical. The framework relies on signals that capture directionality, momentum, and the magnitude of rotation relative to a baseline. These signals may include measures of how far an asset’s rotation angle has moved from a reference axis, the speed of rotation, and the persistence of lead-lag relationships with respect to the benchmark. Each signal provides a different facet of the rotation story, and together they form a richer representation than any single indicator could deliver. The signal set must be carefully curated to avoid redundancy and to ensure that the combined score reflects genuinely informative aspects of rotation rather than noise.
Second, normalization is essential. Weekly and daily signals typically operate on different scales and may be affected by distinct periodicities. The normalization process brings these signals onto a common standard, enabling their meaningful combination. This step also mitigates the risk that one horizon dominates the composite score simply due to differences in measurement units or sampling frequency. Normalization often involves centering the signals, scaling to unit variance, or other transformations that preserve relative relationships while enabling comparability.
Third, horizon weighting is a deliberate design choice. The relative importance assigned to weekly versus daily signals should reflect the intended decision horizon of the strategy. If the goal is to identify medium-term leadership with the flexibility to adjust positions weekly, weekly signals may be given greater weight, while still allowing daily signals to contribute meaningful, near-term nuance. Conversely, a more reactive approach might allocate a larger role to daily signals. The weighting decision should be justified by the desired balance between responsiveness and stability, with sensitivity analyses conducted to understand how different weights influence the rankings.
Fourth, the ranking process must be deterministic. Given the same inputs, the composite score and the resulting top-five sectors should be reproducible. This implies clear rules for handling ties, missing data, or unusual market events that might temporarily distort signals. A transparent, reproducible ranking system is essential for credibility and for enabling constructive examination by readers and researchers.
Fifth, risk and stability considerations should be integrated into the ranking logic. This could involve incorporating volatility adjustments, constraints on turnover, or caps on concentration. The intent is to prevent the ranking from solely privileging momentum at the expense of risk management. Incorporating such controls helps ensure that the top sectors identified in week n are not only strong but also align with a prudent risk posture.
Sixth, the output should be interpretable. A ranking system that yields a simple list of sectors with corresponding scores is preferable to a black-box result. Readers should be able to understand why a sector earned a high ranking and how changes in signals would influence its standing. The clarity of interpretation enhances trust and facilitates meaningful discussion about the method and its outcomes.
Seventh, the framework should allow for backtesting and forward testing, while acknowledging the limitations of backtests in rotational systems. Backtesting provides a historical perspective on how the scoring logic might have performed in past regimes, but it cannot guarantee future results. The plan is to document the approach, show historical sensitivity where feasible, and present forward-looking results as live, ongoing observations. This balance is essential to maintain scientific rigor while recognizing the adaptive nature of markets.
Eighth, the universe selection and data integrity are fundamental. The 11 SPDR sector ETFs offer broad sector coverage and liquidity, supporting robust signal extraction. Ensuring data quality, timely updates, and consistent adjustments for corporate actions is a baseline requirement for credible rankings. The integrity of the inputs directly influences the reliability of the composite score, so data governance remains a priority in every weekly publication.
Ninth, transparency is a guiding principle. Readers should understand not only the final top-five list but also the underlying logic that produces the rankings. This includes documenting how weekly and daily signals are combined, how normalization is performed, how horizon weights are chosen, and how risk controls are applied. Providing this level of detail invites informed discussion, fosters trust, and supports ongoing refinement of the methodology.
Tenth, adaptability will be part of the ongoing development. The initial version is a starting point, not a final specification. As more weekly data accumulate, as reader feedback is incorporated, and as the market environment evolves, the composite scoring approach can be refined. The framework is designed to be iterative, with versioned updates that describe what changed, why it changed, and how those changes affected the ranking and portfolio allocation.
In summary, the composite score represents a structured attempt to translate the dynamic signals embedded in Relative Rotation Graphs into a practical, rule-based ranking. By integrating weekly and daily signals, normalizing them for comparability, and weighting horizons with a clear rationale, the version 1 framework aims to produce a transparent, repeatable method for identifying the strongest sectors at any given time. The subsequent sections will describe how this ranking informs the portfolio construction and how the first-week results illustrate the approach in action.
Portfolio construction: selecting the top five sectors and assigning fixed weights
With a transparent ranking mechanism in place, the next step is to translate the top-ranked sectors into a concrete, investable portfolio construct. The guiding principle is straightforward: identify the five strongest sectors according to the composite score and allocate an equal, fixed weight of 20% to each. This five-sector, 20% per sector scheme creates a simple, balanced, and easy-to-interpret allocation that avoids over-concentration in a single theme while still emphasizing leadership dynamics revealed by the RRG-based ranking.
The decision to enforce a fixed 20% allocation per sector in the top five is intentional. It keeps the portfolio easy to monitor and rebalance while avoiding the complexity of position sizing that depends on volatility, correlation considerations, or changing risk measures. The fixed-weight design makes it transparent to readers and facilitates straightforward performance comparison week to week. It also reduces the potential for overfitting to short-term rotation signals by maintaining stable exposure across the five leading sectors.
Rebalancing discipline is a key consideration in this framework. Given the weekly publishing cadence and the rolling nature of sector leadership, it makes sense to align rebalancing with the publication cycle. Each week, after the ranking is determined, the portfolio would be updated to reflect the new top five sectors in their 20% allocations. This approach achieves a consistent exposure to the leaders while preserving a clean, repeatable procedure that readers can understand and replicate. It also helps manage transaction costs and reduces the potential for excessive turnover, which could erode returns.
Risk management remains an integral aspect of portfolio construction. Even with a fixed 20% allocation to five sectors, it is prudent to consider concentration risk, diversification across sector themes, and potential correlations among sectors. The framework may incorporate checks to prevent the top five sectors from being overly correlated with one another, as well as caps on cumulative sector exposure if certain market episodes lead to clustered leadership. While the base rule is straightforward, additional safeguards can be appended to preserve a balanced risk profile. Any such safeguards would be clearly described in weekly publications, including the rationale for their introduction and their potential impact on performance.
The choice of an equal-weight, five-sector portfolio emphasizes simplicity and accessibility. Equal weighting ensures that no single sector dominates the portfolio at any given time, reflecting the idea that leadership in a rotating framework can shift, and that diversification across the strongest themes provides resilience. This construction aligns with the objective of creating a transparent, reproducible approach that readers can test independently. It also makes it easier to communicate the performance implications of leadership shifts, as the portfolio’s exposure is distributed evenly among the top performers, rather than concentrated in a small subset of sectors.
In practice, the weekly update will present the ranking, the top-five sectors, and their fixed weights, along with a concise interpretation of what the ranking suggests about near-term sector leadership. The publication will also outline any notable movements in the rotation dynamics that led to a sector’s rise into or drop out of the top five, reinforcing the link between RRG signals and portfolio changes. The objective is to provide a clear, consistent narrative that connects the composite score, sector ranking, and resulting allocation, making it feasible for readers to follow the logic behind week-to-week decisions.
The initial week of 2025 serves as a concrete demonstration of how this portfolio construction works. The five sectors identified as the top-ranked according to the composite score in the opening week—namely Consumer Discretionary, Communication Services, Financials, Technology, and Industrials—are allocated 20% each. This lineup creates a diversified exposure across key growth, cyclical, and resilience-oriented themes, reflecting the rotation-driven leadership principle that the framework seeks to capture. The weekly publication will describe how each sector’s rotation characteristics contributed to its ranking, what changes from the prior period (if any) prompted its elevated position, and how the 20% allocations would shape the theoretical portfolio’s sensitivity to market movements.
As the weeks progress, the ranking and allocations will evolve in response to new data, while the underlying rules retain their consistency. The goal is to preserve a transparent, repeatable process that readers can observe, critique, and test. The weekly notes will emphasize not only the final top-five list but also the trajectory of rotation signals that led to their leadership, including any notable expansion or contraction in relative strength and momentum. This combination of systematic ranking, equal-weight allocation, and weekly disclosure is designed to offer a practical blueprint for monitoring sector leadership and understanding how rotation dynamics translate into a straightforward investment posture.
In summary, the portfolio construction approach converts RRG-derived insights into a simple, interpretable structure: identify the five strongest sectors via a composite score and allocate 20% to each, refreshing the lineup and weights weekly. This design aims to balance clarity with rigor, enabling readers to trace how rotation signals inform portfolio composition while maintaining a disciplined, repeatable process that can be evaluated over time.
Week 1 2025 snapshot: sector commentary and rotation insights
The initial week of 2025 provides a concrete, real-world illustration of how the rules-based ranking translates into sector selection and allocation. The five sectors emerging as the leaders, and thus forming the portfolio’s core, are Consumer Discretionary, Communication Services, Financials, Technology, and Industrials. Each sector has its own narrative within the Relative Rotation Graph framework, reflecting how its rotation, momentum, and relative strength intersect to produce a strong standing in the weekly composite score.
Consumer Discretionary has shown resilience after an upward breakout, with the region around a key level serving as a potential support zone should prices pull back. The relative strength for this sector continues to display robust momentum, suggesting that leadership could persist if the price action sustains above the critical support. The rotation pattern indicates ongoing participation by buyers, reinforcing the expectation of continued strength in the near term, provided that the market does not confront a renewed test of resistance or a broader risk-off environment that might suppress discretionary spending.
Communication Services is testing a former rising resistance line, which is acting as support in the current context. The sector’s relative strength has broken out of its prior trading range, signaling a potential acceleration in leadership. The combination of a corrective pullback to a support line and a breakout in relative strength suggests a bullish setup, with room to advance if the momentum carries into new territory. The rotation signal remains constructive, with the sector maintaining favorable positioning within the RRG framework and offering the potential for continued outperformance relative to others in the mix.
Financials continue to exhibit a rhythm characterized by higher highs and higher lows on the price chart, reflecting an ongoing constructive trend. The sector’s relative strength is presently testing the upper boundary of its former trading range as support, indicating resilience in the face of near-term volatility. This dynamic hints at continued leadership, though the rotation pattern suggests a careful watch for any signs of fatigue at the upper boundary or a pullback that could challenge the strength narrative. If the support holds and the upward trajectory remains intact, the financials sector could sustain its favorable standing within the rotation framework.
Technology remains under some pressure due to overhead resistance around a higher price level, yet there is no pronounced price collapse visible within the sector. Relative strength remains contained within the boundaries of its trading range, which implies a balance between buyers and sellers. The ongoing struggle with resistance may pose a challenge to sustained upside, but the absence of a sharp decline reduces near-term risk. If price action manages to break above the resistance threshold and relative strength continues to improve, technology could reinforce its leadership position in the rotation cycle; if not, the sector may enter a consolidation phase with possible rotation sideways.
Industrials are testing a rising support line, with the health of that line serving as a key determinant of the sector’s near-term trajectory. The rotation narrative for Industrials helps explain why this sector is selected as the fifth member of the top five: the combination of technical support and a favorable relative-strength posture provides a basis for continued leadership, albeit with a degree of caution due to potential signs of relative weakness that could emerge in the near term. The sector’s rotation profile indicates a degree of vulnerability if the support line weakens, but as long as the rising support holds, the Industrials theme remains a viable contributor to the portfolio’s overall exposure.
These sector notes illustrate how the weekly ranking translates into actionable insights and a transparent, rule-based allocation strategy. The five sectors identified for week one align with the plan to capture the rotating leadership implied by RRG signals while maintaining a disciplined, equal-weight approach across the top-performing themes. The observations underscore the importance of watching both price action and relative strength within the context of rotation, as shifts in one dimension can lead to meaningful changes in the composite ranking from week to week.
Readers can expect the weekly publication to continue detailing sector-specific rotation dynamics, highlighting how the top five sectors evolve as new data arrive and as market conditions shift. The approach aims to offer a consistent, readable framework that explains why certain sectors rise to the top of the ranking and how their rotations correspond to practical portfolio allocation decisions. In the longer run, the ongoing weekly updates will provide a record of how the version 1 framework performs across a variety of market environments, enabling ongoing assessment, refinement, and, if necessary, recalibration of the rules and weighting choices.
Conclusion
The exploration of Relative Rotation Graphs as a practical, rules-based framework for sector rotation seeks to bridge the gap between qualitative visualization and objective investing discipline. By acknowledging that a fixed track record does not truly exist for a visualization tool, and by establishing explicit, testable, and repeatable criteria, the approach aims to deliver a transparent mechanism for ranking sectors and constructing a disciplined, equal-weight portfolio of the top performers. The 2025 plan centers on publishing weekly outcomes based on the combined signals of weekly and daily RRG data across the 11 SPDR sector ETFs, with a straightforward five-sector lineup and fixed 20% weights. The Week 1 snapshot demonstrates how this framework translates into concrete sector selections and provides a template for readers to observe, critique, and test the methodology in the weeks to come. The ultimate objective is to cultivate a robust, transparent system that evolves through ongoing evaluation, reader feedback, and real-world performance, while embracing the essential caveat that rotation-based signals are one tool among many in the investor’s toolkit.
