Volatility picked up and the major indexes experienced some of the largest intraday swings we've seen in months.
But beneath the surface, the action was actually constructive.
Even though the S&P 500 closed lower, roughly 70% of its constituents finished the day in the green.
That's usually a sign that money is rotating rather than leaving the market altogether.
We're seeing capital move out of crowded leadership names, particularly mega-cap Tech, and into areas that have spent months lagging, including Healthcare, Financials, Industrials, and Real Estate.
We call this sector rotation.
And it's an important piece of the puzzle because healthy bull markets require participation from more than just a handful of stocks. Leadership needs to broaden.
One of my favorite ways to track this is through a Relative Rotation Graph (RRG), a framework developed by our friend Julius de Kempenaer that plots sectors based on momentum and relative strength versus the benchmark.
In simple terms, it shows which groups are leading, improving, weakening, or lagging — and more importantly, how they're moving between those phases.
The key isn't where a sector sits today.
It's where it's headed.
The direction of the arrows tells you whether momentum is improving or deteriorating.
Look at this chart:
Right now, Technology is beginning to roll back toward the weakening quadrant, while Healthcare, Industrials, Financials, and Materials are moving from improving toward leading.
That's exactly the type of rotation you would expect to see as participation broadens.
We saw evidence of that shift yesterday.
And to me, it suggests the next opportunities may be coming from areas that have been overlooked for most of the year.
That's where I'm spending my time looking for stocks with improving momentum and fresh leadership potential.
Stay sharp 😉
Alfonso De Pablos, CMT
Director of Research, All Star Charts
P.S. 👉 Missed Kenny’s live event? Watch the replay to learn the VWAP strategy he’s used to navigate some of the most volatile markets of his 30-year career. See how he identifies high-probability setups, manages risk, and captures intraday moves before the crowd catches on.
