Glossary / Relative performance

Sector rotation

Sector rotation describes a shift in which parts of the market are moving most, as capital concentrates in some sectors and thins out of others over weeks or months. It is an observation about the dispersion of returns across sectors, not a schedule.

How it is measured

How is sector rotation measured?

Compute each sector's return over a rolling window — usually via a sector index or a sector ETF — and rank them. Rotation is visible as a change in that ranking over time, and as a widening or narrowing of the gap between the top and bottom of it. There is no single agreed window, so the picture depends on the one chosen.

Why it matters

Why does sector rotation matter to a swing trader?

Sector membership explains a large share of any individual security's movement, so knowing which sectors have been moving separates company-specific behaviour from a sector-wide move that lifts or drags every name in it. The caution worth stating: rotation is identified after it is under way. A ranking of the last quarter is a description of the last quarter, and the popular idea that sectors rotate in a fixed order through an economic cycle is a stylised model, not a measured regularity.

In Tapeline

Does Tapeline use sector rotation?

Tapeline groups the scored stocks by sector in its public stock directory.

See this in the product

Scored stocks, grouped by sector · How Tapeline scores stocks

Related terms

Relative strength

Relative strength is a difference, not a standalone reading: a security's price change over a period, minus a benchmark's price change over exactly the same period.

Market breadth

Market breadth measures how widely a market move is shared across the securities in it, rather than how far the index itself has travelled.

Market regime

A market regime is a broad classification of prevailing market conditions into a small set of named states — risk-on and risk-off being the most common pair, sometimes with a neutral state between them.

Beta

Beta measures how much a security's price has historically moved for a given move in its benchmark.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.