How to Read a Relative Rotation Graph (RRG): Quadrants, Tails and Sector Rotation – Nummius

By Nummius · October 18, 2026

A relative rotation graph (RRG) shows, on a single chart, how a group of securities is performing relative to a common benchmark, and whether that relative performance is getting stronger or weaker. It is one of the quickest ways to see sector rotation: which parts of the market are leading, which are fading, and which are starting to turn up. This guide explains how to read one and how to use it without over-reading it.

Where relative rotation graphs come from

Relative rotation graphs were developed by Julius de Kempenaer, the founder of RRG Research, and became widely known after charting platforms began offering them. The original version uses two proprietary indicators, the JdK RS-Ratio and the JdK RS-Momentum. Many platforms, including Nummius, compute their own relative strength ratio and momentum measures instead. The details of the math differ, but the chart is read the same way.

The two axes

Every point on the chart is one security, for example a sector ETF, measured against a benchmark such as the S&P 500.

Horizontal axis: relative strength trend. It measures whether the security has been outperforming or underperforming the benchmark, normalized so that the center line means “in line with the benchmark”. To the right of center: stronger than the benchmark. To the left: weaker.
Vertical axis: relative strength momentum. It measures the rate of change of that relative strength. Above center: relative strength is improving. Below center: it is deteriorating.

In the original JdK version both axes are centered on 100. Some implementations, including ours, center them on zero. Only the labels change.

The four quadrants

Quadrant	Position	Relative strength	Momentum	Typical reading
Leading	Top right	Stronger than benchmark	Improving	Outperforming, and the outperformance is growing
Weakening	Bottom right	Stronger than benchmark	Fading	Still outperforming, but losing steam
Lagging	Bottom left	Weaker than benchmark	Fading	Underperforming, and getting worse
Improving	Top left	Weaker than benchmark	Improving	Still underperforming, but the gap is closing

Rotation and tails

Securities tend to move through the quadrants in a clockwise direction: Leading, then Weakening, then Lagging, then Improving, and back to Leading. This is a tendency, not a rule. A sector in Weakening can hook back up into Leading without ever visiting Lagging, and that kind of hook is often worth noticing.

Each point usually carries a tail, a short trail of its previous positions, for example the last 10 weeks. The tail is where most of the information is:

Direction (heading). A tail pointing up and to the right (north-east) shows both relative strength and momentum rising, the strongest heading. Pointing down and to the left is the weakest.
Length. A long tail means the relative position changed a lot over the period; a short one means little changed.
Distance from the center. The further out, the stronger the relative trend, positive or negative.
Smoothness. A smooth, curved tail suggests a steady rotation; a jagged one suggests noise.

A worked reading example

Imagine a weekly sector RRG with these illustrative positions, not a description of any real market:

Energy sits far out in Leading with a long tail pointing north-east. Its outperformance is strong and still accelerating.
Technology is in Weakening, still to the right of center, with its tail pointing down and to the left. It is still beating the benchmark, but by less each week.
Utilities sit in Improving with a short tail pointing up and to the right. They are still underperforming, but the gap is closing.
Financials sit near the center with a short, tangled tail. Nothing decisive is happening there.

A reasonable reading: Energy is the current leader, Technology’s leadership is fading, and Utilities are the sector to watch for a possible move into Leading. That reading is a starting point for research, not a trade. The next step is the price chart of each sector and the strongest stocks inside it.

RRG versus a simple relative strength line

A classic relative strength line divides one security’s price by the benchmark’s and plots the ratio over time. It is excellent for studying one security in depth. The RRG’s advantage is breadth: it shows the relative trend and its momentum for a dozen securities at once, so changes in leadership stand out. Many traders use both, the RRG to spot the rotation and the relative strength line to study it.

Weekly and daily views

Weekly data shows the bigger rotation and is less noisy. Daily data reacts faster and helps with timing, but whipsaws more. A common approach is to use the weekly RRG to choose where to focus and the daily RRG to see whether the shorter-term picture agrees. When weekly and daily disagree, for example weekly Leading but daily Weakening, the strength may be pausing.

A practical sector rotation workflow

Pick a benchmark and a universe. For US sectors, a common choice is the S&P 500 (SPY) as benchmark and the 11 Select Sector SPDR ETFs as the universe: XLK, XLV, XLF, XLY, XLP, XLE, XLI, XLB, XLU, XLRE and XLC.
Scan for headings. Look for sectors in Leading or Improving with tails heading north-east, and note sectors whose tails are rolling over in Weakening.
Drill down. Run a second RRG of the stocks inside a strong sector against the sector ETF, to find the leaders within the leader.
Confirm on the price chart. An RRG is relative. A sector can sit in Leading while falling in absolute terms, simply because the benchmark is falling faster. Check the trend of the price itself before acting.
Write it down. Record which rotation you were acting on in your trading journal, so you can later check whether your sector reads were any good.

Reading defensive and offensive rotation

The mix of sectors in each quadrant says something about the market’s mood. When defensive sectors such as Utilities (XLU), Consumer Staples (XLP) and Health Care (XLV) rotate into Leading while Technology (XLK) and Consumer Discretionary (XLY) move toward Weakening or Lagging, many analysts read that as a risk-off rotation. The reverse pattern is often read as risk-on. These are interpretations of positioning, not forecasts, and they work best alongside other evidence such as market breadth, the put/call ratio and volatility.

Common RRG mistakes

Treating quadrants as buy and sell signals. A sector entering Leading is information, not an instruction.
Forgetting it is relative. Always check absolute price trend as well.
Over-reading daily noise. Short tails on daily data jump around; weekly data is calmer.
Mixing benchmarks. Comparing sectors against SPY and stocks against their sector is fine, but keep each chart on one benchmark.
Ignoring the tail. Position without direction tells only half the story.

Relative rotation graphs in Nummius

Nummius Markets includes relative rotation graphs for all 11 sectors with playback of past rotation, alongside market breadth (advancing and declining issues), an economic trend tracker built on 12 macro indicators, the put/call ratio with 60-day history and a stock screener, so the rotation read sits next to the data that confirms or contradicts it. The daily market analysis on this blog uses the same sector ranks. These tools are part of Core, which has a 14-day free trial; see the pricing page.

Key takeaways

The horizontal axis is relative strength; the vertical axis is its momentum.
Leading, Weakening, Lagging and Improving tend to rotate clockwise, but hooks happen.
The tail’s direction and length carry most of the information.
Use weekly for the big picture, daily for timing, and always confirm on the price chart.

This article is for educational purposes only and is not financial advice. Relative rotation describes past relative performance and does not predict future prices. RRG® and Relative Rotation Graphs® are registered trademarks of RRG Research; Nummius is not affiliated with RRG Research.