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Posted September 22, 2025 at 5:13 am
By Todd Stankiewicz CMT, CFP, ChFC
1/ Sector Rotation – What the RRG is Telling Us
2/ Consumer Discretionary (XLY) – Strong but Tired?
3/ Healthcare (XLV) – Patience Required
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Sector Rotation – What the RRG is Telling Us
I want to finish the week by looking at the S&P 500 sectors through a relative rotation graph (RRG). The RRG shows which sectors are leading, weakening, lagging, or improving relative to the broader index. Sectors usually move clockwise through these quadrants, which makes it a great way to visualize relative strength across the market.
Right now, consumer discretionary and communication services are firmly in the leading quadrant. Both have shown consistent strength compared to the S&P 500, and that is where the most momentum sits today. Technology, on the other hand, is rotating out of leading and into weakening. That is not a sell signal yet, but it is a reminder that leadership does not last forever.
The sector I am paying the most attention to is healthcare. It is moving out of lagging and into improving, which means relative strength is starting to build. If this continues, healthcare could be one of the more interesting opportunities in the weeks ahead.
The takeaway: discretionary and communication services are the leaders right now, but healthcare is worth keeping on the radar. Sector rotation does not happen all at once, and this setup highlights where new opportunities may be forming beneath the surface.
Consumer Discretionary (XLY) – Strong but Tired?
Now let’s focus on one of those leading sectors: consumer discretionary, using the XLY ETF as a proxy.
XLY bottomed near $173 back in March and has since rallied about 40 percent, trading recently around $241. That is a strong move in a short period of time. The chart shows support levels at $230–232, $213–215, and $205–207, while resistance sits right above at $242–243.
The trend is still strong. XLY is pressing against the upper Bollinger Band, which signals momentum but also short-term exhaustion. RSI is sitting in the mid to upper 60s, not extreme but close enough to suggest a pause would not be surprising.
The most likely path here is a pullback into the $235–238 range before resuming higher. A deeper reset could happen if the broader market weakens, but as long as XLY stays above $220–225, the uptrend remains intact.
Consumer discretionary remains one of the leading sectors on the RRG. A little consolidation now could set the stage for the next move higher.
Healthcare (XLV) – Patience Required
Healthcare has lagged much of the market this year. While the S&P 500 has climbed double digits in recent months, XLV has gained only about 2 percent. That underperformance is why it looks quiet on the surface, but it is also what makes it interesting.
The chart shows resistance near $140. A Bollinger Band squeeze is in place, which tells us volatility is building and a breakout or breakdown is coming. The squeeze does not tell us direction though. RSI is sitting around 50, which is neutral and waiting for a catalyst.
For XLV to push higher, three things need to happen.
On the RRG, healthcare is starting to move from lagging into improving, which shows relative strength turning. It does not mean outperformance will happen right away, but it does mean the setup is improving.
Patience is important here. Rotation takes time. Discretionary and communication services are leading today, but healthcare could be lining up to take a turn as leadership shifts.
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Originally posted 19th September 2025
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