Sector Rotation

Sector Rotation is a relative strength strategy for portfolio management on weekly bars — the classic institutional discipline of holding whichever sectors are beating the market and rotating out of those that aren't. It holds a sector while its smoothed relative strength versus the benchmark is above the 1.0 parity line (SECTORRS() > 1) and rotates out when it drops below.

It is a hard, trending, weekly strategy for portfolio management.

How it trades

Buy (sector beating the market):

SECTORRS() > 1

Sell (relative strength exit — sector lagging):

SECTORRS() < 1

When it works best

Institutional-style investing at its most literal: it works when leadership is dispersed and persistent — some sectors clearly outrunning the index for months at a time, which is the norm in a healthy trending market. Its stated precondition is that it requires sector benchmarks: you need a second, date-aligned index series, and the signal is only meaningful when the instrument is genuinely a constituent of that benchmark.

Its weakness is a market that moves as one block (correlations near 1), where every sector hugs parity and the crossings become noise — the smoothing reduces but does not eliminate this. A practical hardening is a neutral band (buy above 1.02, sell below 0.98) so marginal sectors are left alone.