How it works
A simple ratio divides sector index value by benchmark value. Its change, rather than its arbitrary starting level, shows relative performance. Normalize both series to the same initial value when comparing different index bases. Use consistent dates, currencies and dividend treatment; otherwise apparent leadership may reflect measurement differences.
Sector membership and index weights also matter. Classification systems such as GICS group companies by principal business activity, but an index may be concentrated in a few large constituents. Two funds carrying the same sector label can hold different companies or regions. Read their methodology before assuming interchangeable exposure.
Worked example
Suppose a fictional sector and benchmark both start at 100. The sector falls to 90 and the benchmark to 80. Absolute returns are −10% and −20%; the sector leads by 10 percentage points. Its relative factor rises from 1 to 90 / 80 = 1.125, a 12.5% relative increase. Outperformance has not prevented a loss for an unhedged holder of the sector.
Interpretation and limits
Rotation describes a changing pattern of leadership; a price ratio alone does not establish actual money flows or the reason for a shift. Rankings depend on the observation window and can reverse. Relative strength is not adjusted for volatility, concentration or transaction costs and does not guarantee future persistence.
Chart practice
Record matching available closed weekly or monthly bars and calculate the ratio separately if required. Inspect the sector's absolute trend alongside it. Student Wyckoff Pro supports chart analysis; this exercise does not imply a built-in rotation dashboard, RSI tool or automatic sector-allocation service.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
Open the first-chart instructions ↗