9. The big picture: macro, markets and news

Sectors, themes and rotation (BI, THEM, RRG)

BI shows sector and industry performance, THEM curated themes as equal-weight baskets with breadth, and RRG plots each sector's strength and momentum against the market.

  • 4 min
  • 3 questions
  • Lesson 2 of 6

Why you would care

Where is money flowing inside the market? "Tech is leading, utilities lag" or "money is rotating into energy" describe how investors shift between groups. A stock often moves with its group more than on its own news. Seeing group leadership tells you whether a move is about one company or a whole theme.

The idea from scratch

Sectors

A sector groups companies by business: technology, financials, energy, health care, utilities... The S&P 500 is split into 11 sectors, each tracked by an ETF (XLK technology, XLF financials, XLE energy...).

Themes

A theme is a story that cuts across sectors: "AI compute and data centers" includes chip makers, cloud companies and power suppliers. Gloom's themes are curated equal-weight baskets: each member counts the same, so one giant does not dominate.

Breadth = the share of members that rose. A theme up 2% with 90% breadth is a broad move; up 2% with 30% breadth means a few names did the work.

Rotation

Relative strength compares a group's price with the market's (a ratio, scaled so 100 = in line). Momentum measures whether that relative strength is rising or falling. Together they place each group in a quadrant:

QuadrantStrengthMomentumMeaning
Leadingabove 100above 100Beating the market and accelerating
Weakeningabove 100below 100Still ahead, losing steam
Laggingbelow 100below 100Behind and falling further
Improvingbelow 100above 100Behind but catching up

Groups tend to travel clockwise: improving, leading, weakening, lagging. The trail of weekly points shows the path.

Diagram: Improving leads to Leading; Leading leads to Weakening; Weakening leads to Lagging; Lagging leads to Improving.
Wide diagram: scroll sideways to see all of it.

See it in Gloom

Gloom screenshot: RRG: the 11 sector ETFs plotted by relative strength (across) and momentum (up) against SPY, with weekly trails and a table of quadrants
RRG: the 11 sector ETFs plotted by relative strength (across) and momentum (up) against SPY, with weekly trails and a table of quadrants. Historical example.

open themBI for sectors and industries (tabs Sectors and Industries; newer versions add a Themes tab), THEM for themes (in newer versions it opens that Themes tab), RRG for rotation.

  1. RRG quadrants: Leading top right, Weakening bottom right, Lagging bottom left, Improving top left.
  2. XLK Technology Leading 104.74 105.63: tech beats the market and accelerates.
  3. XLE Energy Weakening 101.09 95.70: still ahead, losing momentum.
  4. XLRE Real Estate Lagging 92.26, STR PCTL 1: the weakest relative strength of its past year.
Gloom screenshot: THEM, Themes tab
THEM, Themes tab: curated thematic baskets with 1-day, 1-week and 1-month returns and breadth. Captured 2026-10-06.
  1. In THEM: Cybersecurity +1.69% ... +21.18% (1M) breadth 100%: every member rose that day.
  2. Homebuilders -2.14% breadth 17%: a broad decline.

Practice and recap

Try it3 tasks
  1. In RRG, which sectors are leading? (Communication XLC and Technology XLK.)
  2. A theme is up 1% with breadth 25%. Broad or narrow? (Narrow: a few members did the work.)
  3. Utilities lagging at strength 89.28: is it beating or trailing the market? (Trailing.)
Common mistakes4 mistakes
  • Treating the clockwise cycle as a rule; groups can jump quadrants.
  • Ignoring breadth.
  • Comparing an equal-weight theme with a market-cap index without noticing the weighting difference.
  • Chasing the "leading" quadrant after the move.
Check yourself3 questions
  1. What does breadth measure?
  2. What does the Improving quadrant mean?
  3. Why use equal-weight baskets for themes?
Answers
  1. The share of a group's members that rose.
  2. Weaker than the market but gaining relative momentum.
  3. So that one very large company does not dominate the theme's return.
Words in this lesson7 words
sector
A group of companies in the same kind of business.
theme
A story that cuts across sectors, tracked by a basket.
equal-weight basket
Each member counts the same.
breadth
The share of members that rose.
relative strength
A group's performance compared with the market.
momentum (relative)
Whether relative strength is rising or falling.
rotation
Money moving from one group to another.

Educational material about reading market data, not investment advice.