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2012issue C0878-79

Building a sector-rotation histogram from rate-of-change spreads

This archive construction locks one shared-lookback on every sector proxy, averages a two-name cyclical side against a three-name defensive side, and scales that spread into a histogram-overlay. Editorial note: read the bars as a regime frame for a single trade, not as a standalone trigger.

  • Apply one shared-lookback to every sector proxy so each current close is compared with a close the same number of sessions back.
  • The defensive-average is the mean of three close-to-lookback ratios on the energy, utilities, and consumer-staples proxies labeled XLE, XLU, and XLP.
  • The sector-rotation-composite is 100 times the two-name cyclical-average minus the defensive-average, then drawn as a histogram-overlay on a daily chart.
  • Editorial reading: use the histogram to sketch rotation forces around one trade rather than as a buy or sell trigger on its own.
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Rate of Change1 readingCurrent trackSector rotation10 readings

Lock one lookback across the proxies

The archive walk-through builds a sector-rotation-composite from close-to-lookback ratios and places that reading beside price as a histogram-overlay.

Every sector proxy uses the same shared-lookback. When the custom function inputs are added, that length is set to 75, so each current close is compared with the close the same number of sessions earlier.

Average a cyclical side against a defensive side

The defensive-average is the mean of three close-to-lookback ratios on energy, utilities, and consumer-staples proxies labeled XLE, XLU, and XLP. That mean is the bear-side term.

The cyclical-average is the mean of two bull-side close-to-lookback ratios. The archive calls this two-name side a bullish composite. The finished sector-rotation-composite is 100 times that composite minus the defensive-average.

Draw the spread as a histogram overlay

After the custom function is saved, it is added to a daily chart and switched to a histogram appearance. The histogram-overlay lets the scaled cyclical-minus-defensive reading sit beside a price series.

A spreadsheet implementation of the same construction is shown as a 75-day rate-of-change visualization on a broad equity benchmark.

The write-up presents the indicator as a way to visualize rotation forces and suggests trying other available indexes as sector proxies.

S&P 500 with 75-day sector-rotation histogram

The lower pane is Siligardos’ sector-rotation model on a 75-day rate-of-change lookback: a two-name cyclical average minus a three-name defensive average, scaled by 100 and drawn as a histogram under the S&P 500. Bars stay near zero through the mid-2000s, then jump above 40 into the 2008–09 break, so the spread frames a risk-off regime rather than giving a standalone entry. Values were read off the August 2012 Traders’ Tips Excel figure, not from a printed table.
The lower pane is Siligardos’ sector-rotation model on a 75-day rate-of-change lookback: a two-name cyclical average minus a three-name defensive average, scaled by 100 and drawn as a histogram under the S&P 500. Bars stay near zero through the mid-2000s, then jump above 40 into the 2008–09 break, so the spread frames a risk-off regime rather than giving a standalone entry. Values were read off the August 2012 Traders’ Tips Excel figure, not from a printed table.S&P 500 (^GSPC) with SRMind(75) · daily · 1998-07-31T00:00:00.000Z to 2012-02-29T00:00:00.000Z

Lookback is fixed at 75 sessions as the tip instructs. Daily histogram bars were sampled at the printed date ticks plus the visible extremes; y-values are approximate to the labeled 20-point grid.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
5 of 10 in the Sector rotation track
201274-77 pp.Next on Sector rotationConstructing a bull-bear sector rotation overlayA sector-rotation-oscillator is a scaled cyclical-versus-defensive rate-of-change spread used to classify broad-market regime on a weeks-to-months horizon.
All readings on this track · 10 readings
  1. 2001Constructing relative-strength ratios for spreads and rotation
  2. 2001Sector rotation, timing and leverage as a regime case study
  3. 2004Read one stock idea as a late-cycle puzzle
  4. 2004Always-on delayed-weak and live-strong sector sleeves
  5. 2012Building a sector-rotation histogram from rate-of-change spreads
  6. 2012Constructing a bull-bear sector rotation overlay
  7. 2012A relative-performance heatmap for pairs trading and sector rotation
  8. 2014Evaluating an annual contrarian sector rank-rotation
  9. 2014A ranking workflow that treated sector rotation as an abstention procedure
  10. 2015A nine-sector sleeve drill on the business-cycle map
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2001Constructing relative-strength ratios for spreads and rotation2001Sector rotation, timing and leverage as a regime case study2004Always-on delayed-weak and live-strong sector sleeves2004Read one stock idea as a late-cycle puzzle2012Constructing a bull-bear sector rotation overlay