Market Rotation Basics: Index, Sector, and Intraday Auction Rotation Explained
Market rotation basics explain how money moves through the market. It shifts between indices, sectors, and even price ranges inside the session. If you ignore rotation, you’ll constantly misread strength, fade the wrong moves, and trade against the real flow.
Index Rotation Basics
Index rotation happens when money flows from one major index to another:
- ES (S&P 500) – broad market
- NQ (Nasdaq) – tech/growth
- RTY (Russell 2000) – small caps
- YM (Dow) – industrials/value
When tech is ripping and ES is dragging, that’s rotation. When RTY leads, risk appetite is high. This ties directly into market breadth basics, because leadership tells you where momentum is actually coming from.
Sector Rotation Basics
Sector rotation is the flow between groups of stocks:
- Growth – tech, semiconductors, communications
- Value – financials, industrials, energy
- Defensive – healthcare, utilities, staples
If tech rolls over but financials and energy pick up the slack, ES can hold up even while NQ dumps. That’s why understanding rotation is critical—index moves don’t exist in a vacuum.
Intraday Auction Rotation Basics
Intraday rotation is exactly what you saw in market profile basics and market auction basics:
- Rotations inside a balanced range
- Back-and-forth movement between VAH, VAL, and POC
- Rejection at extremes → rotation to the opposite extreme
Intraday rotations are the heartbeat of a balanced session.
How Index, Sector, and Intraday Rotation Interact
The three types of rotation aren’t separate—they feed into each other:
1. Sector rotation drives index rotation
If tech leads, NQ leads. If financials lead, ES and YM firm up.
2. Index rotation shapes intraday auction behavior
When leadership flips mid-session, rotations inside value get sharper and faster.
3. Intraday auction rotation reveals when sector/index rotation is weakening
If the auction keeps rejecting highs that the leading index is pushing toward, the leadership is fake.
Basic Rotation Checklist
Before trading, ask:
- Which index is leading?
- Which sector is powering that index?
- Is the market in a rotational (balanced) or trending regime? See market regime basics.
- Is intraday rotation expanding or collapsing?
Once you line up all three, trades become obvious.
Market Rotation Basics Tell You Where the Real Flow Is
Rotation shows where money is going and where it’s leaving. If you track index strength, sector leadership, and intraday auction rotations together, you stop trading blind and start trading with actual flow, not guesses.