When markets are moving up, more groups and stocks may be moving down. The power of the few winners overwhelms the many losers. This is known as negative divergence. When markets are going down, more groups and stocks may be moving up, but the power of the losers overwhelms the performance of the winners. This is known as a positive divergence.
Divergences normally resolve within six months of the evidence of the condition.
Negative divergences either resolve with a broadening of the market and more upside or the markets collapse. Positive divergences normally resolve with a strong market rally or a deterioration in breadth and retest of old lows. Pinpointing impending sector rotation can be done using technical analysis, using broken trendlines or major moving averages. See technical analysis. Relative strength is a line that tracks this performance, and can be analyzed like any other chart.