Sector Momentum: Consumer Discretionary Turned Positive and Entered Breakout

Defensive and Cyclical Breakouts Coexist

Two breakouts and two breakdowns leave the eleven S&P 500 sector ETFs split on 3M momentum as of October 23. Energy XLE leads at 17.0%, and Industrials XLI trails at -9.6%. Six sectors are positive, the median is 0.6%, and the 26.6pp spread widened by 1.2pp.

XLE has held positive for 13 weeks, and its -0.56 correlation to SPY leaves the leader moderately inverse to the market. Healthcare XLV joins the upper tier. Consumer Staples XLP is in breakout at 5.6% and is gaining pace in a convex uptrend.

Communication Services 3M Momentum Crossed Below Zero

Communication Services XLC turned negative at -0.4%, and its 0.89 beta keeps the move close to market amplitude. Consumer Discretionary XLY turned positive at 3.6% after a 6.0pp jump and is in breakout. The two sign flips split the cyclical growth group.

Utilities XLU is in breakdown at -7.4%, and its -0.13 correlation to SPY offers only a weak hedge. Industrials XLI lost 3.4pp and is in breakdown, and its 0.86 beta keeps the laggard near market amplitude. Materials XLB is positive, and Financials XLF plus Real Estate XLRE add two more negatives.

Breakout: 3-month momentum above the group median and in the top half of the fund's own 1-year momentum range, after a weekly rise in momentum in the top quarter of the group.
Breakdown: 3-month momentum below the group median and in the bottom half of the fund's own 1-year momentum range, after a weekly fall in momentum in the bottom quarter of the group.

S&P 500 Sectors ETFs Heatmaps

WEEKLY · 13 WEEKS

How to read: each cell is the ETF's price change over the previous 13 weeks, as of that week. Read across a row to see its momentum build or fade over the last 13 weeks; read down the last column to compare ETFs this week.

WEEKLY · 13 WEEKS

How to read: each cell is how closely the ETF's weekly returns moved in the same direction as SPY over the 13 weeks to that date: 1 moves with SPY, 0 moves independently, below 0 moves opposite. It says nothing about how far it moved.

WEEKLY · 13 WEEKS

How to read: each cell is how far the ETF moved for each 1% move in SPY, over the same 13 weeks: 1.0 moves in line, 1.5 moves half as much again, 0.5 half as much. Read it with correlation: a high beta only describes the ETF's typical move when its correlation is high too.

Romain Gandon
CEO, Quantlake

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Past performance is not indicative of future results.