Sector Momentum: Technology Leads at 33.0%

Growth Concentrates Sector Leadership

As of July 2, eight of the eleven S&P 500 sector ETFs are positive on the 3M momentum measure, and the median sits at 8.3% beneath a wide upper tail. Technology XLK leads at 33.0%. The 42.5pp top-to-bottom spread, one breakout, and one breakdown leave a sector map with concentrated growth leadership and a separate inverse defensive cluster.

Technology XLK has been positive since April 17 and amplifies SPY at 1.87 beta. Consumer Discretionary XLY added 0.1pp to 8.5% (beta 1.41, correlation 0.90), while Communication Services XLC has been negative since May 22 at -1.6%. Growth leadership sits with market beta, and the drawdown outside technology is selective.

Financials Broke Out

Financials XLF added 0.3pp to 12.7% and moved into the section's lone breakout (beta 0.29, correlation 0.33). Industrials XLI at 12.6% and Healthcare XLV at 12.0% reinforce the middle ranks, XLV on a -0.62 beta and -0.44 correlation that places it in the inverse cluster. Consumer Staples XLP added 0.2pp to 4.5% (beta -0.24, correlation -0.30). Positive breadth away from tech now comes from low-amplitude cyclicals and a defensive inverse shelf.

Real Estate XLRE fell 5.8pp to 8.3%, and its beta compressed from 0.82 to 0.03, so a near-high rank now has almost no market amplitude. Utilities XLU turned negative at -0.6% and moved into a breakdown state; its recent inverse reading to SPY is a short-window signal off a near-zero baseline. Energy XLE has been negative since June 18 at -9.5%, and its -0.53 correlation with SPY leaves the laggard in the inverse tail. The weak end splits between rate-sensitive decay and commodity-linked inversion, so sector breadth is positive and the distribution is bifurcated.

S&P 500 Sectors ETFs Heatmaps

S&P 500 Sectors ETFs: 3M Momentum

S&P 500 Sectors ETFs: 3M Correlation vs SPY

S&P 500 Sectors ETFs: 3M Beta vs SPY

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.