Sector Momentum: Two Sectors Broke Out

Sector Breadth Is Thin

Sector breadth stays thin as of October 2. Four of the eleven S&P 500 sector ETFs hold positive 3M momentum, the median is -4.6%, and Energy XLE leads at 18.7%. The cross-section spread is 31.0pp, and that gap widened by 1.2pp from last week.

XLE has been positive since July 17, and its -0.56 correlation to SPY gives the leading sector a hedge-like profile against the index. Technology XLK at 10.8% joined Energy in breakout, and its 2.04 beta marks the second leader as high-amplitude growth. Healthcare XLV and Communication Services XLC are positive at 1.9% and 1.0%.

Financials 3M Momentum Crossed Below Zero

Financials XLF turned negative at -3.5% after a 6.2pp drop and crossed into the lower part of its 1-year range this week. Its 0.35 beta leaves that move muted in amplitude.

Consumer Staples XLP to Consumer Discretionary XLY span -4.6% to -5.8%. Industrials XLI and Real Estate XLRE are -7.3% and -7.9%. Utilities XLU remains last at -12.3%, and its -0.17 correlation to SPY stays mildly inverse.

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.