Sector Momentum: Two Sectors Broke Out

Growth Leadership Broadens

The sector field widened without broad participation as of September 25, with five of the eleven S&P 500 sector ETFs positive on 3M momentum and a -2.5% median below zero. Energy XLE leads at 15.9%, the top-bottom spread is 29.8pp, and three sectors are below -5%. Two sectors broke out, two broke down, and leadership remains selective. 

XLE fell 4.6pp on the week and has been positive since July 17; its -0.59 correlation to SPY leaves a moderate inverse linkage for the leading sector. Technology XLK turned positive at 8.5% after a +9.3pp reversal, and Communication Services XLC climbed to 6.7%, up 5.2pp, with both in breakout leadership. Healthcare XLV is positive at 6.9% after -6.3pp, which keeps one defensive sector in the upper tier even as its pace faded. 

Consumer Staples Reached a New Range Low

Consumer Staples XLP turned negative at -2.5% after -2.6pp, and it crossed into the lower part of its 1-year range this week. 

Real Estate XLRE fell to -7.4%, down 5.2pp, and Utilities XLU slid to -13.9%, down 6.3pp, extending both breakdowns. Industrials XLI is -5.7%, Materials XLB improved to -3.0% after +0.2pp, and Consumer Discretionary XLY rose to -3.1% after +1.9pp. Financials XLF is positive at 2.7% after -1.9pp. 

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.