Communication Services XLC led the downside and Healthcare XLV tops the weekly standings.
Dispersion sits in an elevated regime as of October 23, with the eleven S&P 500 sector ETFs trading further apart than their recent norm. A z-score of +1.08 marks an established high reading, and the spread narrowed modestly over the past five sessions.
Healthcare XLV leads the weekly table at +0.23 in Leading; its five-session move rolled lower, and the 13-week (intermediate) line stands at +0.13. Energy XLE is second as the other confirmed leader and rotated higher from within Leading, with strong positive 13-week backing. Utilities XLU posted the strongest upside rotation from Improving and is sixth. Financials XLF and Real Estate XLRE rebounded from lagging bases into the top four. Materials XLB is fifth in Improving after a smaller rise. Consumer Staples XLP and Consumer Discretionary XLY strengthened within Leading and rank seventh and eighth as emerging leaders. Technology XLK is ninth in Lagging after rolling lower.
Communication Services XLC led the downside rotation and ranks eleventh in Lagging at -0.89. Its 20-day (tactical) and 13-week lines read -0.38 and -0.03. Industrials XLI followed with the next sharpest decline and ranks tenth in Lagging, with both horizons negative and strong 13-week underperformance. Positive current-week readings covered nine of the eleven sectors.
How to read this report
The readings
13W, 20D, 5D: each day we compare a sector's return with the average return of the 11 sectors, each counted equally. The S&P 500 weights them by size, so the two can differ. We divide that gap by how much the sector usually moves in a day (its daily swings over the last 20 sessions), so a quiet sector and a volatile one are measured on the same scale. Each reading averages these daily scores over its window: 13W over the last 13 weeks (about a quarter), 20D over the last 20 sessions (about a month), 5D over this week. +0.50 means that on a typical day the sector beat the average by half its usual daily move; 0 means it matched the average.
In the text
Dispersion regime: how far apart the 11 sectors' returns were on the latest day (the spread of their daily returns), compared with that spread's average over the last 60 sessions. The z-score is the distance from that average, in units of the spread's usual variation (estimated with a GARCH model, which widens the unit when markets turn volatile). High-dispersion (+2 or more) and elevated (+1 to +2): sectors moving further apart than usual. Normal: -1 to +1. Transitional-low (-1 to -2) and low-dispersion (-2 or less): sectors moving more closely together than usual.
Ranks are this week's standings, by 5D. The quadrant (see On the chart) uses 13W and 20D, so a sector can rank near the top this week and still sit in Lagging.
On the chart
Quadrant: does 20D agree with 13W? The chart plots 13W across and 20D up. Leading: beat the average on 13W and is still beating it on 20D. Improving: trailed on 13W, but has beaten the average on 20D. Weakening: beat the average on 13W, but has trailed it on 20D. Lagging: trailed on 13W and is still trailing on 20D. In Improving and Weakening, 20D goes against the 13W trend. A reading near zero means a sector close to the average, whatever its quadrant.
Trails and dots: each sector's path over the last 5 sessions. The dot marks the latest session, coloured by its state (defined under the table).
Sector Leadership Matrix
| Sector | 13W Z | 20D Z | 5D Z | Velocity | Quadrant | State |
|---|
| Energy (XLE) | +0.16 | +0.33 | +0.22 | +0.16 | Leading | Confirmed Leader |
| Healthcare (XLV) | +0.13 | +0.12 | +0.23 | -0.05 | Leading | Confirmed Leader |
| Consumer Staples (XLP) | +0.07 | +0.27 | +0.10 | +0.03 | Leading | Emerging Leader |
| Consumer Discretionary (XLY) | +0.01 | +0.00 | +0.10 | +0.03 | Leading | Emerging Leader |
| Technology (XLK) | -0.00 | -0.33 | +0.02 | -0.13 | Lagging | Deteriorating |
| Materials (XLB) | -0.00 | +0.05 | +0.16 | +0.03 | Improving | Early Improving |
| Communication Services (XLC) | -0.03 | -0.38 | -0.89 | -0.31 | Lagging | Deteriorating |
| Financials (XLF) | -0.03 | -0.01 | +0.18 | +0.13 | Lagging | Rebound |
| Real Estate (XLRE) | -0.15 | -0.03 | +0.16 | +0.13 | Lagging | Rebound |
| Utilities (XLU) | -0.18 | +0.26 | +0.15 | +0.22 | Improving | Early Improving |
| Industrials (XLI) | -0.20 | -0.33 | -0.47 | -0.16 | Lagging | Deteriorating |
How to read this table
13W Z, 20D Z, 5D Z: the readings defined above; the table is sorted by 13W Z, strongest first.
Velocity: how much 20D changed this week; positive is rising, negative is falling. It is the vertical part of the sector's trail on the chart.
State: the quadrant refined by how 13W and 20D moved this week.
Confirmed Leader: Beat the sector average on 13W and 20D, and is one of the two strongest on 13W.
Emerging Leader: Beat the sector average on 13W and 20D, outside the two strongest on 13W.
Early Improving: Trailed on 13W and beat the average on 20D, by 0.20 or less (and at most 0.50 on 5D), or with 13W falling this week.
Rebound: Trailed on 13W and 20D, but 20D rose more than 0.05 this week and 13W did not fall.
Deteriorating: Trailed on 13W and 20D, and 20D fell more than 0.05 this week.
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.
