Communication Services XLC led the downside and Materials XLB tops the weekly standings.
Dispersion sits in a high-dispersion regime as of October 30, with the eleven S&P 500 sector ETFs moving further apart than their recent norm. The z-score is +2.14. The spread widened markedly over the past five sessions. The expansion decelerated, and the high reading is established.
Healthcare XLV and Materials XLB posted the fastest upside rotation and strengthened into Leading; XLV ranks second as a confirmed leader positive on both horizons, and XLB ranks first at +0.54. Materials XLB and Consumer Discretionary XLY are emerging leaders, positive on both horizons with near-zero intermediate backing; XLY climbed five places to third. Real Estate XLRE and Financials XLF rebounded from underperformance into Improving states at sixth and eighth, Consumer Staples XLP firmed in seventh inside Leading, and Industrials XLI rose to fifth from a lagging base. Utilities XLU held fourth in Improving after a tactical fade met firmer 13-week backing, and Energy XLE slid to ninth and ranks as a confirmed leader.
Communication Services XLC posted the field's longest downside rotation and ended eleventh at -1.16, negative on both horizons from a Lagging quadrant. Technology XLK rolled lower into tenth and sits in Weakening, with negative 20-day backing and a flat 13-week line. Nine of the eleven sectors hold positive current-week readings.
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) | +0.18 | +0.25 | +0.03 | -0.08 | Leading | Confirmed Leader |
| Healthcare (XLV) | +0.15 | +0.31 | +0.39 | +0.19 | Leading | Confirmed Leader |
| Consumer Staples (XLP) | +0.05 | +0.36 | +0.09 | +0.09 | Leading | Emerging Leader |
| Materials (XLB) | +0.01 | +0.24 | +0.54 | +0.19 | Leading | Emerging Leader |
| Technology (XLK) | +0.00 | -0.52 | -0.25 | -0.18 | Weakening | Strong Weakening |
| Consumer Discretionary (XLY) | +0.00 | +0.04 | +0.26 | +0.04 | Leading | Emerging Leader |
| Financials (XLF) | -0.05 | +0.11 | +0.08 | +0.12 | Improving | Early Improving |
| Utilities (XLU) | -0.10 | +0.22 | +0.22 | -0.04 | Improving | Strong Improving |
| Communication Services (XLC) | -0.13 | -0.62 | -1.16 | -0.24 | Lagging | Deteriorating |
| Industrials (XLI) | -0.14 | -0.32 | +0.20 | +0.01 | Lagging | Confirmed Laggard |
| Real Estate (XLRE) | -0.14 | +0.06 | +0.09 | +0.09 | Improving | Early Improving |
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.
Strong Improving: Trailed on 13W, but beat the average on 20D by more than 0.20 (or on 5D by more than 0.50), and 13W did not fall this week.
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.
Strong Weakening: Beat the average on 13W, but trailed it on 20D by more than 0.20.
Deteriorating: Trailed on 13W and 20D, and 20D fell more than 0.05 this week.
Confirmed Laggard: Trailed on 13W and 20D, among the four weakest on 13W, with little change 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.
