Sector Rotation: Dispersion Slips Into Transitional-Low, Z-Score -1.37

Health Care XLV led the sharpest downside rotation as Energy XLE tops the weekly standings.

Sector selection runs through narrower relative-strength gaps as dispersion across the eleven S&P 500 sector ETFs sits in a transitional-low regime as of September 11. The dispersion z-score is -1.37 against its GARCH-normalised mean, and the spread narrowed modestly over the past five sessions. That fresh narrowing leaves single-session extremes mean-reversion-prone, so relative moves matter more than spread width.

Technology XLK and Communication Services XLC posted the fastest upside rotations, and Energy XLE tops the weekly standings at +0.55 as a confirmed leader in the Leading quadrant. XLK is an emerging leader, positive on both the 20-day (tactical) and 13-week (intermediate) horizons with near-zero intermediate backing, and XLC climbed to third from an improving base. Industrials XLI rebounded tactically and jumped seven ranks to fourth from lagging ground. Utilities XLU reached fifth with only a shallow lift and a negative 13-week line. The upside concentrates in the confirmed and emerging leaders plus a tactical recovery cluster, so leadership is selective rather than broad.

Health Care XLV led the downside rotation; it fell seven ranks to eleventh at -0.46 as both the 20-day and 13-week lines deteriorated inside the Leading quadrant. Materials XLB and Consumer Discretionary XLY filled out the downside cluster from lagging territory, and Consumer Staples XLP drifted lower. Real Estate XLRE recovered tactically into sixth from a lagging base, and Financial XLF slipped to eighth despite a mild positive 13-week line. Five of the eleven sectors hold positive current-week readings, and the positive half leans on rebound and early-improving states more than on established 13-week leadership.

Sector Rotation Map

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.