Sector Rotation: Dispersion Slips to Transitional-Low, Z-Score -1.72

Industrials XLI drove the week's sharpest upside rotation and Technology XLK tops the standings.

Dispersion across the eleven S&P 500 sector ETFs sits in a transitional-low regime as of October 2, a beta-driven market with less room for stock and sector selection. Its z-score against the GARCH-normalised mean is -1.72, and the spread narrowed modestly over the past five sessions. The move into this low-dispersion regime is recent.

Industrial XLI drove the strongest upside rotation in the field and ranks fourth as an early improver, with positive 20-day (tactical) strength and mild negative 13-week (intermediate) backing. Technology XLK tops the weekly standings at +0.48. It strengthened further inside the Leading quadrant, and its 13-week reading is +0.11. Utilities XLU rebounded from a lagging base and jumped seven ranks to second. Energy XLE ranks third as a confirmed leader with positive readings on both horizons. Consumer Discretionary XLY ranks fifth from a lagging base with little weekly movement.

Financial XLF led the downside rotation and finished last at -0.38; its 13-week reading is -0.03. Health Care XLV posted the sharpest rank fade, down five places to tenth. Communication Services XLC slipped two places to sixth as it rolled over from a leading position. Consumer Staples XLP deteriorated to ninth. Materials XLB ranks seventh and Real Estate XLRE ranks eighth, each with little weekly movement from lagging positions. Three of the eleven sectors hold positive leadership states.

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.