Weekly Momentum: Technology Surges while Staples Break Down

Sector Breadth Improved, but Leadership Narrowed Hard

Technology (XLK) led at 24.5% three-month momentum — the rate at which price has changed over the past 13 weeks — up 11.9 points on the week. Breadth (the share of ETFs with positive momentum) rose to 72.7%, with 8 of 11 sectors above zero. The regime (the prevailing momentum direction) narrowed hard around one aggressive winner while several cyclical and defensive groups deteriorated.

XLK Leads Sectors while XLP and XLI Break Down

Technology (XLK) broke out to 24.5%, up 11.9 points, near its own 1-year high, with a 13-week rolling beta of 1.47 and correlation of 0.90 to SPY, confirming an amplified sector move still tightly aligned with the broad market. Consumer Discretionary (XLY) rose to 2.1%, up 4.0 points, and entered breakout. Communication Services (XLC) climbed to 1.3%, up 3.8 points.

Energy (XLE) cooled to 5.3%, down 10.7 points, with beta of -1.31 and correlation of -0.82, moving decisively against the broad equity tape rather than alongside it. Real Estate Sector (XLRE) remained firm at 6.5%, down 1.2 points, but momentum plateaued near highs. Materials (XLB) slowed to 0.6%, down 4.1 points, with beta of 0.44 and correlation 0.32, a low-amplitude move driven more by sector-specific weakness than by the market.

Industrials (XLI) slipped to 0.3%, down 4.5 points, entering breakdown while sitting near a 1-year low in its own history. Consumer Staples (XLP) fell to -3.7%, down 5.1 points, and entered breakdown, with beta of 0.27 and correlation 0.29, leaving it only loosely connected to the equity rally. Healthcare (XLV) stayed deepest in negative territory at -8.6%, down 2.8 points, with beta of 0.52 and correlation 0.57. Breadth improved, but leadership became less diversified as Technology overwhelmed the rest of the field.

Momentum Heatmaps

S&P 500 Sector Momentum

Beta & Correlation vs SPY — 3M Rolling

S&P 500 Sectors — Correlation vs SPY

S&P 500 Sectors — 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.