Optics and datacentre interconnect2 of last 4 wks down-2.2
Look at = up this week, members agreeing beyond chance, and 2 weeks running or a move over 2.0sd. Move out of = same rules, downward. Mechanical ranking of residual moves, checked by the backtest, not a forecast. Tags: driver = the basket's real-world series moved with it (confirms) or against it; shorts and institutions from FINRA and 13F, against the universe; vol = parent sector implied vol on the week. Backtest 2023-04-07 to 2026-09-04, look-at minus move-out-of vs sector: 1 week +0.52% (t 1.83, 166 wks), 4 weeks +0.64% (t 0.85). Positive but not significant at 4 weeks: a screen with a weak one-week edge, not a signal. sd = size of the move vs a normal week for that series; under 0.75 is no move, 2 is big.
The view
The market leaned toward stagflation fear without committing. Driven by crude, this week's core CPI print. Cyclicals underperformed defensives (-0.5sd). CCC spreads widened a little (+1.7sd) with high yield flat; one week, not yet a warning. The dollar weakened.
The baskets that rose were hard-asset and commodity-linked; the ones that fell were domestic cyclical. Rails down with dry bulk up means seaborne commodity demand firm, domestic freight soft.
The most unusual move is Agricultural inputs at +3.5sd with 100% of members up. The discovery layer found that group on its own from raw co-movement, which makes it a real driver rather than noise. Its drivers disagree (DBA -1.0sd, Maize (IMF) +1.2sd, Wheat (IMF) +2.2sd, Soybeans (IMF) +1.3sd). The options market is most worried about XLF: implied 16 against 20 realised, the widest gap of any sector. One unnamed cluster of 7 names moved together (+1.5sd, cohesion 0.35). Look at the ticker list before believing it; low cohesion clusters are usually noise. What decides next week: whether the 10-year clears the deadband, which would decide the quadrant; whether cyclicals against defensives clears the deadband.
Rotation quadrant
undecided
rates +0.6sd · growth -0.5sd
13-week trend: no trend
Big dot = this week, small = prior weeks. Right = 10y up, up = cyclicals beat defensives. Grey cross = no real move.
XLK+0.3
XLC-0.3
XLY-0.8
XLF+0.0
XLI-0.6
XLB-0.7
XLE+0.7
XLV+0.1
XLP-0.7
XLU+0.3
XLRE-0.6
Sectors: each ETF’s week vs its own normal week.
Rates and curve
2 moved
2 up of 12, about 5 by chance
nowa month agoa year ago
Yields by maturity, today vs a month and a year ago.
5y breakeven+7bp+1.4
10y breakeven+4bp+0.9
5y Treasury+6bp+0.7
10y Treasury+5bp+0.6
-3sd0+3sd
Bars: this week’s move vs a normal week for that series; grey band = noise.
Credit, liquidity, risk
6 moved
4 up, 2 down of 23, about 10 by chance
CCC OAS+28bp+1.7
WTI+8.17%+1.4
Broad dollar-0.57%-1.0
IG OAS+2bp+0.9
Gold, managed money-5.51%-0.9
Brent+6.99%+0.8
HY OAS+8bp+0.7
BBB OAS+2bp+0.7
-3sd0+3sd
Positioning: nothing crowded against its 3-year range.
Spreads, Fed plumbing, vol, dollar, oil, futures positioning. Right = wider, bigger or higher this week. Crowded = where speculators already sit, from CFTC.
Baskets on one idea, after stripping out market and sector. % = members moving the same way; higher = more believable. ✓ ✗ = its real-world driver moved with or against it. (SIC) = mechanical sub-industry basket, not hand-picked. * = members did not agree beyond chance, so not read as a theme.
Discovery
1 unnamed
2 groups found
7 names, no basket+1.5sd
ATRC CI CLH CMG FMC NVRI VRNS
Agricultural inputs+1.5sd
CF IPI MOS NTR PZZA RLX
Stocks that moved together this week, found without the basket list. Thin bar = how tightly; short = probably noise.
Options market
calm
VIX/VIX3M 0.87 (-0.7sd vs 3y); SKEW 149 (+0.8sd)
sector
IV
wk
realised
gap
Financials
16
20
-4
Consumer staples
17
20
-4
Industrials
20
28
-8
SPY
13
23
-10
Materials
19
29
-10
Real estate
16
27
-11
1 week of implied vol held; z-scores from 30.
Front VIX over 3-month VIX: above 1 = stress is now. SKEW high = the tail is already hedged. Per sector: implied vol a month out, its change this week, realised vol last month, and the gap. Biggest gap = where options are most worried relative to what price did.