rates +2.1sd, growth +0.1sd this week; growth +0.1sd is 0.63sd short of the 0.75sd band; 13-week trend: no trend (rates +1.3sd, growth -0.1sd per quarter); 2s10s flattened 12bp over the month
Leading now
Life Sciences Tools & Services (GICS)new+2.1
shorts covering · institutions cut last quarter
Advanced packaging and testreversal+1.9
Communications Equipment (GICS)reversal+1.8
shorts adding · institutions added last quarter
Semiconductors (GICS)2nd wk up+1.5
Look at
Life Sciences Tools & Services (GICS)new+2.1
shorts covering · institutions cut last quarter
Semiconductors (GICS)2nd wk up+1.5
Driver moved first: Agricultural inputs (Wheat (IMF) +2.2sd, basket flat); Growth medical devices (10y Treasury +2.1sd, basket flat); SMR and advanced reactors (10y Treasury +2.1sd, basket flat)
Move out of
Industrials (sector)4th wk down-0.9
Vertical SaaS2nd wk down-3.1
driver confirms · shorts covering
Insurance brokers3rd wk down-2.0
crowded short · shorts covering · institutions cut last quarter
Insurance Brokers (GICS)3rd wk down-1.8
crowded short · shorts covering · institutions cut last quarter
Health Care Equipment (GICS)3rd wk down-2.2
institutions cut last quarter
Exchanges and market structure2nd wk down-1.8
driver contradicts
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
Inflation pricing moved up with no matching growth signal, so the regime is unresolved. Driven by this week's core CPI print. Yields rose without breakevens, which is a real-rate move. CCC spreads widened a little (+0.9sd) with high yield flat; one week, not yet a warning. The dollar weakened.
What rose was AI capex, with nothing clearly falling against it. Datacentre baskets rising while software fell says AI capex is intact and the software sell-off is about rates and the application layer, not tech.
The most unusual move is Vertical SaaS at -3.1sd with 100% of members down. Its driver moved the same way (10y Treasury +2.1sd), so this reads as the real-world series repricing, not a rotation. Shorts were covering into the fall, which reads as capitulation rather than a fresh leg. Its parent sector has no implied-vol reading, so the options market says nothing about this one either way. Across the sectors, options on financials are priced as if it will swing 16% a year while it has actually been swinging 9%, the largest overpayment of the eleven. 3 sub-industries moved broadly with no hand basket over them, the largest Health Care Equipment at -2.2sd, and 2 of them are technology, so there is no technology basket at all. One unnamed cluster of 9 names moved together (-1.3sd, cohesion 0.35). Look at the ticker list before believing it; low cohesion clusters are usually noise. What decides next week: whether CCC widening spreads into broad high yield.
Rotation quadrant
undecided
rates +2.1sd · growth +0.1sd
Neither axis moved enough to name a regime, so there is nothing to call yet. Growth came closer than rates (+0.1sd) and is nowhere near the bar. The last 13 weeks have no direction either, so this is not a pause in the middle of a bigger move.
Big dot = this week, small = prior weeks. Right = 10y up, up = cyclicals beat defensives. Grey cross = no real move.
XLK+0.1
XLC+0.2
XLY-0.7
XLF-0.9
XLI-0.9
XLB-1.4
XLE+0.7
XLV-1.8
XLP-1.0
XLU-0.7
XLRE-0.6
Sectors: each ETF’s week vs its own normal week.
Rates and curve
8 moved
7 up, 1 down of 12, about 5 by chance
More rates series moved than chance explains: 8 of 12 against about 5 in a quiet week, 7 up and 1 down. The biggest was 3m bill (+3.0sd).
nowa month agoa year ago
Yields by maturity, today vs a month and a year ago.
3m bill+9bp+3.0
5y Treasury+21bp+2.4
2y Treasury+19bp+2.1
10y Treasury+17bp+2.1
-3sd0+3sd
Bars: this week’s move vs a normal week for that series; grey band = noise.
Credit, liquidity, risk
12 moved
9 up, 3 down of 23, about 10 by chance
More credit and liquidity series moved than chance explains: 12 of 23 against about 10 in a quiet week, 9 up and 3 down. The biggest was Oil vol (OVX) (+2.5sd).
Oil vol (OVX)+35.14%+2.5
Overnight RRP+4.6bn+2.2
VIX 3m+12.04%+1.9
VIX+22.78%+1.9
Copper- #1, managed money+12.72%+1.7
Treasury general acct-84.6bn-1.6
VIX 9-day+20.89%+1.1
Broad dollar-0.57%-1.0
-3sd0+3sd
Crowded: Copper- #1, managed money long +1.5sd
Spreads, Fed plumbing, vol, dollar, oil, futures positioning. Right = wider, bigger or higher this week. Crowded = where speculators already sit, from CFTC.
Themes
12 moved
5 up, 7 down of 81, about 11 by chance
More baskets moved than chance explains: 12 of 81 against about 11 in a quiet week, 5 up and 7 down. One of them was carried by a couple of names rather than the whole group, so it is not really a theme.
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. (GICS) = mechanical sub-industry basket, not hand-picked. * = members did not agree beyond chance, so not read as a theme.
Discovery
1 unnamed
4 groups found
9 stocks moved together with no basket covering them (-1.3sd), but they only move together loosely, so it is probably coincidence (cohesion 0.35).
Stocks that moved together this week, found without the basket list. Thin bar = how tightly; short = probably noise.
Options market
calm
VIX/VIX3M 0.85 (-0.3sd vs 3y); SKEW 154 (+1.1sd)
One month of protection on the S&P is unusually cheap against three months, which is the shape of a market expecting nothing soon (ratio 0.85). Options on financials are priced as if the sector will swing 16% a year while it has actually been swinging 9%, the largest overpayment of the sectors here. Only 2 weeks of this sector data is stored, so the levels are readable but there is nothing to compare them against yet.
sector
IV
wk
realised
gap
Financials
16
9
+7
Industrials
20
14
+6
Consumer staples
17
10
+6
Materials
19
14
+5
Technology
28
25
+2
Real estate
16
14
+2
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.
Positioning by basket
7 moved and tagged
universe shorts +3.9% on the last print; 13F holders +1.3% last quarter
The falls happened in names people had already bet against. 2 of the 4 baskets that fell were among the most shorted in the index before this week even started, so there is less fuel left in the move. How current this is: the short-interest column counts bets placed as of 31 August, about 2 weeks ago. The 13F column is older still, 31 March, about 5 months ago, so “institutions added last quarter” means more funds held these names at that date. It says nothing about what anyone did during this move.
basket
wk
DTC z
shorts31 Aug
13F31 Mar
read
Vertical SaaS
-3.1
+0.2
-11%
shorts covering
Health Care Equipment (GICS)
-2.2
+0.9
+3%
-3%
institutions cut last quarter
Life Sciences Tools & Services (GICS)
+2.1
+0.1
-5%
-5%
shorts covering, institutions cut last quarter
Insurance brokers
-2.0
+3.0
-4%
-3%
crowded short, shorts covering, institutions cut last quarter
Insurance Brokers (GICS)
-1.8
+3.0
-6%
-6%
crowded short, shorts covering, institutions cut last quarter
Communications Equipment (GICS)
+1.8
+0.7
+5%
+16%
shorts adding, institutions added last quarter
Datacentre and grid contractors
+1.6
+0.0
+8%
shorts adding
Per basket, median of members. DTC z = days-to-cover against each name's own 3 years (over +1.5 = crowded short). Shorts = change in short shares on the last FINRA print minus the universe. 13F = change in institutional holder count last quarter minus the universe. Slower prints than price; context, not triggers.
Blind spots
3 uncovered
26 sub-industry baskets beside 55 hand baskets
3 sub-industries moved as a group this week and none of your 55 baskets covers them, so you had no way to see them. 2 of them are technology (Communications Equipment and Semiconductors), which means you have no technology basket at all.
Health Care Equipment81%-2.2
Communications Equipment100%+1.8
Semiconductors87%+1.5
-3sd0+3sd
Every S&P 500 name grouped by its GICS sub-industry, scored like a hand basket. Listed: sub-industries that moved broadly this week with no hand basket covering them, so the taxonomy missed them. Disagree = a hand basket and its sub-industry cousin moved opposite ways.