Methodology

Sector Rotation Heatmap

We compare each sector ETF to the S&P 500 (SPY) using relative strength. Relative strength is the ratio of sector price to benchmark price, which removes market beta and isolates sector performance. We use log returns (the institutional standard) rather than simple returns for additive, symmetric, and statistically stable metrics.

Our multi-horizon momentum stack uses three timeframes: 5 days (capital rotation, 20%), 21 days (monthly trend, 30%), and 63 days (quarterly leadership, 25%) — tilted toward persistence over noise. Participation filters — log-transformed volume (10%) and cross-sectionally ranked trend stability (15%) — confirm that moves are backed by institutional flow. Volume is log-transformed before ranking to prevent extreme spikes from dominating. Stability is percentile-ranked so sector-structural volatility differences don't bias scores. Each sector receives a regime label: Strong Leadership (80–100), Improving (60–80), Neutral (40–60), Weak (20–40), or Capital Outflow (0–20).

Market Regime

The market regime (risk-on, risk-off, or neutral) is derived from sector rotation scores. We split sectors into cyclical (e.g. Technology, Financials, Consumer Discretionary) and defensive (e.g. Utilities, Healthcare, Consumer Staples). When cyclical sectors as a group outperform defensives, we label the regime as risk-on. When defensives lead, it's risk-off. If neither group clearly leads, the regime is neutral.

Ratio Pairs & Regime Signals

Ratio pair analysis uses price ratios between asset pairs to infer relative strength and regime direction. Early warning pairs (HYG/LQD, RUT/SPX, XLY/XLP) lead turning points. Macro cycle pairs (Gold/Copper, TLT/SPX) and equity leadership (NDX/SPX, SMH/SPX) complete the picture. Rising ratios indicate numerator outperforming; falling ratios indicate denominator outperforming. A synthesis combines all pairs into a risk-on/risk-off outlook.

Sector Leaders

For each S&P 500 sector, we identify the strongest individual stocks among the top holdings of that sector's ETF. The methodology combines relative strength versus the market over medium-term and long-term horizons, trend signals (moving average crossovers and price position relative to key averages), and volume behavior (volume on up days vs. down days). Stocks are filtered for sufficient liquidity and history. Within each sector, we rank candidates and surface the leader and runner-up.

Fallen Angels

Fallen Angels are well-known, liquid stocks that have pulled back significantly from their 52-week highs. We screen a large-cap universe for stocks that have declined a meaningful percentage from their 52-week high — typically 20% or more — and apply a minimum volume filter to ensure tradability. Results are sorted by how far they've fallen. This screen surfaces potential value and mean-reversion candidates, not buy recommendations.

Data Sources

All price and volume data comes from publicly available market data. We use daily OHLCV (open, high, low, close, volume) and align historical series by trading date. Sector classifications follow standard industry taxonomies. Data may be delayed and is provided for informational purposes only.

Disclaimer

This methodology is described at a conceptual level. Scores, rankings, and signals are for informational and educational use only. They are not investment advice, and past results do not guarantee future performance. Always do your own research and consult a qualified financial professional before making investment decisions.