How last weekend's scorecard settled
- Tech (XLK) on the sector map: it dropped into Lagging. Last week it was Weakening at 100.5 / 99.4; now it's 99.8 / 98.6. Last Saturday's edition said a drop into Lagging would make this a lasting rotation, and it happened in one week.
- The four bond funds on the asset map: all four are still Improving and closer to the line. TLT and IEF moved from 98.7 and 98.8 to 99.3, with momentum above 102. None crossed into Leading, and US stocks kept their lead, so the asset read stayed RISK-ON, FADING.
- Korea and Taiwan on the world map: the selling didn't spread. Taiwan stayed Weakening and didn't fall into Lagging. Korea's momentum turned up, from 97.2 to 97.8, and Korea rose 0.6%, the best of the eleven markets. That's the first sign last week's chip selling is easing, though Thursday showed it isn't over.
- Energy and commodities: both stayed Leading. Oil's lowest close was 97.15 on Wednesday, above the 96.52 pivot, and it finished the week at 103.27.
- The sector read itself: RISK-OFF for a second week. It didn't turn to RISK-OFF, BOUNCING.
The week
On the surface, a quiet week. The S&P 500 slipped 0.5%, the Nasdaq 0.7%, and the Dow rose 0.4%. World stocks (ACWI) fell 0.6%. The VIX ended at 19.45, a little lower than a week ago.
Underneath, it was two weeks in one. Through Wednesday, stocks rose: SPY hit 773.09 and QQQ 725.20. On Thursday, the chip trade sold off again. QQQ fell 2.9% in a day, Taiwan 4.6% and Korea 5.0%. SPY gave back its gains and ended the week at 759.97.
What rose tells the story. Small caps (IWM) gained 2.0%. Energy and health care led the sectors, and long Treasuries (TLT) rose 1.6% as the 10-year yield fell back under 5%, to 4.988%. What fell: communications (XLC) lost 4.4%, gold lost 4.0%, and China lost 4.5%.
Gold is the odd one out. In a week when money moved to safety inside stocks and into bonds, gold fell, as it did last week. Safe havens aren't moving together.
The week in one table
| Sectors | Week | Assets | Week | World | Week |
|---|---|---|---|---|---|
| Energy (XLE) | +1.6% | Small caps (IWM) | +2.0% | Korea (EWY) | +0.6% |
| Health care (XLV) | +1.5% | Long Treasuries (TLT) | +1.6% | US (SPY) | −0.4% |
| Real estate (XLRE) | +1.0% | Commodities (DBC) | +1.1% | Japan (EWJ) | −0.8% |
| Utilities (XLU) | +0.8% | 7–10y Treasuries (IEF) | +0.7% | UK (EWU) | −1.0% |
| Materials (XLB) | +0.8% | Corporate bonds (LQD) | +0.4% | Taiwan (EWT) | −1.3% |
| Staples (XLP) | +0.7% | High yield (HYG) | +0.3% | Emerging (EEM) | −1.3% |
| Financials (XLF) | +0.7% | Dollar (UUP) | +0.1% | Germany (EWG) | −1.5% |
| Discretionary (XLY) | +0.6% | US stocks (SPY) | −0.4% | Hong Kong (EWH) | −1.6% |
| Tech (XLK) | −0.1% | Developed ex-US (EFA) | −0.9% | France (EWQ) | −1.8% |
| Industrials (XLI) | −1.9% | Emerging (EEM) | −1.3% | India (INDA) | −2.5% |
| Communications (XLC) | −4.4% | Gold (GLD) | −4.0% | China (FXI) | −4.5% |
Friday Oct 23 close against Friday Oct 16 close. World stocks (ACWI): −0.6%.
Map 1: sectors against the S&P 500
Settled read: RISK-OFF, a second week. Offense is still lagging defense.
- Leading: energy (XLE), health care (XLV), and now staples (XLP, up from Improving)
- Weakening: none
- Improving: discretionary (XLY), utilities (XLU), real estate (XLRE), and materials (XLB, up from Lagging)
- Lagging: tech (XLK, down from Weakening), communications (XLC), financials (XLF), industrials (XLI)
Two weeks ago tech led the market. Now it's in the back corner, and communications, home of the big internet names, is the weakest sector on the map (98.0 / 97.4). Staples joined energy and health care in the lead: three of the four defensive sectors are now Leading or Improving.
Since 1999, weeks that settled RISK-OFF were followed by a 10%+ SPY drop within 13 weeks about 1 in 6 times, against 1 in 8 for all weeks. The read raises the risk; it doesn't call the direction.
Map 2: asset classes against world stocks
Settled read: RISK-ON, FADING, unchanged. Risk assets are still ahead of safe havens, but the gap keeps closing.
- Leading: US stocks (SPY), commodities (DBC), the dollar (UUP)
- Improving: high yield (HYG), corporate bonds (LQD), long Treasuries (TLT), 7–10y Treasuries (IEF)
- Lagging: small caps (IWM), developed ex-US (EFA), emerging markets (EEM), gold (GLD)
No quadrant changed, but the bonds moved closer to Leading: all four now sit between 98.9 and 99.3 with momentum above 101.7. SPY is still Leading, though its momentum slipped again, from 101.7 to 101.3. Gold went the other way, deeper into Lagging (98.6 / 97.8).
Small caps are the quiet change. IWM rose 2% and is the closest of the stock funds to Improving (98.3 / 99.6).
Map 3: the world's markets against world stocks
There's no risk read for this map. It shows where the world's money is going, not how much risk it's taking.
- Leading: the US (SPY), and now the UK (EWU, up from Improving)
- Weakening: Japan (EWJ), Taiwan (EWT)
- Improving: France (EWQ) and India (INDA), both up from Lagging
- Lagging: Germany, Hong Kong, Korea, China, emerging markets (EEM)
The UK made it to Leading even though it fell 1% this week. Its relative trend had turned up the week before, and it lost less than most. It's the defensive market of the group, heavy in energy, health care and staples, the same sectors leading Map 1.
China moved the other way: down 4.5%, the worst on the map, and deeper into Lagging.
One more map: value took the lead from growth
On the OT Trend style map, value (VTV) moved into Leading against the S&P 500 this week, and large-cap growth (VUG) dropped from Leading to Lagging. On the factor map, dividend payers (HDV), quality (QUAL) and value lead, while high beta (SPHB) and momentum (MTUM) lag. Its risk read is RISK-OFF for a second week: since 2011, those weeks were followed by a 10%+ SPY drop within 13 weeks 1 in 8 times, against 1 in 12 for all weeks.
What the maps agree on
The rotation out of tech has lasted two weeks. Tech went from Leading to Weakening to Lagging, and growth from Leading to Lagging. On the other side, staples, value, dividend payers and the UK moved into the lead. That's the same move seen through four maps.
Across asset classes, it's still only a lean. The sector and factor reads are RISK-OFF; the asset read isn't. US stocks, commodities and the dollar still lead world stocks, and the bonds are gaining but haven't crossed. Money has moved to defense inside the stock market, and it's only starting to move across asset classes.
Lower yields helped the defensive side, not tech. The 10-year fell from 5.098% to 4.988%, and the stocks that rose with it were small caps, real estate and utilities. Tech fell anyway, and the yield drop didn't reverse the rotation, as it didn't last week.
Analyst Watch: the Dow 30 and Exxon, Oct 19–23
62 analyst actions: 46 targets raised, 7 cut, 7 kept and 2 new. Among them, 2 upgrades, both from Freedom Broker, Hold to Buy: Procter & Gamble, and Goldman Sachs with a lower target (1,200 to 1,100). One downgrade: Loop Capital on Apple, Buy to Hold, target 370 to 330. One new coverage: Wolfe Research starts Nike at Underperform, target 28.
The week's headline: IBM. Eleven firms moved their IBM targets on Thursday, all up or unchanged, and the stock rose 9.2% for the week. The new targets range from 240 to 280. Most now sit within 10% of the 253.56 close, so most carry high Reach scores but little upside. Procter & Gamble had nine raises and an upgrade on Friday, to targets between 166 and 190. Travelers had eight raises, but seven of the eight targets are still below its 398.28 close.
Upside with decent odds (10%+ above Friday's close and a Reach score of 80 or more):
- IBM: Jefferies and Citigroup at 280, 10.4% above the close, Reach 80.
- 3M (MMM): JP Morgan at 191 (10.1%, Reach 87) and Bernstein at 197 (13.6%, Reach 82). 3M rose 5.3% this week.
- On the consensus targets, two Dow stocks qualify: JPMorgan (372.26, 12.3% above the close, Reach 88) and Goldman Sachs (1,031.14, 17.8%, Reach 85).
Targets below the price: Apple's two moves this week (MoffettNathanson's 283 and Loop's 330) are both below the 347.73 close, and Apple's consensus target (328.35) is 5.6% below it too. Amgen's consensus target is 9.7% below its price, and Travelers' is 5.8% below.
Big upside, lower odds: Nvidia's consensus target is 55.9% above the close (Reach 70), Boeing's 41.9% (Reach 47) and Caterpillar's 37.7% (Reach 66). High upside and lower Reach scores usually go together.
| Consensus | Close | Target | Upside | Reach |
|---|---|---|---|---|
| JPMorgan (JPM) | 331.58 | 372.26 | +12.3% | 88 |
| 3M (MMM) | 173.46 | 189.98 | +9.5% | 87 |
| Goldman Sachs (GS) | 875.68 | 1,031.14 | +17.8% | 85 |
| American Express (AXP) | 313.22 | 368.72 | +17.7% | 77 |
| Merck (MRK) | 145.27 | 159.76 | +10.0% | 76 |
| Salesforce (CRM) | 248.57 | 286.14 | +15.1% | 74 |
| Microsoft (MSFT) | 524.51 | 601.73 | +14.7% | 71 |
| Nvidia (NVDA) | 210.96 | 328.95 | +55.9% | 70 |
| Boeing (BA) | 188.35 | 267.22 | +41.9% | 47 |
Consensus = the average analyst target. Reach is OddsTrader's score for how likely the price is to touch the target within a year.
Scorecard for next Friday's settled reads
- Tech (XLK) and communications (XLC) on Map 1: both are Lagging. A turn up in momentum (above 100) would move them to Improving, the first sign the rotation is running its course. Further drops would mean it's still going.
- The bonds on Map 2: TLT and IEF are 0.7 from the line. If one crosses into Leading while SPY loses its lead, the asset read turns RISK-OFF and agrees with the sector read.
- Small caps (IWM): momentum at 99.6. A move above 100 puts IWM in Improving against world stocks, the first stock fund outside the US large caps to get there.
- Gold: two weeks down while bonds rose. Whether gold rejoins the safe-haven trade or keeps falling with it is the open question on Map 2.
- The 10-year under 5%: it closed at 4.988%. Whether it stays under 5% and keeps helping the defensive side, or climbs back above, frames the week for bonds and real estate.
Next Saturday's edition opens with how each of these settled.
For the data-minded
Each value is RS-Ratio / RS-Momentum on the weekly map. Above 100 / above 100 is Leading, above / below is Weakening, below / above is Improving, below / below is Lagging.
Sectors against SPY: RISK-OFF → RISK-OFF
| Week 42 | Week 43 | Quadrant | |
|---|---|---|---|
| XLE energy | 101.9 / 101.2 | 102.2 / 101.4 | Leading |
| XLV health care | 101.4 / 101.0 | 102.0 / 102.1 | Leading |
| XLP staples | 99.7 / 101.8 | 100.8 / 102.2 | Improving → Leading |
| XLY discretionary | 98.6 / 100.5 | 99.0 / 101.4 | Improving |
| XLU utilities | 98.8 / 101.4 | 99.2 / 102.0 | Improving |
| XLRE real estate | 98.3 / 100.6 | 98.7 / 101.5 | Improving |
| XLB materials | 98.5 / 100.0 | 99.2 / 100.8 | Lagging → Improving |
| XLK tech | 100.5 / 99.4 | 99.8 / 98.6 | Weakening → Lagging |
| XLF financials | 99.3 / 98.9 | 99.6 / 99.4 | Lagging |
| XLI industrials | 98.3 / 99.7 | 98.3 / 100.0 | Lagging |
| XLC communications | 98.9 / 99.2 | 98.0 / 97.4 | Lagging |
Asset classes against ACWI: RISK-ON, FADING → RISK-ON, FADING
| Week 42 | Week 43 | Quadrant | |
|---|---|---|---|
| SPY US stocks | 102.5 / 101.7 | 102.4 / 101.3 | Leading |
| DBC commodities | 101.8 / 101.1 | 101.9 / 101.1 | Leading |
| UUP dollar | 101.0 / 102.0 | 101.4 / 101.8 | Leading |
| HYG high yield | 98.5 / 100.2 | 98.9 / 101.7 | Improving |
| LQD corporate bonds | 98.8 / 102.0 | 99.2 / 102.5 | Improving |
| TLT long Treasuries | 98.7 / 101.8 | 99.3 / 102.5 | Improving |
| IEF 7–10y Treasuries | 98.8 / 101.3 | 99.3 / 102.3 | Improving |
| IWM small caps | 97.8 / 99.0 | 98.3 / 99.6 | Lagging |
| EFA developed ex-US | 98.0 / 99.3 | 98.4 / 99.8 | Lagging |
| EEM emerging | 98.5 / 98.1 | 98.1 / 97.9 | Lagging |
| GLD gold | 99.1 / 98.9 | 98.6 / 97.8 | Lagging |
World markets against ACWI (no risk read)
| Week 42 | Week 43 | Quadrant | |
|---|---|---|---|
| SPY US | 102.5 / 101.7 | 102.4 / 101.3 | Leading |
| EWU UK | 99.6 / 100.7 | 100.3 / 101.4 | Improving → Leading |
| EWJ Japan | 100.9 / 99.4 | 100.4 / 98.9 | Weakening |
| EWT Taiwan | 101.1 / 99.5 | 100.5 / 98.5 | Weakening |
| EWQ France | 97.8 / 99.6 | 98.1 / 100.1 | Lagging → Improving |
| INDA India | 98.3 / 99.9 | 98.5 / 100.2 | Lagging → Improving |
| EWG Germany | 98.3 / 99.2 | 98.5 / 99.5 | Lagging |
| EWH Hong Kong | 99.3 / 99.9 | 99.3 / 99.9 | Lagging |
| EWY Korea | 98.6 / 97.2 | 98.3 / 97.8 | Lagging |
| FXI China | 99.1 / 99.7 | 98.7 / 98.4 | Lagging |
| EEM emerging | 98.5 / 98.1 | 98.1 / 97.9 | Lagging |
How to read this
- RS-Ratio compares each fund with its benchmark (SPY for sectors, ACWI for the other two maps) on weekly closes, smoothed and scaled so 100 is the average of the past 21 weeks. Above 100 means it's been doing better than the benchmark.
- RS-Momentum is whether RS-Ratio itself is rising, scaled over 10 weeks. Above 100 means the relative trend is improving.
- Quadrants: groups usually travel Leading → Weakening → Lagging → Improving → Leading. A move up a quadrant is money starting to arrive; a move down is money starting to leave.
- Sector risk read: offense (tech, discretionary, communications, financials, industrials, materials) against defense (staples, utilities, health care, real estate). The drop odds are from weekly reads since 1999: how often SPY fell 10% or more within the next 13 weeks. They describe past risk, not future returns.
- Asset risk read: risk assets (US, ex-US and emerging stocks, small caps, high yield, commodities) against safe havens (Treasuries, gold, the dollar); corporate bonds are neutral.
- World markets are US-listed country funds in dollars, so a currency move counts as part of each market's move.
- Reach is OddsTrader's score, from its proprietary algorithm, for how likely a stock is to touch an analyst's target within a year, from 0 to 100. It was tested on more than 13,000 past targets. A high Reach on a target close to the price means likely but small; the useful mix is real upside with a high score.
You’ll find the rotation maps in OT Trend’s Rotation tab, and a Reach score for every analyst target in OddsTrader’s Analyst Ratings. Both apps are on the App Store, each with a free 1-week trial.
For information only. This is not investment advice. The rotation reads describe relative strength and past drop risk, not future returns. Analyst targets are opinions, and Reach scores describe odds, not forecasts. Do your own research and manage your risk.
