Volatility
The VIX term structure held its steepened shape from last week, with the 1-month/3-month spread at 2.8 points. Front-month implied volatility drifted lower to 14.2, while realized 20-day volatility rose slightly to 12.6. The implied-realized spread has now compressed for three consecutive weeks, from 4.1 on March 10 to 1.6 currently.
Single-stock dispersion continues to run above index-level movement. The average daily range across S&P 500 constituents was 2.3%, compared to 0.7% for the index itself. In our observation, a dispersion ratio above 3:1 sustained over multiple weeks tends to reflect a regime where idiosyncratic factors dominate macro drivers.
This does not prove a directional view. It describes a volatility environment.
Breadth & Participation
The percentage of S&P 500 names above their 50-day moving average rose to 52%, up from 49% last week and the 48% low recorded on March 10. The improvement was broad-based rather than concentrated in a single sector.
New 20-day highs outnumbered new 20-day lows by a ratio of 1.4:1. That ratio was 0.9:1 two weeks ago. Breadth is no longer deteriorating. Whether it accelerates from here remains an open question.
Sector Rotation
The cyclical rotation that emerged in our March 16 note extended into a third week. Energy led all sectors, outperforming the index by 1.8%. Industrials continued their relative strength at +0.9%, while Materials faded to flat.
Defensive sectors continued to underperform. Utilities trailed by 0.7% and Consumer Staples by 0.5%. The Utilities-to-Industrials relative ratio has declined 3.2% over the past three weeks.
Within Technology, the semiconductor-software divergence persisted. Semiconductors outperformed by 0.6%, software underperformed by 0.3%. The sector is not behaving as a monolith.
Correlation
Tech intra-sector correlation declined further to 0.47, down from 0.53 last week and 0.61 on March 10. Three consecutive weeks of falling intra-sector correlation within the largest sector weight is structurally notable. It indicates that name-level catalysts are reasserting dominance over sector-level flows.
Cross-sector correlation between Energy and Industrials rose to 0.44, suggesting these cyclical leaders are increasingly responding to shared macro inputs. Average pairwise correlation across the full index held steady at 0.27.
The combination of declining intra-sector correlation and stable cross-sector correlation is consistent with a stock-picker's dispersion environment. We note this as a structural observation, not an endorsement of any approach.
Notable Scanner Observations
The Energy momentum cluster flagged in our March 16 note showed follow-through. The 20-day breakout count expanded from 9 names to 13 this week, with the z-score rising to 2.4 against the trailing 12-week baseline of 3. Three of the new additions were mid-cap exploration and production names.
The mid-cap industrials mean-reversion cluster, which peaked at 14 observations on March 10 and normalized to 7 last week, fell further to 4 — now below the baseline average of 6. That cluster appears fully unwound.
A new observation: the scanner detected a volatility compression cluster in Healthcare, with 8 names showing 20-day realized volatility below the 10th percentile of their trailing 52-week range. The z-score was 1.7. Compression at this level has historically preceded expansion, though the direction is indeterminate.
We do not interpret scanner output as actionable. These observations describe statistical patterns in the data, not opportunities.