Market X-Ray · Toolbox 3
Ratio-Quality Decomposition
A rising ratio is ambiguous. IWM/SPY can rise because small-caps led — or because the S&P fell. This decomposes every structural ratio into what the numerator did versus the denominator, and scores how meaningful the move is: numerator-driven and consistent across horizons = high quality; denominator-driven or one-horizon = low quality, mechanically misleading. Quality is reliability, not direction.
Updated daily · data as of 2026-10-09
Alerts — misleading strength & real weakness
Cyclical Breadth rising mainly because XLU fell sharply — a mechanically misleading improvement.
- Ratio +1.4% over 21d
- Quality score 18/100 (Denominator collapse)
- Denominator-driven (79% of the move)
Financial Risk Breadth falling on KBE weakness — KBE dropping faster than XLU, a high-quality warning.
- Ratio -4.8% over 21d
- Quality score 69/100 (numerator-driven)
- Single-horizon
Micro-Cap Breadth falling on IWC weakness — IWC dropping faster than IWM, a high-quality warning.
- Ratio -0.7% over 21d
- Quality score 56/100 (numerator-driven)
- Confirmed across 1d/21d/63d
Every ratio — decomposed (21-day)
| Ratio | State | Quality | Driver | Num | Den | Ratio | TF |
|---|---|---|---|---|---|---|---|
| S&P 500 Equal-Weight Breadth RSP/SPY | ▼ Numerator lag | 10 | denominator | +0.3% | +3% | -2.6% | aligned |
| Ex-Mag-7 Breadth XMAG/SPY | ▼ Lagging in rally | 30 | denominator | +1.5% | +3% | -1.4% | mixed |
| Nasdaq Ex-Top-30 Breadth QNXT/QTOP | ▼ Lagging in rally | 31 | denominator | +3.6% | +6.9% | -3.1% | mixed |
| Nasdaq-100 Equal-Weight Breadth QQQE/QQQ | ▼ Lagging in rally | 34 | denominator | +3.8% | +6.1% | -2.1% | mixed |
| Credit Breadth HYG/LQD | ▲ Flat | 48 | denominator | -1.3% | -1.4% | +0.1% | aligned |
| Small-Cap Breadth IWM/SPY | ▼ Absolute weakness | 49 | denominator | -2.8% | +3% | -5.6% | aligned |
| High-Beta Breadth SPHB/SPLV | ▲ Absolute leadership | 76 | numerator | +6.3% | -1.9% | +8.4% | aligned |
| Nasdaq Ex-Tech Breadth QQXT/QQQ | ▼ Numerator lag | 1 | denominator | 0% | +6.1% | -5.7% | mixed |
| Mid-Cap Breadth MDY/SPY | ▼ Numerator lag | 8 | denominator | -0.3% | +3% | -3.2% | aligned |
| Ex-Tech S&P Breadth SPXT/SPY | ▼ Numerator lag | 16 | denominator | +0.6% | +3% | -2.3% | mixed |
| Cyclical Breadth XLI/XLU | ▲ Denominator collapse | 18 | denominator | -0.5% | -1.9% | +1.4% | mixed |
| Semiconductor Leadership SMH/XLK | ▲ Flat | 39 | numerator | +7.7% | +7.4% | +0.2% | mixed |
| Consumer Risk Breadth XLY/XLP | ▼ Flat | 43 | denominator | +1% | +1.1% | -0.1% | mixed |
| Extended-Market Breadth VXF/SPY | ▼ Numerator lag | 7 | denominator | -0.3% | +3% | -3.2% | mixed |
| Small Growth Breadth IWO/IWN | ▲ Defensive improvement | 36 | denominator | -2.3% | -3.3% | +1% | mixed |
| AI Participation AIQ/XLK | ▼ Lagging in rally | 38 | denominator | +5.6% | +7.4% | -1.7% | mixed |
| Micro-Cap Breadth IWC/IWM | ▼ Strong deterioration | 56 | numerator | -3.5% | -2.8% | -0.7% | aligned |
| Software Participation IGV/XLK | ▲ Strong leadership | 60 | numerator | +11.3% | +7.4% | +3.6% | aligned |
| Financial Risk Breadth KBE/XLU | ▼ Strong deterioration | 69 | numerator | -6.6% | -1.9% | -4.8% | mixed |
| Nasdaq Tech vs Ex-Tech QTEC/QQXT | ▲ Absolute leadership | 88 | numerator | +8.4% | 0% | +8.3% | mixed |
| Large Growth vs Value IWF/IWD | ▲ Strong leadership | 92 | numerator | +5.5% | +0.4% | +5.1% | aligned |
| Internet Participation FDN/XLK | ▼ Lagging in rally | 38 | denominator | +5.5% | +7.4% | -1.8% | mixed |
How to read it
Using log returns, ratio return = numerator return − denominator return, so each leg's contribution is exact. The quality score is the numerator's share of the move scaled by how consistently the ratio points the same way across 1, 21 and 63 days — high when the asset we track is genuinely the story, low when the move is a denominator artifact. Misleading strength = a ratio rising on a denominator collapse; real weakness = a ratio falling because the numerator itself is deteriorating, confirmed across horizons.
For information and discussion only — a reading of market internals, not investment advice. Thresholds are uncalibrated pending the planned backtest. Pairs with Breadth-of-Breadth and the Beta-Instability X-Ray.
FAQ · from the current data · as of 2026-10-09
Quick answers
What does Ratio-Quality Decomposition measure?
A rising ratio is ambiguous — it can mean the numerator led (real) or the denominator collapsed (misleading). This decomposes every structural ratio into what the numerator did versus the denominator, and scores how meaningful the move is: numerator-driven and consistent across horizons scores high; denominator-driven or single-horizon scores low.
What is the average ratio quality right now?
As of 2026-10-09, the average quality score across tracked ratios is 40 out of 100, with 31.8% of ratios numerator-driven.
How many ratios are showing misleading strength or real weakness?
As of 2026-10-09, 1 ratios are rising on low quality (misleading strength) and 2 are falling on genuine numerator weakness (real weakness).
How is the quality score calculated?
Using log returns, ratio return equals numerator return minus denominator return, so each leg’s contribution is exact. The quality score is the numerator’s share of the move scaled by how consistently the ratio points the same way across 1, 21 and 63 days — high when the tracked asset is genuinely the story, low when the move is a denominator artifact.