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 2026-10-06
Alerts — misleading strength & real weakness
Financial Risk Breadth falling on KBE weakness — KBE dropping faster than XLU, a high-quality warning.
- Ratio -3.7% over 21d
- Quality score 59/100 (numerator-driven)
- Single-horizon
Micro-Cap Breadth falling on IWC weakness — IWC dropping faster than IWM, a high-quality warning.
- Ratio -0.8% over 21d
- Quality score 54/100 (numerator-driven)
- Confirmed across 1d/21d/63d
Every ratio — decomposed (21-day)
| Ratio | State | Quality | Driver | Num | Den | Ratio | TF |
|---|---|---|---|---|---|---|---|
| Nasdaq Ex-Top-30 Breadth QNXT/QTOP | ▼ Numerator lag | 5 | denominator | +0.4% | +7.3% | -6.4% | mixed |
| Ex-Mag-7 Breadth XMAG/SPY | ▼ Numerator lag | 15 | denominator | -0.3% | +1.4% | -1.7% | mixed |
| Nasdaq-100 Equal-Weight Breadth QQQE/QQQ | ▼ Numerator lag | 23 | denominator | +2% | +5.8% | -3.6% | mixed |
| Credit Breadth HYG/LQD | ▲ Defensive improvement | 41 | denominator | -2% | -2.7% | +0.8% | aligned |
| High-Beta Breadth SPHB/SPLV | ▲ Absolute leadership | 52 | numerator | +5.8% | -3.8% | +10% | mixed |
| S&P 500 Equal-Weight Breadth RSP/SPY | ▼ Absolute weakness | 66 | numerator | -2.7% | +1.4% | -4% | aligned |
| Small-Cap Breadth IWM/SPY | ▼ Absolute weakness | 78 | numerator | -4.7% | +1.4% | -6% | aligned |
| Cyclical Breadth XLI/XLU | ▲ Defensive improvement | 29 | denominator | -1.8% | -3.8% | +2% | mixed |
| Nasdaq Ex-Tech Breadth QQXT/QQQ | ▼ Absolute weakness | 37 | denominator | -3.9% | +5.8% | -9.1% | mixed |
| Consumer Risk Breadth XLY/XLP | ▲ Flat | 43 | denominator | -2.6% | -2.7% | +0.1% | mixed |
| Semiconductor Leadership SMH/XLK | ▲ Strong leadership | 45 | numerator | +11.6% | +8% | +3.3% | mixed |
| Ex-Tech S&P Breadth SPXT/SPY | ▼ Absolute weakness | 60 | numerator | -2.1% | +1.4% | -3.4% | aligned |
| Mid-Cap Breadth MDY/SPY | ▼ Absolute weakness | 61 | numerator | -2.2% | +1.4% | -3.5% | aligned |
| Software Participation IGV/XLK | ▼ Lagging in rally | 34 | denominator | +6.3% | +8% | -1.6% | mixed |
| AI Participation AIQ/XLK | ▼ Lagging in rally | 35 | denominator | +4.2% | +8% | -3.5% | aligned |
| Small Growth Breadth IWO/IWN | ▲ Defensive improvement | 36 | denominator | -4.4% | -5.1% | +0.7% | mixed |
| Micro-Cap Breadth IWC/IWM | ▼ Strong deterioration | 54 | numerator | -5.5% | -4.7% | -0.8% | aligned |
| Extended-Market Breadth VXF/SPY | ▼ Absolute weakness | 59 | numerator | -2% | +1.4% | -3.4% | aligned |
| Financial Risk Breadth KBE/XLU | ▼ Strong deterioration | 59 | numerator | -7.3% | -3.8% | -3.7% | mixed |
| Nasdaq Tech vs Ex-Tech QTEC/QQXT | ▲ Absolute leadership | 60 | numerator | +9% | -3.9% | +13.4% | mixed |
| Large Growth vs Value IWF/IWD | ▲ Absolute leadership | 71 | numerator | +4.8% | -1.9% | +6.8% | aligned |
| Internet Participation FDN/XLK | ▼ Numerator lag | 18 | denominator | +2% | +8% | -5.5% | 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 2026-10-06
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 2026-10-06, the average quality score across tracked ratios is 45 out of 100, with 50% of ratios numerator-driven.
How many ratios are showing misleading strength or real weakness?
As of 2026-10-06, 0 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.