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 2026-08-03

Avg quality 43/100 how meaningful, mean
Numerator-driven 40.9% of ratios
Misleading up 2 rising on low quality
Real weakness 4 numerator-driven down

Alerts — misleading strength & real weakness

Misleading strength — Cyclical Breadth strong · 100

Cyclical Breadth rising mainly because XLU fell sharply — a mechanically misleading improvement.

  • Ratio +2.7% over 21d
  • Quality score 12/100 (Denominator collapse)
  • Denominator-driven (88% of the move)
Misleading strength — Credit Breadth strong · 100

Credit Breadth rising mainly because LQD fell sharply — a mechanically misleading improvement.

  • Ratio +1.9% over 21d
  • Quality score 1/100 (Denominator collapse)
  • Denominator-driven (99% of the move)
Real weakness — Semiconductor Leadership strong · 100

Semiconductor Leadership falling on SMH weakness — SMH dropping faster than XLK, a high-quality warning.

  • Ratio -6.6% over 21d
  • Quality score 85/100 (numerator-driven)
  • Confirmed across 1d/21d/63d
Real weakness — High-Beta Breadth strong · 100

High-Beta Breadth falling on SPHB weakness — SPHB dropping faster than SPLV, a high-quality warning.

  • Ratio -2.5% over 21d
  • Quality score 66/100 (numerator-driven)
  • Single-horizon
Real weakness — Micro-Cap Breadth strong · 87

Micro-Cap Breadth falling on IWC weakness — IWC dropping faster than IWM, a high-quality warning.

  • Ratio -1.9% over 21d
  • Quality score 69/100 (numerator-driven)
  • Single-horizon
Real weakness — AI Participation elevated · 53

AI Participation falling on AIQ weakness — AIQ dropping faster than XLK, a high-quality warning.

  • Ratio -0.7% over 21d
  • Quality score 53/100 (numerator-driven)
  • Single-horizon

Every ratio — decomposed (21-day)

RatioStateQualityDriverNumDenRatioTF
Credit Breadth HYG/LQD Denominator collapse
1
denominator 0% -1.9% +1.9% aligned
Small-Cap Breadth IWM/SPY Absolute weakness
16
denominator -0.5% +1.7% -2.2% mixed
Ex-Mag-7 Breadth XMAG/SPY Absolute weakness
29
denominator -0.8% +1.7% -2.5% mixed
S&P 500 Equal-Weight Breadth RSP/SPY Lagging in rally
33
denominator +1% +1.7% -0.7% mixed
Nasdaq Ex-Top-30 Breadth QNXT/QTOP Defensive improvement
34
denominator -1% -1.6% +0.6% mixed
Nasdaq-100 Equal-Weight Breadth QQQE/QQQ Defensive improvement
38
denominator -1.3% -1.8% +0.5% mixed
High-Beta Breadth SPHB/SPLV Strong deterioration
66
numerator -3% -0.5% -2.5% mixed
Mid-Cap Breadth MDY/SPY Numerator lag
3
denominator +0.1% +1.7% -1.6% aligned
Cyclical Breadth XLI/XLU Denominator collapse
12
denominator -0.4% -3.1% +2.7% aligned
Nasdaq Ex-Tech Breadth QQXT/QQQ Absolute leadership
27
denominator +0.9% -1.8% +2.8% mixed
Ex-Tech S&P Breadth SPXT/SPY · Flat
50
denominator +1.7% +1.7% 0% aligned
Consumer Risk Breadth XLY/XLP Absolute leadership
76
numerator +0.9% -0.2% +1.1% mixed
Semiconductor Leadership SMH/XLK Strong deterioration
85
numerator -7.9% -1.4% -6.6% aligned
Large Growth vs Value IWF/IWD Numerator lag
7
denominator -0.2% +3% -3.2% mixed
Extended-Market Breadth VXF/SPY Absolute weakness
31
denominator -1.1% +1.7% -2.8% mixed
Financial Risk Breadth KBE/XLU Absolute leadership
47
denominator +2.8% -3.1% +6% aligned
AI Participation AIQ/XLK Strong deterioration
53
numerator -2.1% -1.4% -0.7% mixed
Small Growth Breadth IWO/IWN Absolute weakness
54
numerator -2.2% +1.4% -3.6% mixed
Nasdaq Tech vs Ex-Tech QTEC/QQXT Absolute weakness
61
numerator -3.6% +0.9% -4.5% mixed
Micro-Cap Breadth IWC/IWM Strong deterioration
69
numerator -2.4% -0.5% -1.9% mixed
Software Participation IGV/XLK Absolute leadership
74
numerator +4.1% -1.4% +5.6% aligned
Internet Participation FDN/XLK Absolute leadership
71
numerator +5.9% -1.4% +7.4% 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.