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 2026-08-26
Alerts — misleading strength & real weakness
Cyclical Breadth rising mainly because XLU fell sharply — a mechanically misleading improvement.
- Ratio +3.4% over 21d
- Quality score 21/100 (Denominator collapse)
- Denominator-driven (79% of the move)
Every ratio — decomposed (21-day)
| Ratio | State | Quality | Driver | Num | Den | Ratio | TF |
|---|---|---|---|---|---|---|---|
| S&P 500 Equal-Weight Breadth RSP/SPY | ▼ Lagging in rally | 29 | denominator | +2% | +3.4% | -1.3% | mixed |
| Small-Cap Breadth IWM/SPY | ▼ Lagging in rally | 32 | denominator | +1.9% | +3.4% | -1.5% | mixed |
| Ex-Mag-7 Breadth XMAG/SPY | ▼ Lagging in rally | 40 | denominator | +2.8% | +3.4% | -0.6% | mixed |
| Nasdaq-100 Equal-Weight Breadth QQQE/QQQ | ▼ Flat | 43 | denominator | +5% | +5.3% | -0.3% | mixed |
| Nasdaq Ex-Top-30 Breadth QNXT/QTOP | ▲ Strong leadership | 47 | numerator | +5.8% | +5% | +0.7% | mixed |
| High-Beta Breadth SPHB/SPLV | ▲ Absolute leadership | 64 | numerator | +7% | -2.5% | +9.8% | mixed |
| Credit Breadth HYG/LQD | ▲ Strong leadership | 74 | numerator | +1.1% | +0.4% | +0.7% | aligned |
| Mid-Cap Breadth MDY/SPY | ▼ Numerator lag | 14 | denominator | +0.8% | +3.4% | -2.5% | mixed |
| Cyclical Breadth XLI/XLU | ▲ Denominator collapse | 21 | denominator | -1.2% | -4.4% | +3.4% | aligned |
| Nasdaq Ex-Tech Breadth QQXT/QQQ | ▼ Lagging in rally | 32 | denominator | +3% | +5.3% | -2.2% | mixed |
| Ex-Tech S&P Breadth SPXT/SPY | ▼ Lagging in rally | 33 | denominator | +2% | +3.4% | -1.4% | mixed |
| Semiconductor Leadership SMH/XLK | ▼ Lagging in rally | 42 | denominator | +4.9% | +6.9% | -1.8% | aligned |
| Consumer Risk Breadth XLY/XLP | ▲ Absolute leadership | 63 | numerator | +4.2% | -0.9% | +5.1% | mixed |
| Financial Risk Breadth KBE/XLU | ▲ Defensive improvement | 30 | denominator | -2.3% | -4.4% | +2.2% | mixed |
| Extended-Market Breadth VXF/SPY | ▼ Lagging in rally | 35 | denominator | +2.8% | +3.4% | -0.5% | mixed |
| AI Participation AIQ/XLK | ▲ Strong leadership | 46 | numerator | +10.2% | +6.9% | +3.1% | mixed |
| Large Growth vs Value IWF/IWD | ▲ Strong leadership | 49 | numerator | +4.5% | +2.5% | +1.9% | mixed |
| Micro-Cap Breadth IWC/IWM | ▲ Strong leadership | 52 | numerator | +4.1% | +1.9% | +2.2% | mixed |
| Software Participation IGV/XLK | ▲ Strong leadership | 55 | numerator | +11.6% | +6.9% | +4.4% | mixed |
| Nasdaq Tech vs Ex-Tech QTEC/QQXT | ▲ Strong leadership | 63 | numerator | +7.4% | +3% | +4.3% | mixed |
| Small Growth Breadth IWO/IWN | ▲ Absolute leadership | 80 | numerator | +3.6% | +0.1% | +3.5% | mixed |
| Internet Participation FDN/XLK | ▲ Strong leadership | 46 | numerator | +7.5% | +6.9% | +0.6% | 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 2026-08-26
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 2026-08-26, 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 2026-08-26, 1 ratios are rising on low quality (misleading strength) and 0 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.