Record highs are being driven by Tech (XLK +20%) and Semis (SMH +31%), masking the fact that most sectors, such as Healthcare (XLV -9%), are actually down since the onset of the war.

Monthly sector divergences are at extreme levels, with one sector outperforming the others by 15% in both March and April.

Short interest is diverging sharply, either falling 20% across most sectors or rising 10% in relatively flat sectors such as Industrials, Consumer Discretionary, and Communications.

The Magnificent Seven (Mag7) names are up an average of around 4%, but there are huge divergences between the stocks; for instance, Meta Platforms (META) is down -6% while Broadcom (AVGO) has surged +28%.

On the index ETF side, SPY short interest is up 15% and QQQ is up 10%, suggesting that institutional investors are utilizing these instruments for hedging against record highs. The Mag7 shows a similar pattern, with short interest increasing by 15%.

All names have seen an increase in shorting, indicating this is a broad-based sentiment phenomenon across these Battleground Stocks. Notably, all sectors participated in this upswing over the last month, except for Energy (XLE), which was the best performer the month before.

Since the outbreak of the war, market gains have not been broad-based; only Technology (XLK) and Energy (XLE) are up, Consumer Discretionary (XLY) is basically flat, and the rest are down. Healthcare (XLV) has dropped 9%. I

In March, XLE outperformed the broader market by 15%, and in April, XLK followed suit. The XLK return of 20% marks only the second month in 30 years that such a move has occurred.

There is a huge dispersion of returns—reflected in the standard deviations of monthly performance—as the market rotates violently.

While aggregate Sector ETF short positions are smaller, they are experiencing large compositional changes. Currently, most sector ETF have seen a 20% decrease in short interest data. This suggests investors have been covering shorts and buying into the rally, even though only one sector has generated meaningful positive real returns.

However, three sectors—XLY, XLC, and XLI—show short interest 10% higher, and all three have returns close to flat.

While the monthly volatility has been very high, daily volatility has remained curiously low. There hasn’t been two-sided volatility; rather, the market is characterized by one-sided winning and losing streaks.

Despite the market headlines, most sectors are down over the last two months. Sector dispersion remains very high, and short interest data is barbelled: down 20% or up 10% for ETFs, with almost no middle ground.

Individual Mag7 shorts are higher like the QQQ and SPY.

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