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Sector WatchCurrent & Emerging Opportunities In Outright & Relative Performance
July 28th, 2016
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Sector WatchUnderstanding Our Metrics
• We utilize the 9 Select Sector SPDR ETFs for our price‐ and asset flow‐based metrics.
• We track and analyze each sector’s quarterly momentum vs. the S&P 500, which typically oscillates between overbought and oversold relative extremes, to help determine when intermediate term relative performance trends are beginning and ending.
• We track the percentage of sector bet‐related assets invested in each sector to: 1) identify historic over‐ and under‐invested extremes, and 2) determine where the money is going now (which sectors are accumulating assets and which are shedding them).
• We also track the total daily assets invested in each sector ETF on an outright basis to determine potential peaks and bottoms in price.
These metrics collectively help us to identify intermediate term (1‐2 quarter) overweight /underweight opportunities, and to determine the optimum timing for entries and exits.
Sector Watch: Asbury’s Current BiasOur Bias as of July 25th
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The table above lists our current market calls for relative outperformance (green background) andunderperformance (red background) versus the S&P 500 in the 9 sectors of the US broad market index as
represented by the Select Sector SPDR ETFs. The table includes the date that we initiated the call, relative sector performance since then, and in the rightmost column Asbury’s performance
relative to the direction of the call.
Sector Watch: Asset FlowsHistoric vs. Current Asset Flows: Materials, Energy, Utilities Under‐Invested. Consumer Discretionary, Health Care, Consumer Staples Over‐Invested.
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This chart shows the historic daily average distribution of investor assets in the 9 Sector SPDR ETFs since our data series began on
May 31st, 2006.
This chart displays the current distribution of these assets through July 26th. The most under‐invested sectors are, in order,
Materials, Energy and Utilities. The most over‐invested sectors are Consumer
Discretionary and Health Care.
Sector Watch: Asset FlowsInvestor Assets Moving Into Health Care, Out Of Financials
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The biggest inflow of investor assets over the past week went to Utilities. The biggest inflows over the previous 1 month and 3 month periods went to Health Care.
The biggest outflow of assets over the past week came from Energy. The biggest outflows over the previous 1 month and 3 month periods came from Financials.
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The percentage of ETF sector bet‐related assets invested in the SPDR Health Care ETF (XLV) has been in a trend of quarterly expansion since May 26th.
Similar trends have historically coincided with relative outperformance versus the SPDR S&P 500 (SPY).
Sector Watch: OutperformHealth Care: Amid Favorable Conditions For More Relative Outperformance
Meanwhile, weekly momentum in the relative performance line between XLV and SPY is turning
positive according to the MACD, a popular momentum gauge, as this metric has recently risen
above its zero line.
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What’s missing, however, is a lack of positive monthly momentum in the daily relative performance line
between XLI and SPY according to the 1‐month rate of change,. This is necessary to indicate these expanding
assets are having a positive effect on the sector.
Sector Watch: Outperform Industrials: Expanding Assets Have Not Yet Fueled A Positive Relative Trend
The current Jun 22nd trend of quarterly expansion in the percentage of ETF sector bet‐related assets invested in Industrials (XLI) indicates favorable
conditions for more sector outperformance, like that which occurred between January and April.
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However, this chart shows that the percentage of all ETF‐related sector assets invested in Consumer
Discretionary is still in a trend of quarterly contraction as defined by its 63‐day MA. It would take quarterly expansion to fuel a new trend of outperformance.
Sector Watch: Market PerformConsumer Discretionary: Watch Asset Flows To Fuel A New Outperformance Trend
The Consumer Discretionary Sector SPDR (XLY) has become quarterly oversold versus SPY. Previous instances of this have closely coincided with the
beginning of every intermediate term trend of relative sector outperformance since 2010.
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However, this chart shows that the percentage of all ETF‐related sector assets invested in Financials is still in the midst of a trend of quarterly contraction, as defined by its 63‐day MA, which has historically coincided with relative sector underperformance.
Sector Watch: Market PerformFinancials: Better Asset Flows Necessary To Suggest An Overweight Opportunity
The total net assets invested in the SPDR Financial Sector ETF (XLF) have edged above their 21‐day
moving average, suggesting that a new bullish trend of monthly expansion may beginning.
However, this chart shows that that the percentage of all ETF‐related sector assets invested in Technology is
still in the midst of a late April trend of quarterly contraction. It would take a trend of expansion to
indicate recent relative outperformance is sustainable.
Sector Watch: Market PerformTechnology: Watch Asset Flows To Fuel A New Outperformance Trend
Weekly momentum in the relative performance line between the SPDR Technology Sector ETF (XLK) and SPY is bottoming and turning positive according to the weekly MACD indicator. Note that previous
instances of this preceded relative outperformance.
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The daily total net assets invested in the SPDR Materials Sector ETF (XLB) are currently in a monthly trend of
expansion, and have actually been increasing since June 27th. Note that the previous trend of expansion fueled
the January 20th to June 8th advance in the ETF.
Sector Watch: Market PerformMaterials: Overbought Extremes Warn Of Upcoming Relative Underperformance
However, this chart shows that XLB has been hovering at quarterly overbought extremes versus SPY since May, which the red highlights show had previously coincided with peaks in relative underperformance .
This metric warns that further relative outperformance and outright strength by XLB may be limited.
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The percentage of ETF‐related sector assets invested in Energy declined below their 63‐day MA this week, indicating the 2016 trend of quarterly expansion is
over and warning that a new trend of contraction, and coincident relative underperformance, is beginning.
Sector Watch: Market PerformEnergy: Contracting Asset Flows, Weekly Momentum Warn Of Underperformance
Meanwhile, momentum in the relative performance line between XLE and SPY is turning negative according to the weekly MACD indicator, which is now declining
below its dotted trigger line as did in July 2014, to warn of an emerging trend of relative underperformance.
The red arrows show that weekly momentum in the relative performance line between the SPDR
Consumer Staples ETF (XLP) and SPY peaked in February and has been negative since, warning of upcoming relative sector underperformance.
Sector Watch: Market PerformConsumer Staples: Vulnerable To More Relative Underperformance
This chart shows that the total net assets invested in XLP, as a percentage of all sector‐related ETF assets invested, is threatening to decline below its 63‐day
MA. If it does, it is likely to trigger and fuel even more relative sector underperformance.
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Meanwhile, the percentage of all ETF‐related sector assets invested in Utilities has also stalled,
corroborating the weakness we see in the chart at left. Quarterly contraction would likely trigger and fuel a new trend of relative sector underperformance.
Sector Watch: Market PerformUtilities: Favorable Vulnerable To Upcoming Relative Underperformance
Weekly momentum in the relative performance line between the SPDR Utilities Sector (XLU) and SPY, as measured by the weekly MACD indicator, is diverging with the relative performance line. This negative
divergence often precedes relative underperformance.
Contact Us:Phone: 1‐224‐569‐4112
1‐888‐960‐0005
Email: info@asburyresearch.com
On The Web: http://asburyresearch.com/
Twitter: asburyresearch
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