State Street Sector Model (SSTREET): Two Changes

Buy Oil & Gas Exploration & Production XOP and Energy XLE 

As a refresher, the State Street Sector Model SSTREET monitors the Relative Strength (RS) relationships between each of the sector and industry ETFs in the model universe versus the S&P 500 Index SPX on a 6.5% scale. ETFs that are showing positive RS versus the SPX (measured by a column of Xs) are included in the model and are removed only when that relationship reverses into Os. Over the past week of trading, the respective RS charts comparing the SPDR S&P Oil & Gas Exploration & Production ETF XOP and the Energy Select Sector SPDR Fund XLE versus the S&P 500 Index reversed up into Xs, warranting their additions to the SSTREET model. This model remains fully invested through sector-based ETFs within the broader State Street family of ETFs and is evaluated on a weekly basis. The number of holdings can vary based on sector leadership within changing markets, and with the addition of XOP and XLE, the model is equally weighted across 18 positions at 5.55% each. Year-to-date, the SSTREET model is up 21.84%, outperforming the S&P 500's return of 12.52% (through 11/24).

Like a radar screen, the Weekly Activity Summary gives you a snap shot view of any technical changes to the State Street universe of ETFs. Included in the summary below are both long term technical changes and intermediate term technical changes.

The distribution curve places each ETF on a bell curve according to their respective degrees of overbought or oversold status using a 10-week distribution. ETFs that are statistically oversold will appear on the left-hand side of the bell curve, while those that have become statistically overbought will appear on the right-hand side of the bell curve. Perhaps the most useful attribute of this feature is that it displays the entire universe on the curve at one time with an "average level" to give us a general picture of whether the State Street ETF universe is generally overbought on a near-term basis, or generally oversold. Our best opportunities are to buy strong market ETFs that have regressed back toward mean conditions based on market weakness, or have become oversold based upon extreme market weakness. 
Weekly Distribution is a short-term gauge that is most helpful in timing entry and exit points, while the longer-term information of trend and relative strength is a more controlling factor in the decision of whether to buy or sell. The Distribution Curve below displays those ETFs with positive RS in uppercase letters and those ETFs with poor RS versus the market in lowercase letters. As well, those ETFs that are on a Point & Figure Buy signal appear in Green letters, while those on Sell signals can appear in Red letters. Box Color indicates the Sector Status Rating. Green = Favored, Yellow = Average, and Red = Unfavored.

Average Level

84.09

											XRT
											xtl
											spyv
											xli
											ewx
											sdy
											gwx
											rwx
											xme
											MDY
											kie
											xtn
											gii
											kce
											cwi
											xlf
											DGT
								srln			kre
								psk	rwr	rwo	kbe
								xph	SPY	XLB	xop
								XBI	XLC	CWB	SLYG
								wip	JNK	MDYG	XAR
							xlu	XLY	gxc	XSD	MDYV
						shm	XLK	bwz	DIA	fez	SLY
						flrn	SPYG	bwx	XSW	XHS	xle
						bil	XHB	XHE	tfi	gmf	SLYV
		GLD				XLV	xlp	ibnd	ebnd	dwx	xes
<--100	-100--80	-80--60	-60--40	-40--20	-20-0	0-20	20-40	40-60	60-80	80-100	100->

The DWA Matrix uses a Point & Figure relative strength comparison of each index to one another to identify the strongest and the weakest among the universe used. The ETFs with the most relative strength buy signals (suggesting outperformance) versus the others in the group are listed at the top. These ETFs should be overweighted in the portfolio. Those ETFs with the least amount of relative strength buy signals versus the others in the group are listed at the bottom. These ETFs should be underweighted in the portfolio.

The State Street ETF Model Portfolios are designed to identify major leadership themes within a market, doing so through the use of Point and Figure relative strength tools.  Each of the State Street Models are evaluated weekly and guided by a rules-based investment methodology. The construction of the State Street Sector ETF Portfolio is done through an analysis of the each State Street Sector ETF relative strength chart versus the S&P 500, while the Global Sector Rotation model employs a relative strength matrix ranking of the model's inventory.  In either case, those with strong relative strength make the cut and are eligible to be included in the portfolio, while those that aren't, will sit upon the sideline.  For more information on the portfolio construction and back testing please see the information files on the Models Page. To enter a portfolio amount and see shares to be purchased as well as modify the portfolio to your specifications, click here. (Note: All State Street ETF Models are updated Wednesday mornings by 9:30 am EST)

• State Street Sector ETF Model: Buy XOP and XLE
• State Street Global Rotation ETF Model: No changes this week.
• State Street Targeted Sector Rotation ETF Model: No changes this week.
• State Street Fixed Income Model: No changes this week.

* - Model Inception:1/17/2007

* - Model Inception:10/28/2008

* - Model Inception: 07/28/2010

* - Model Inception: 04/27/2011