As of January 13, we will no longer be publishing the weekly State Street ETF report. With that in mind, over the next few weeks, we will be reviewing the methodologies underlying each of the four SSGA strategies so that you can continue running them on your own going forward if you wish. Today, we’ll start with the State Street Sector Rotation Model SSTREET.  

The SSTREET model uses an “RS versus benchmark” methodology, which simply means we look at each of the members within the investable universe (of which there are 31) versus a benchmark (in this case the S&P 500 Index SPX) in order to determine which are bought into the model and which remain on the sidelines. When a fund’s RS chart versus against SPX (on a 6.5% scale) to a column of X’s, denoting positive Relative Strength for that ETF, it is included in the portfolio. The ETFs are then only removed when there is a reversal into O's versus the benchmark, telling us that it has deteriorated sufficiently relative to the broad market. The inventory for the model is shown below. Currently, 20 (out of 31) ETFs in the inventory are in the model.

• Model is evaluated on a weekly basis
• Remains 100% invested
• # of holdings will vary based on sector leadership. There are 31 sector ETFs in the investable universe.
• Each week, we compare all 31 ETFs versus SPX on a 6.5% scale. All sectors with their RS charts in Xs are held in the model while all sectors with RS charts in Os remain on the sidelines.
• When there is a model change, the holdings are rebalanced back to equal weight.
• As of 12/22, there are 20 holdings weighted at 5% each.
• Year-to-date, SSTREET is up 26.77% versus SPX’s gain of 14.13%.

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

55.30

							XLY		bwx
							sdy		kbe
							gmf		ewx
							XLC		xlf
							rwo	SPYG	rwx
							kie	SPY	tfi
							XLB	xle	DGT	MDYV	CWB
							XHB	xop	ibnd	xme	kce
							srln	xtn	ebnd	MDY	wip
					bil	flrn	xli	XLK	XAR	XSD	SLY
					GLD	rwr	dwx	kre	SLYV	XHS	XBI
					gxc	gii	spyv	bwz	xph	XRT	SLYG
					shm	psk	DIA	fez	gwx	MDYG	XSW
			xlu		xlp	XLV	JNK	cwi	xes	XHE	xtl
<--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: No changes this week.
• 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