There are no changes to report this morning.

As of January 13, we will no longer be publishing the weekly State Street ETF report. With that in mind, over the next two 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. Last week, we discussed the State Street Sector Rotation Model SSTREET, which can be accessed here. Today, we’ll review the State Street Targeted Sector Rotation Model SSTARGETSECTOR. 

The SSTARGETSECTOR model uses utilizes a relative strength (RS) matrix to determine its holdings. The strongest ETFs are held in the model until they fall significantly out of favor versus the other members. The model is evaluated weekly and will always own five positions. Upon a change, the model holdings will rebalance so each position is equally-weighted at 20%. Currently, the model owns technology XNTK, regional banking KRE, semiconductors XSD, homebuilders XHB, and software & services XSW. Year-to-date, the SSTARGETSECTOR is up 28.19%, outperforming the S&P 500 Index SPX by 12.83%.

Model Rules

• State Street US‐sector ETFs are the universe used.
• Remains 100% invested.
• State Street US‐sector ETFs are compared to each other to determine inclusion using a 3.25% Relative Strength matrix.
• The top five ETFs within the model universe are bought and are only sold when they fall sufficiently out of favor versus the other potential ETFs on a Relative Strength basis.
• A new ETF is only added when one ETF falls out of favor.
• Upon a change, if any one position is more than 27% or less than 13%, the change is made, and all positions are rebalanced back to 20% each. If these collars are not breached, then the change is made using a replacement method.

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

53.43

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