The Industrial Select Sector SPDR exchange-traded fund (XLI) was No. 7 by return among
the ETFs that divide the S&P 500 into nine pieces during the first third of
this year, as its adjusted closing share price climbed to $53.03 from $52.03, a
gain of $1.00, or 1.92 percent.
Over this period, XLI’s return was a little less than one-eighth
that of the Utilities SPDR ETF (XLU)
and about four-fifths that of the SPDR S&P 500 ETF (SPY), as described in “XLU Coppock Guide: Bullish as of May Day 2014.”
(XLU returned 14.74 percent, and SPY returned 2.41 percent.)
XLI is the seventh of 13 ETFs featured in a J.J.’s Risky
Business blog series this month. Basically, I have been looking at each
ETF with both eyes fixed on its Coppock guide, as was the case in “SPY Coppock Guide: Away From Bullishness, Toward
Nonbullishness as of March 31, 2014.” The Coppock guide, aka either the
Coppock curve or the Coppock indicator, is a long-term indicator of price
movements in major equity-market indexes calculated on the basis of monthly
data.
Figure 1: XLI And Its
Coppock Guide, The Complete History
Note: The XLI
closing-value scale is on the left, and the Coppock guide scale is on the
right.
Source: This J.J.’s
Risky Business chart is based on
proprietary analyses of Yahoo Finance adjusted monthly share-price data and those data themselves.
Edwin S. Coppock constructed his long-term guide not to flash both
bullish and bearish signals but to generate only bullish signals. However, I
employ it to produce either bullish or nonbullish signals. It is extremely
important to keep in mind that a nonbullish signal is not equivalent to a bearish signal in the context of the guide.
I anticipate XLI may rise after a bullish signal and expect
it might do anything following a nonbullish signal (i.e., trade higher, lower
or sideways).
Figure 2: XLI’s
Behavior Subsequent To Initial Bullish Signals
Source: This J.J.’s
Risky Business chart is based on
proprietary analyses of Yahoo Finance adjusted monthly share-price data.
The XLI Coppock guide’s initial bullish signals collectively
have done a fair job in forecasting the future upward movements of the ETF on
monthly closing bases. In 11 cases since November 2000, these signals have been
correct on seven occasions, or 63.64 percent of the time, and incorrect on four
occasions, or 36.36 percent of the time.
The XLI Coppock guide’s latest initial bullish signal flashed
in June 2012, when the ETF’s closing share price was $34.37. Factoring in the
one-month lag in the confirmation of any signal, XLI’s closing share price soared
to $51.83 in February 2014 from $34.50 in July 2012, which clearly constitutes bullish
action by any standard.
Figure 3: XLI’s
Behavior Subsequent To Initial Nonbullish Signals
Source: This J.J.’s
Risky Business chart is based on
proprietary analyses of Yahoo Finance adjusted monthly share-price data.
The XLI Coppock guide’s initial nonbullish signals
collectively have built an interesting track record since November 2000. Again,
it is important to keep in mind a nonbullish signal is not equivalent to a bearish signal in the context of the Coppock
guide. After the generation of 11 initial nonbullish signals over the years, the
ETF’s share price on monthly closing bases declined on six occasions, or 54.55
percent of the time, and advanced on five occasions, or 45.45 percent of the
time.
The XLI Coppock guide’s most recent initial nonbullish signal was
produced in March, when the ETF’s closing share price was $52.33. Because of the
one-month lag in the confirmation of any signal, it is too early to tell
whether the ETF’s share price will rise or fall on a monthly closing basis, but
the historical tendency is the historical tendency.
Coppock Guide: The
Blog Series
Related Reading
Author’s Note: This is
the seventh blog post in a May series centered on the Coppock guides of 13
important ETFs, among them all nine Select Sector SPDRs. The first was
cross-posted at both J.J.’s Risky Business and
J.J. McGrath’s Instablog on Seeking Alpha, but the rest of the series will be posted here. You can follow me
(and the series) @JJMcGrath3000 on Twitter, at JJMcGrath on StockTwits and via myself on Google+.
Disclaimer: The opinions
expressed herein by the author do not constitute an investment recommendation,
and they are unsuitable for employment in the making of investment decisions.
The opinions expressed herein address only certain aspects of potential
investment in any securities and cannot substitute for comprehensive investment
analysis. The opinions expressed herein are based on an incomplete set of
information, illustrative in nature, and limited in scope. In addition, the
opinions expressed herein reflect the author’s best judgment as of the date of
publication, and they are subject to change without notice.
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