The Materials Select Sector SPDR exchange-traded fund (XLB) ranked No. 4 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 progressed to $47.67 from $46.04,
a yield of $1.63, or 3.54 percent.
Over this period, XLB’s return was a bit less than one-quarter
that of the Utilities SPDR ETF (XLU)
and a bit less than 1-1/2 times 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.)
Figure 1: XLB And Its
Coppock Guide, The Complete History
Note: The XLB
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 developed 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 XLB 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: XLB’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 XLB Coppock guide’s initial bullish signals collectively
have done an almost-perfect job in forecasting the future upward movements of
the ETF on monthly closing bases. In 12 cases since November 2000, these signals
have been correct on 11 occasions, or 91.67 percent of the time, and incorrect
on one occasion, or 8.33 percent of the time.
The Coppock guide’s latest initial bullish signal flashed
last June, when XLB’s closing share price was $37.77. Factoring in the
one-month lag in the confirmation of any signal, I note the ETF’s closing share
price advanced to the aforementioned $47.67 in April from $39.87 in July, which
clearly constitutes bullish action by any standard.
Figure 3: XLB’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 XLB Coppock guide’s initial nonbullish signals
collectively have compiled a pretty mixed track record when evaluated on
monthly closing bases. Again, it is extremely important to keep in mind that a
nonbullish signal is not equivalent
to a bearish signal in the context of the Coppock guide. Following the generation
of 11 initial nonbullish signals since November 2000, the ETF’s share price has
fallen on six occasions, or 54.55 percent of the time, and risen on five occasions,
or 45.45 percent of the time.
Factoid o’ the Day: Five of the 11 XLB Coppock guide’s initial
nonbullish signals have been produced in the merry month of May (in 2002, 2004,
2009, 2010 and 2013).
Coppock Guide: The
Blog Series
Related Reading
Author’s Note: This is
the fourth 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.
