The Financial Select Sector SPDR exchange-traded fund (XLF) ranked No. 8 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 inched higher to $21.96 from $21.78,
an increase of 18 cents, or 0.83 percent.
Over this period, XLF’s gain was a small fraction of the
return of the Utilities SPDR ETF (XLU)
and about one-third 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: XLF And Its
Coppock Guide, The Complete History
Note: The XLF
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 XLF 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: XLF’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 Coppock guide’s initial bullish signals for XLF have
compiled a more anemic forecasting record than the guide’s initial bullish
signals for any other Select Sector SPDR, as they have done neither better nor
worse than a series of coin flips would have done in predicting the future
upward movements of the ETF on monthly closing bases. In 10 cases since November
2000, these signals have been correct on five occasions, or 50.00 percent of
the time, and incorrect on five occasions, or 50.00 percent of the time.
Figure 3: XLF’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.
In contrast, the XLF Coppock guide’s initial nonbullish
signals have compiled an extremely interesting track record over the years. Keeping
in mind a nonbullish signal is not
equivalent to a bearish signal, the 10 initial nonbullish signals since
November 2000 have been followed by the ETF’s share price on monthly closing
bases declining on eight occasions, or 80.00 percent of the time, and advancing
on two occasions, or 20.00 percent of the time.
The XLF Coppock guide’s latest initial nonbullish signal flashed
in December, when the ETF’s closing share price was $21.78. Subsequently, the
comparable figures were $20.98 in January, $21.62 in February, $22.34 in March
and $21.96 in April. Therefore, the action in the market appears to have been
pretty nonbullish to me, even though it is still an open question as to whether
XLF will fall or rise on a monthly closing basis in the wake of this most
recent signal.
Coppock Guide: The
Blog Series
Related Reading
Author’s Note: This is
the eighth 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.
