Conclusion, Investment Implications, Strategy

The SPDR S&P Homebuilders ETF (XHB) is in the midst of a late 2022 major uptrend amid quarterly relative outperformance versus the S&P 500 (SPY) and monthly asset expansion since early May.  These three factors indicate favorable conditions for recent strength in XHB to continue.

Current Sector & Industry Group Ideas

Table 1 below is also accessible via the Sector & Industry Group Ideas rectangle at the top of the Research Center.

Table 1

Click the table to  make it larger

This table also regularly appears in our weekly Keys To This Week: Sector & Industry Groups report published on Monday mornings.

Analysis and Rationale

In seeking to track the performance of the S&P Homebuilders Select Industry Index (the “index”), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index represents the homebuilders segment of the S&P Total Market Index (“S&P TMI”).

The upper panel of Chart 1 below plots the SPDR S&P Homebuilders ETF (XHB) daily since January along with its 200- and 50-day moving averages, widely-watched minor and major trend proxies.  The lower panel plots the corresponding daily relative performance of XHB versus the SPDR S&P 500 ETF Trust (SPY) along with its 63-day moving average, which we use to identify the Strategic (quarterly) trend of relative performance versus the broad market. 

Chart 1

The upper panel shows that XHB is in the midst of a major uptrend relative to its 200-day moving average, one that  began in November 2022.  It also shows that XHB is in the midst of an Apr 20th minor uptrend according to its 50-day MA , one which was tested and held on May 31st.  The lower panel shows that XHB in the midst of an Apr 20th trend of quarterly (our Strategic time frame) relative outperformance versus SPY and that this trend appears to resuming.

The upper panel of Chart 2 below also plots XHB daily since January, this time with a corresponding chart of the daily total net assets invested in XHB and their 21-day moving average in the lower panel.  We use the moving average to identify a monthly (our Tactical time period) trend of expansion or contraction in these assets.  

Chart 2

The lower panel shows that these assets are currently in a May 8th trend of monthly expansion and that this trend is accelerating. Expanding assets indicate bullish conviction and are the fuel that drives a price trend.

The current combination of a positive major trend, quarterly relative outperformance versus the benchmark, and expanding assets establish favorable conditions for the current rise in XHB to continue.