Conclusion, Investment Implications, Strategy

The SPDR S&P Metals and Mining ETF (XME)  is in the midst of minor and major bullish price trends while also amid an October 2022 trend of Strategic  (quarterly) relative outperformance versus the benchmark S&P 500 (SPY).  Meanwhile, the total net assets invested in XME are resuming their January trend of Tactical (monthly) expansion.  These three factors (positive trend, relative outperformance, expanding investor assets ) indicate favorable conditions for XME to continue rising in the weeks and potentially months ahead.

Current Sector & Industry Group Ideas

Table 1 below is an updated version of Table 2 that appears in our weekly Keys To This Week: Sector & Industry Groups report published on Monday mornings.

This table is also accessible via the Sector & Industry Group Ideas rectangle at the top of the Research Center.

Analysis and Rationale

In seeking to track the performance of the S&P Metals & Mining Select Industry Index (the “index”), the SPDR S&P Metals and Mining ETF (XME) 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 metals and mining segment of the S&P Total Market Index (“S&P TMI”). The fund is non-diversified.

The upper panel of Chart 1 below plots XME daily since October along with its 200-day moving average, a widely-watched major trend proxy.  The lower panel plots the corresponding daily relative performance of XES 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 XME has been above its 200-day moving average since Jan 6th to indicate a positive major trend.  The lower panel shows that XME has resumed its October 2022 trend of Strategic, quarterly relative outperformance versus the S&P 500 (SPY) following successful tests of that trend on Feb 13th and 23rd.

The lower panel of Chart 2 below plots the daily total net assets invested in XME since October 2022 along with their 21-day moving average, which we use to identify a monthly trend of expansion or contraction.  The green arrow points out that these assets appear to be resuming their Jan 5th trend of monthly (our Tactical time period) expansion as of Mar 1st.  The upper panel shows that XME is also in the midst of an October minor uptrend, as defined by its 50-day moving average, and that this trend was recently tested and held on Feb 24th.

Chart 2

As long as these positive factors — trend, relative performance, and asset flows — remain intact, XME is likely to continue rising in the weeks and potentially months ahead.