Conclusion, Investment Implications, Strategy

The SPDR S&P Oil & Gas Equipment & Services ETF (XES) is in the midst of minor and major bullish trends that were initiated in October 2022, while also amid Strategic relative outperformance versus the benchmark S&P 500 (SPY) and monthly expansion in assets.  These three factors (positive trend, relative outperformance, expanding investor assets ) indicate favorable conditions for XES 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.

Table 1

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 Oil & Gas Equipment & Services Select Industry Index, the SPDR S&P Oil & Gas Equipment & Services ETF (XES) 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 oil and gas equipment and services segment of the S&P Total Market Index (“S&P TMI”).

The upper panel of Chart 1 below plots XES 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 KIE has been above its 200-day moving average since October to indicate a positive major trend, and that this trend was tested and successfully held on Dec 9th.  The lower panel shows that KIE appears to be resuming its October 2022 trend of Strategic, quarterly relative outperformance versus the S&P 500 (SPY) after testing it on Feb 2nd and 22nd.

The lower panel of Chart 2 below plots the daily total net assets invested in XES since October 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 are in the midst of a Dec 23rd trend of monthly (our Tactical time period) expansion and that this trend appears to be accelerating.  The upper panel shows that XES is also in the midst of an October minor uptrend, as defined by its 50-day moving average, and that this trend is currently being tested and may be resuming.

Chart 2

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