Conclusion, Investment Implications, Strategy

The SPDR S&P Software & Services ETF (XSW) is in the midst of a January major uptrend amid quarterly relative outperformance versus the S&P 500 (SPY) and monthly asset expansion since mid May.  These three factors indicate favorable conditions for recent strength in XSW 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 Software & Services 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 software and services segment of the S&P Total Market Index (“S&P TMI”).

The upper panel of Chart 1 below plots the SPDR S&P Software & Services ETF (XSW) daily since January along with its 200-day moving average, a widely-watched major trend proxy.  The lower panel plots the corresponding daily relative performance of XSW 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 XSW is in the midst of Jan 23rd major uptrend, as defined by its 200-day MA, which was tested and held on Mar 13th and May 4th.  The lower panel shows that XSW has been outperforming SPY on a Strategic basis since May 22nd.

The upper panel of Chart 2 below also plots XSW daily since January, this time with a corresponding chart of the daily total net assets invested in XSW 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 17th trend of monthly expansion.  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 XSW to continue.