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Summary

  • The SPDR S&P MidCap 400 ETF was the No. 2 performer ranked by January-July returns among the three most popular ETFs based on the S&P 1500's constituent indexes.
  • Meanwhile, the fund's adjusted daily closing share price last month declined to $249.13 from $260.56, a loss of -$11.43, or -4.39 percent.
  • Seasonality analysis and U.S. Federal Reserve policy shifts indicate the fund's weakness could continue in the third quarter.

The SPDR S&P MidCap 400 ETF (NYSEARCA:MDY) ranked second by returns during the initial seven months of the year among the three most popular exchange traded funds based on the S&P 1500's constituent indexes, which also encompass the SPDR S&P 500 ETF (NYSEARCA:SPY) and the iShares Core S&P Small-Cap ETF (NYSEARCA:IJR).

MDY climbed to $249.13 from $242.80, a hike of $6.33, or 2.61 percent, over the period. The middle-capitalization ETF thus underperformed the large-cap SPY, which was up 5.51 percent, and outperformed the small-cap IJR, which was down -2.44 percent.

Intraday on July 1, MDY hit an all-time high of $264.00, a level I consider important because of its proximity to the estimate promulgated in my "SPY, MDY And IJR At The Fed's QE3+ Market Top" in March.

Figure 1: MDY Monthly Change, 2014 Vs. 1996-2013 Mean

(click to enlarge)

Source: This J.J.'s Risky Business chart is based on analyses of adjusted closing monthly share price data at Yahoo Finance.

MDY behaved much worse in the first seven months of this year than it performed in the comparable periods of its initial 18 full years of existence, based on the means calculated by employing data associated with that historical time frame (Figure 1). The same data set shows the average year's weakest quarter was the third, with a small negative return, and its strongest quarter was the fourth, with a large positive return.

Figure 2: MDY Monthly Change, 2014 Vs. 1996-2013 Median

(click to enlarge)

Source: This J.J.'s Risky Business chart is based on analyses of adjusted closing monthly share price data at Yahoo Finance.

MDY behaved much worse in the first seven months of this year than it performed in the comparable periods of its initial 18 full years of existence, based on the medians calculated by using data associated with that historical time frame (Figure 2). The same data set shows the average year's weakest quarter was the third, with a relatively small negative return, and its strongest quarter was the fourth, with an absolutely large positive return.

Don't Fight The Fed

At least in the short and intermediate terms, I believe the waxing of the Federal Reserve's quantitative easing programs have been bullish for equities, and I think the waning of its QE programs have been bearish for stocks, as mentioned in "Building A Martin Zweig-Like Fed Indicator Integrating Innovations Of The 21st Century."

Therefore, it appears significant that the Federal Open Market Committee's actions and words all suggest it is moving toward tightening and away from loosening its multiple monetary policies, beginning with its current QE program. With such a background, it is difficult to picture MDY making a great deal of progress in the foreseeable future.

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.

Source: MDY: January-July 2014 Performance And Historical Seasonality