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J.J. McGrath
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In cyberspace, I am best known as MackTheKnife, the winner of the Zacks $100,000 Challenge 2007. In meatspace, I am best known as J.J. McGrath, an editor and writer based in New York. You can follow me @JJMcGrath3000 on Twitter, as JJMcGrath on StockTwits and as J.J. McGrath on Google+.
My blog:
J.J.'s Risky Business
View J.J. McGrath's Instablogs on:
  • Select Sector SPDR ETFs: 2014 Halftime Reports And Seasonality

    The Select Sector SPDRs carving the S&P 500 into nine slices may be unique in the exchange-traded fund universe: They serve not only as investing and trading vehicles but also as equity-market indicators, lagging, coincident and leading. Accordingly, I keep an eye (or two) on them at all times.

    A few results of this many-faceted observation process can be found in a recent series of articles published here at Seeking Alpha. In each of the nine pieces, I focus on a single sector SPDR: its behavior in the first half of this year relative to its parent's proxy, the SPDR S&P 500 ETF (SPY), and all its siblings; its average monthly performances during the first full 15 years of its existence; and market-moving issues likely to have effects on it in the foreseeable future (e.g., changes in policy at the U.S. Federal Reserve).

    If you employ the sector SPDRs as market indicators, then you might want to read all of these articles. If you use a given sector SPDR as either an investing or a trading vehicle, then you might want to read the piece related to it. In any case, all nine of them are accessible via the hyperlinks appearing below:

    Utilities Select Sector SPDR ETF: XLU's 2014 Halftime Report And Seasonality

    Energy Select Sector SPDR ETF: XLE's 2014 Halftime Report And Seasonality

    Health Care Select Sector SPDR ETF: XLV's 2014 Halftime Report And Seasonality

    Materials Select Sector SPDR ETF: XLB's 2014 Halftime Report And Seasonality

    Technology Select Sector SPDR ETF: XLK's 2014 Halftime Report And Seasonality

    Consumer Staples Select Sector SPDR ETF: XLP's 2014 Halftime Report And Seasonality

    Financial Select Sector SPDR ETF: XLF's 2014 Halftime Report And Seasonality

    Industrial Select Sector SPDR ETF: XLI's 2014 Halftime Report And Seasonality

    Consumer Discretionary Select Sector SPDR ETF: XLY's 2014 Halftime Report And Seasonality

    SPY And Select Sector SPDR ETFs In First Half Of This Year

    (click to enlarge)

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

    Author's Note: As you may or may not have noticed, Seeking Alpha recently launched its ETF Hub, which Jonathan Liss described here. I am looking forward to checking out all its bells and whistles.

    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.

    Jul 14 10:30 AM | Link | Comment!
  • Coppock Guide To SPY And 12 Other Big-League ETFs: Signal History And Status

    The Coppock guide is among my favorite long-term indicators of price movements in major equity-market indexes, which accounts for the recent J.J.'s Risky Business series of blog posts centered on the guide's past relationship and present status in association with each of 13 big-league exchange-traded funds.

    Edwin S. Coppock introduced his guide, aka either the Coppock curve or the Coppock indicator, in Barron's more than half a century ago. He designed it not to flash both bullish and bearish signals but to generate only bullish signals. However, I employ it to produce either bullish or nonbullish signals.

    It is extremely important to keep in mind that a nonbullish signal is not equivalent to a bearish signal in the context of the Coppock guide as I use it. I anticipate a given index and its derivatives may rise after a bullish signal and expect it might do anything following a nonbullish signal (i.e., trade higher, lower or sideways).

    Accordingly, I couple my employment of the Coppock guide with the use of another of my favorite long-term indicators of price movements in major stock-market indexes, namely, the comparison of a given index's most recent monthly closing price with its 10-month simple moving average.

    As is widely known, this market-timing model is the centerpiece of Mebane Faber's "A Quantitative Approach To Tactical Asset Allocation." I will be blogging about my adaptation of this model in relation to each of the 13 ETFs mentioned in my Coppock guide series of blog posts as we get closer to the overall market's inflection point.

    Meanwhile, I have here for each of the 13 ETFs in the Coppock guide series its current signal (i.e., either bullish or nonbullish) and a link to the relevant blog post about it. These data are followed by a couple of charts displaying the historical performance records of the Coppock guide's signals with respect to these ETFs.

    Utilities Select Sector SPDR Fund

    XLU Coppock Guide: Bullish as of May Day 2014

    Energy Select Sector SPDR Fund

    XLE Coppock Guide: Bullish as of May Day 2014

    Health Care Select Sector SPDR Fund

    XLV Coppock Guide: Nonbullish as of May Day 2014

    Materials Select Sector SPDR Fund

    XLB Coppock Guide: Bullish as of May Day 2014

    Consumer Staples Select Sector SPDR Fund

    XLP Coppock Guide: Nonbullish as of May Day 2014

    Technology Select Sector SPDR Fund

    XLK Coppock Guide: Bullish as of May Day 2014

    Industrial Select Sector SPDR Fund

    XLI Coppock Guide: Nonbullish as of May Day 2014

    Financial Select Sector SPDR Fund

    XLF Coppock Guide: Nonbullish as of May Day 2014

    Consumer Discretionary Select Sector SPDR Fund

    XLY Coppock Guide: Nonbullish as of May Day 2014

    IShares Core S&P Small-Cap ETF

    IShares Core S&P Small-Cap ETF (NYSEARCA:IJR) Coppock Guide: Nonbullish as of May Day 2014

    SPDR S&P MidCap 400 ETF

    SPDR S&P MidCap 400 ETF (NYSEARCA:MDY) Coppock Guide: Nonbullish as of May Day 2014

    SPDR S&P 500 ETF

    SPDR S&P 500 ETF (NYSEARCA:SPY) Coppock Guide: Nonbullish as of May Day 2014

    PowerShares QQQ

    PowerShares QQQ (NASDAQ:QQQ) Coppock Guide: Bullish as of May Day 2014

    Figure 1: ETF Behavior After Coppock Guide's Bullish Signals

    (click to enlarge)

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

    Measured by their Coppock guide initial bullish signals since inception, XLU has been hot, while XLF has been not. In predicting future upward movements in share prices on monthly closing bases, the initial bullish signals for the former ETF have been absolutely perfect and the signals for the latter ETF have been absolutely imperfect.

    Figure 2: ETF Behavior After Coppock Guide's Nonbullish Signals

    (click to enlarge)

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

    Again, it is extremely important to keep in mind that a nonbullish signal is not equivalent to a bearish signal in the context of the Coppock guide as I employ it. Nonetheless, the Coppock guide initial nonbullish signals for XLE, XLU and XLF collectively have compiled pretty interesting historical performance records since inception.

    Because the Coppock guide is calculated on the basis of monthly data, I will be recrunching all the relevant numbers following the market close on Friday.

    Correction: This recrunching of the relevant numbers allowed me to detect a data-download error associated with MDY, which in turn enabled changes in this article's graphics and their related text: See SPDR S&P MidCap 400 ETF (MDY) Coppock Guide: Nonbullish as of May Day 2014.

    Related Reading

    Utilities No. 1 Among Select Sector SPDR ETFs In 2014 As Of Mid-April

    Sector SPDRs Behavior In January Indicates Change In Mood, 2013 Vs. 2014

    SPY, MDY And IJR At The Fed's QE3+ Market Top

    Author's Note: This blog entry is being cross-posted at both J.J.'s Risky Business and J.J. McGrath's Instablog on Seeking Alpha.

    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.

    Disclosure: I am long SDS.

    May 29 8:30 AM | Link | Comment!
  • XLU Coppock Guide: Bullish As Of May Day 2014

    Mr. Market's psychological transition from manic last year to depressive this year has been mirrored by the behaviors of the Select Sector SPDRs dividing the S&P 500 into nine pieces, as reported in "Utilities No. 1 Among Select Sector SPDR ETFs In 2014 As Of Mid-April" at Seeking Alpha.

    The Utilities SPDR exchange-traded fund (XLU) was the best performer among its peers during the first third of 2014, as its adjusted closing share price advanced to $43.21 from $37.66, a gain of $5.55, or 14.74 percent. By way of comparison, the SPDR S&P 500 ETF (SPY) climbed to $188.31 from $183.88, an increase of $4.43, or 2.41 percent.

    Accordingly, I am happy to have XLU as the first of a baker's dozen ETFs to be featured this month in a J.J.'s Risky Business blog series being launched today. Basically, I will be looking at each ETF with both eyes fixed on its Coppock guide, as was the case in "SPY Coppock Guide: Away From Bullishness, Toward Nonbullishness as of March 31, 2014."

    The Coppock guide, aka either the Coppock curve or the Coppock indicator, is a long-term indicator of price movements in major stock-market indexes introduced by Edwin S. Coppock in Barron's more than half a century ago. Both the indicator's history and its methodology are interesting in themselves, but my focus now is on its relevance to XLU.

    Figure 1: XLU And Its Coppock Guide, The Complete History

    (click to enlarge)

    Note: The XLU closing-value scale is on the left, and the Coppock guide scale is on the right.

    Source: This J.J.'s Risky Business chart is based on proprietary analyses of Yahoo Finance adjusted monthly share-price data and those data themselves.

    Coppock developed his long-term guide not to generate both bullish and bearish signals but to generate only bullish signals. However, I employ it to generate either bullish or nonbullish signals. It is extremely important to keep in mind that in the context of the Coppock guide a nonbullish signal is not equivalent to a bearish signal. In my use of the indicator, I anticipate XLU may advance after a bullish signal and expect it might do anything following a nonbullish signal (i.e., trade higher, lower or sideways).

    Figure 2: XLU's Behavior Subsequent To Initial Bullish Signals

    (click to enlarge)

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

    The XLU Coppock guide's initial bullish signals collectively have compiled a perfect record in prognosticating the future upward movements of the ETF on monthly closing bases, as they have been accurate in all 12 cases since November 2000. The most recent bullish signal was generated last December, when XLU's closing share price was $37.66.

    Because of a one-month lag in the confirmation of a Coppock guide signal, however, I used XLU's closing share price of $38.78 in January as the baseline in determining the success or failure of the latest signal. As mentioned above, the ETF's final print was $43.21 in April.

    Figure 3: XLU's Behavior Subsequent To Initial Nonbullish Signals

    (click to enlarge)

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

    The XLU Coppock guide's initial nonbullish signals collectively have compiled a pretty interesting track record of their own. Keeping in mind that in the context of the Coppock guide a nonbullish signal is not equivalent to a bearish signal, XLU since November 2000 has fallen on nine occasions, or 81.82 percent of the time, and risen on two occasions, or 18.18 percent of the time, in the wake of nonbullish signals.

    I monitor XLU because I believe it is key to any analysis of market sentiment based on the comparative behaviors of the nine Select Sector SPDRs. If XLU ranks either at or close to No. 1 in relative returns during a given period, then I think market participants are generally in risk-off mode; if XLU ranks either at or close to No. 9 in relative returns over a given period, then I think market participants are generally in risk-on mode.

    Author's Note: This first blog post in a series centered on the Coppock guides of 13 important ETFs is being cross-posted at both J.J.'s Risky Business and J.J. McGrath's Instablog on Seeking Alpha. The rest of the series will be posted at the former location. You can follow me (and the series) @JJMcGrath3000 on Twitter, at JJMcGrath on StockTwits and via myself on Google+.

    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.

    May 01 12:50 PM | Link | Comment!
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