Research Excerpts

Anticipating Relative Performance via Asset Flows, Part 2 (Utilities)

Posted on: Wednesday, May 29th, 2013

Years ago we developed a metric that indicates when investors are collectively “offsides” on a specific sector bet, either too bullish or too bearish, based on historic daily investor asset flows into and out of US stock market sector-related ETFs (exchange traded funds).

Chart 2 of our April 23rd blog posting, entitled Anticipating Relative Performance via Asset Flows, showed that our Rydex Utilities Ratio (one of our metrics) was edging into historic over-invested extremes which had historically coincided with or led the beginning of new trends of both outright sector weakness and relative sector underperformance.

This historic extreme in our ratio was a component in our trend model’s April 26th shift to market perform on Utilities, from outperform on February 25th, which captured 6% of relative sector outperformance in 2 months’ time.

The chart below shows that our Rydex Utilities Ratio has since reversed from late April over-invested extremes and, through the end of last week, is now closing in on opposite under-invested extremes.

0527-1

Meanwhile, our trend model shifted to underperform in Utilities as of May 7th and thus far has captured 8% of relative sector outperformance in a little less than 3 weeks. At least as far as we’re concerned, understanding and tracking investor positioning is a key factor in market successful sectors bets.

More charts, detail and investment strategy on this topic are available in our latest Sector Watch report (access requires subscription), one of 8 premium research reports that Asbury Research produces for subscribers at various intervals throughout the month.

Interested investors can request further information about our research, including services and pricing, by clicking here and completing the on-line form or by calling us at 1-888-960-0005.