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Setting up for Success | ETFsector.com Daily Trading Outlook, May 31, 2024

Major US indices corrected on Thursday with the Nasdaq leading markets lower (-1.08%) while the Dow and S&P 500 gave up -86 bps and -60bps respectively.  Under the surface, stock level breadth and sector performance skewed positive as losses were concentrated in Tech (XLK) and Comm. Services (XLC).  A reversal from the previous week where Tech/Growth outperformed, and defense and cyclicality lagged.  Small Caps as measured by the Russell 2000 (IWM) were a standout to the upside gaining +1.00%, though they remain short of a clear technical break-out.

Eco Data Releases | Friday May 31st, 2024

Date Time Event Survey Actual Prior Revised
05/31/2024 08:30 Personal Income Apr 0.30% 0.50%
05/31/2024 08:30 Personal Spending Apr 0.30% 0.80%
05/31/2024 08:30 Real Personal Spending Apr 0.10% 0.50%
05/31/2024 08:30 PCE Deflator MoM Apr 0.30% 0.30%
05/31/2024 08:30 PCE Deflator YoY Apr 2.70% 2.70%
05/31/2024 08:30 PCE Core Deflator MoM Apr 0.20% 0.30%
05/31/2024 08:30 PCE Core Deflator YoY Apr 2.80% 2.80%
05/31/2024 09:45 MNI Chicago PMI May 41.5 37.9

 

S&P 500 Constituent Earnings Announcements by GICS Sector | Friday May 31st, 2024

No S&P 500 Constituents release earnings today

The economic calendar presents personal income and spending data on Friday as well as MoM and YoY PCE deflators a latest indicator on the inflation front.

The US 10yr yield is rolling over short of April highs as Crude languishes at near-term oversold levels.  Somewhat strangely relative to history the USD and Crude have been positively correlated for much of the past 2 years.  However we are seeing broader commodities prices showing some near-term strength which is on our radar.  The Bloomberg Commodities Index is pulling back from intermediate-term resistance.  A move above would be meaningful in our view.

  • BCOM (200-day m.a.| Relative to S&P 500)
  • BCOM has sustained overbought momentum through the 200-day m.a. A move above the 108 level would be very bullish for the Materials Sector (XLB) based on our historical trend models 

 

Factor Friday: Commodities ETF’s in Focus

Most of the AUM in the Commodities linked ETF space (Chart 1, below) is concentrated in precious metals funds which take up almost 80% of commodity classified ETF assets as categorized by our friends at ETFAction.  However the performance profile in the last few months (Chart 2, below) has shifted in favor of Broad Market Commodities, and that has historically dovetailed with Value and Cyclicality.  Both have lagged Growth since early 2023 and we’d need to continue to see broad commodities stack positive performance to underpin a return to cyclical sectors and value exposures as alpha sources.

Chart 1: Commodity Linked ETF AUM

Chart 2: Commodity Linked ETF Performance (Monthly)

 

Sources: Bloomberg, ETFAction

Patrick Torbert

Patrick Torbert is a veteran financial market analyst who is currently the Editor and Chief at ETF Insight a NY based full-service content, TV, video podcast and digital marketing firm that represents several ETF issuers. Patrick brings 20+ years of experience from Fidelity Asset Management where he most recently served as an equity and multi-asset analyst.
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