Sunday, April 29, 2007

XLP and Money Flows for Consumer Staples Stocks

Our last look at the Consumer Staples sector of the S&P 500 stock universe found a solid runup in price on above-average adjusted relative dollar volume flows. Even during the market weakness of late February/early March, money flows for the Staples stocks remained average or above.

In the chart above, we can see that the sector ETF (XLP; blue line) has since risen to new highs, with the 10-day average of adjusted flows (pink line) moving smartly above the 200-day moving average (red line). During the recent run to new highs, there has been a deceleration of money flows into the sector, but these have remained above average nonetheless.

The five highly weighted stocks within XLP that are included in the flow calculations are PG, MO, WMT, KO, and WAG. All five show net dollar inflows over the past 10 trading sessions and all but MO are displaying flows above the 200-day average. WMT, interestingly, is showing particular recent inflows relative to the average. Although the 10-day flows for MO are below the 200-day average, they are still solidly positive.

As long as flows remain above average for the Consumer Staples stocks, I expect further price gains. This sector has been a major beneficiary of recent strength in the S&P 500 Index. With further deceleration of flows, it would not be surprising to see some price consolidation. This is something I'll be watching carefully.