There are numerous ETFs that track everything from countries, commodities, currencies and stock market indices to individual market sectors. ETFs provide a wonderfully easy way to discover what’s happening in the world markets. I apply a version of my System Quality Number® (SQN®) score to measure the relative performance of numerous markets in a world model.
The Market SQN score uses the daily percent change for input over a 100-day period. Typically, a Market SQN score over 1.47 is strongly bullish and a score below -0.7 is very weak.
The following color codes help communicate the strengths and weaknesses of the ETFs in this report:
- Dark Green: ETFs with very strong Market SQN scores > 1.47
- Light Green: ETFs with strong Market SQN scores (0.70 to 1.47).
- Yellow: ETFs with slightly positive Market SQN scores (0 to 0.70). These are Neutral/Sideways
- Brown: ETFs with slightly negative Market SQN scores (0 to -0.7).
- Red: Very weak ETFs that earn negative Market SQN scores (< -0.7).
This is basically the same rating scale that we use for the Market SQN Score in the Market Update. The world market model spreadsheet report below contains a cross-section of currently available ETFs; excluding inverse funds and leveraged funds. In short, it covers equity markets around the globe, major asset classes, equity market segments, industrial sectors, and major currencies.
World Market Summary — Equities & Currencies
Each month we look at the equities markets across the globe by segment, region, and sector.
We’ve added a section with a few categories promoted all the time as the hot new areas. Last month, all of them were either bear or neutral, however, everything is bullish with just marijuana being neutral this month.
After being neutral most of last year, the equity markets made a huge move upward and became mostly green in January and February. Then COVID-19 hit and the World Market Model turned brown and red almost everywhere for the next few months. Even at the end of June, the chart was mostly red and brown and very bearish. Last month everything was neutral with a few greens and this month almost everything is bullish. Wow!
Look at the table below. It’s mostly green with a few yellows and some red in the currencies. The important ETF is the US dollar – which is now bearish and down from a high of 103 in March to about 93 cents. That’s a pretty big drop. The US Passport had gone from being the best passport in the world to one of the worst with over 100 countries wanting US Citizens to stay away because of our poor response to COVID-19. We also had a 2nd quarter drop of 32% in GDP (annualized) – a drop bigger than anything we have not seen before. If you measure your wealth in US Dollars, then we’d suggest that you protect your portfolio with cryptos or gold.
This month the Aussie dollar, the Euro, the Swedish Krona, and the Swiss franc are all strong bull. Bitcoin, the British Pound, the Canadian Dollar and the Chinese Yuan are bullish. The Japanese Yen is neutral while two currencies are red — the US Dollar and the Indian Rupee.
In the Asian sector, Hong Kong (where China wants to remove freedoms and status) and Singapore are both neutral after being bearish last month. Everything else is green.
All of the market sectors in the US are bullish and only a few countries in the Americas are neutral: Brazil, Chile, and Latin American countries.
In Europe, everything is bullish except for Austria, Spain, Greece, and the UK.
US market segments are bullish with just a few neutral sectors. The neutral sectors include Energy, Financial, Aerospace and Defense, REITs, Utilities, Insurance, Networking, Marijuana, and Regional Banks. Only Volatility is bearish (i.e., the market is quiet).
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities are mixed. Gold and Silver are both in strong bull territory as are Base Metals, Timber, and Global Agribusiness. Commodities, Coal, Steel, and Global Water are bullish, while Agriculture and Livestock are neutral. Only Oil is bearish.
Real estate ETFs are generally bullish.
Short term bonds and inflation-protected bonds are both strong bullish. 3-7 year bonds are bullish while 1-3 year bonds, 7-10 year bonds, and 10-20 year bonds are neutral. Only long term bonds are bearish in this category.
The top 15 list has every ETF scoring above 2.95 and 13 of them being above 3.0. That might be a new record for strength.
On the downside, we have five strong bear funds and the US Dollar is the only one below minus 2.0.
Let’s look at the summary table which measures the percentage of ETFs in each of the strength categories. You can see the distribution of the database by Market SQN score in bullish, neutral and bearish categories below –
I have highlighted the most extreme values for each column since we started this report in 2015.
The overall picture jumped dramatically in one month from overwhelming neutral with over 70% in that category, to overwhelmingly bullish with 81.7% in those two categories. The prior record was in 79.0% in June 2017. Bullish ETFs are up from 19.8% last month and 6.7% the prior month. This month 3.3% were bearish compared with 10.1% last month and 68.6% the prior month.
By the way, the monthly crypto update doesn’t come out until mid-September but cryptos are as strong as I have seen them. BTC is currently $11,900 on Tuesday, Sept. 1st and GBTC is $13.70 with about a 15% premium. The people who were early adopters of our risk free offer on GBTC in early July are now up 41% in six weeks. Perhaps now you can see why I was willing to make that offer.
We are keeping the offer open for the time being but I’m unwilling to buy GBTC over $12.50. If we switch the offer to BTC, that will likely last a short while only as BTC is pretty close to my ceiling price. I’m unwilling to offer no risk guarantees at the current prices so the offer remains open but nothing will happen until the price comes down again.
Until the beginning of October, this is Van Tharp.
Be careful to base your actions upon what IS happening, not what you think might happen. The markets always offer opportunities, but to capture those opportunities, you MUST know what you are doing. If you want to trade these markets, you need to approach them as a trader, not a long-term investor. We’d like to help you learn how to trade professionally because trying to navigate the markets without an education is hazardous to your wealth. All the beliefs given in this update are my own. Though I find them useful, you may not. You can only trade your own beliefs about the markets.