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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 an index-based 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.
Let’s start from the left of the table below in the Asia Pacific region. Asia was looking weak last month and now it looks weaker. Taiwan and Australia are yellow, India is the only green country, and all the rest have negative Market SQN scores. China has the worst score in Asia and several China-related ETFs are on the Bottom 15 List this month. Those low scores probably have two main factors – global investors pulling back from investments in China and the country’s economic weakness.
In the US, the S&P and NASDAQ are dark green while the rest of the segment-based indexes are yellow. The other America’s markets are a mix from Chile’s weakest score (-.97) in the region to Argentina’s very strong score.
Everything in Europe is yellow or green. Russia has the strongest score while Germany, Spain, and Sweden all are the weakest – though still positive with yellow.
The most important ETF in the model is the US Dollar (UUP) – which has a score of exactly 0.0 right now. While the Chinese equities ETF is red, the Chinese currency ETF is green – the only green currency. The Yuan is up from 100 days back but it’s mostly been flat for the last three months. Every other currency is yellow, brown, or red – indicating relative equivalence to or weakness against USD – which has been trading within a large range for the last year.
In Van’s most talked about sectors, we have yellow, brown, and red. Last month, MJ was negative but it has an even lower score this month and earned a spot on the Bottom 15 List – even as several drafts of legalization bills make their way around congress – which should help the sector.
The rest of the market sectors were mostly green last month but yellow dominates now. Health Care and REIT are the only dark green sectors now while volatility and marijuana are red.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities are weaker overall than last month though none of them are red. Global Water is very strong right now but natural gas exceeds that score. Both ETFs are on the Top 15 List. Gold and silver continue to be on the weak side though base materials show mild strength. You might say the group currently represents a confirmation of mild inflation – but it’s not a strong vote.
The real estate ETF RWX has a similarly strong score to RWR in the sector table above. Price data is missing for the RE Europe symbol so not much to say here overall. As Van has mentioned, the residential market in the Research Triangle Park region of North Carolina where we live continues to be very strong as it does in many markets across the US.
While interest rates continue to stay low, the bond-related ETFs are all positive. TIPS are the strongest – but not by much compared to the intermediate treasury ETF. Overall, short-term issues are the weakest.
The top 15 ETFs in the database have Market SQN® scores averaging lower than last month. The list has a mix of areas but healthcare, water, and real estate seem to be repeated themes.
On the bottom 15 list, everything is strong bear. China issues seem to be the dominant theme now as China has economic weakness and wants to reign in its tech giants. Both are deterring foreign investing.
Summary
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 –
So the summary numbers tend to verify the perception that the database weakened overall in the last month. Nearly half of the symbols score in the sideways category. August continues the weakening trend from a few months of very strong numbers in the first quarter.
Van will return to write the September SQN Report.
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.