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.
The S&P 500 Market SQN score for 100 days and for 200 days is strong bull for both, whereas the shorter time periods are now in neutral. In the hot areas, we see strength in everything.
Look at the table below that covers the equity markets across the globe. It’s now mostly totally green. In Asia, only Malaysia is yellow. In the Americas, everything is bullish except for Brazil which is neutral. In Europe, only Poland and Switzerland are neutral. And in Africa, everything is green.
The most important ETF in the model is the US Dollar (UUP) – which remains strong bear. The USD Index is down from a high of 103 in March 2020 to about 91 now. That’s a pretty big drop. UUP is no longer one of the worst-performing ETFs we track, but it’s still red. And now gold, usually a hedge for times like these, is also red. If you measure your wealth in US Dollars, then we’d suggest that you protect your portfolio with cryptos.
In the US market sectors, there are only two bear sectors, utilities and volatility. Everything else is either neutral or bullish. The strongest sectors are in oil and gas (in a nice recovery), broker dealers (the market is booming), gaming, media, networking, regional banks, robots and AI. The performance of broker-dealers might be a good measure of the long-term health of the market. That sector is now the 10th strongest ETF with a Market SQN score of 2.74 up from 1.47 last month – which was strong already.
The only real weaknesses on the table are in the currencies, probably due to COVID-19 spending around the world to try and protect economies. Here, the Indian Rupee is the worst, followed by the US dollar, and then the Japanese Yen and the Swiss Franc. If you are willing to call it a currency, Bitcoin dominates that group.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
There are two bear sectors in commodities – gold, and natural gas. Silver is neutral but oil has moved up to bullish territory. In fact, commodities, base metals, oil, coal, steel, agriculture, and global agribusiness all have Market SQN scores over 2.0.
Real estate ETFs are bullish and our data is back from two ETFs that had been missing data in previous reports. My thought would be that real estate would be generally down, but real estate is a hedge against the US dollar crashing, and interest rates are cheap.
In bonds, our junk ETF is bullish. Inflation-protected bonds and short-term bonds are neutral and everything over three years is strong bear. Why would you want to be in debt instruments paying less than 2-3% when the value of the US Dollar has gone down 10%? One of the stronger sectors, however, is muni bonds. So, is this where conservative big money goes for safety these days? Does that mean that big cities like New York, Chicago, Los Angeles, and Miami have debt that’s safer than the US Government? No, it just means that conservative funds really have nowhere to go (and they don’t consider BTC to be conservative).
The top 15 areas all have Market SQN® scores above 2.62 and two of them are over 3.0. The hot areas on the top 15 list are rare earth metals, small cap info tech, Taiwan, Dynamic Media, Micro cap ETF, Copper, etc. Muni bonds are still on the top list but are at the bottom of the top 10. None of the clean energy ETFs are on the top list any longer.
BTC at 2.51 is just outside of the top 15. Its strong relative performance compared to bearish gold seems to indicate that institutional investors are starting to prefer BTC as a better hedge against the collapse of the US Dollar.
On the bottom 15 list, everything is strong bear and most involve ETFs for fixed income, the US Dollar, and natural gas.
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. And you will notice this month has the highest strong bull percentage since 2015.
The overall picture of the database is similar to last month. Actually, in the last two months, 75.5% and 69.6% of our database was bullish and now it’s at 78.7%. Most of the change isn’t in the bearish category but in the neutral category which is becoming more bullish.
Our GBTC offer of last summer was hugely successful for the Super Traders who participated. Many of them had their second phase of the program fully paid for through the promotion. We just finished another similar offer this time with cryptos featuring mostly DeFi area coins. That offer just closed but we are accepting applications for the ST Foundation program for anyone who wants to start in July or later this year.
Until the March SQN report, 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.