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. The US Dollar continued its strength in January but it is no longer green as it has been for a long time. It’s now neutral and despite its weakening, all of the markets continue to look very weak.
In US equities, the Medium and Small Cap segments look very weak while there is a little less weakness in the Large Caps (they are only brown). And in every US Sector, the Market SQN scores look weak. The only exception is Volatility which is green (but that’s bearish for the market).
In Europe, there are two neutral countries — Poland and Russia — while everything else is weak. In Africa, everything is weak except South Africa which is neutral.
In Asia everything is week except for two neutral countries, Singapore and Hong Kong.
The only country strength is south of our border. Brazil is dark green (and stands out for that). Latin America is light green. Chile and Argentina are neutral. Everything else is weak.
Currencies is the one area of the World Market Model in which there is a little strength. The Brazilian Real is green, The British Pound, Japanese Yen, the Indian Rupee (what did I say at the end of the Market Update article above?) and the Chinese Yuan are all neutral and colored yellow. The weakest currency is still Bitcoin which shows as the only red currency.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities were still weak overall in January but Gold turned dark green (which indicates people are scared generally but now they are also afraid of Bitcoin). Livestock and Silver are both light green. Base Metals and Natural Gas are both yellow and every other commodity is very weak.
The top 15 ETFs are looking much weaker as a group compared to last month. We have only 8 dark green sectors (instead of 15 at the end of December) with Palladium being the strongest in January. 7 of the top 15 are only light green. We have the entire list of 15 weakest ETFs in red this month and the three weakest are WBI Tactical Share ETFs.
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 —
The market became quite weak in October with 7.5% of all sectors being bullish and 84% being bearish. On Nov 30th, only 3% of the symbols in the database were bullish while 82.5% were bearish. At the end of December, 84% of the database was in bearish territory with 65% in very bearish territory. 77% are bearish now with only 6.6% being bullish.
We have been calculating this data since the beginning of 2015 and the last few months were by far the most bearish months in that four-year period. Market pundits say that 2018 was the worst year since 2008.
I have no idea whether this market will stay where it is and become sideways or if it will get worse or if it will recover. Just continue to pay attention to what the market is doing.
Until the April SQN Report this is this is Van Tharp.
The February report will be written by RJ Hixson while I’m away in India.
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.