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. However, all figures are relative to the US Dollar. The US dollar bullish ETF (UPP) is one of two bullish currencies at 1.10. And it makes everything look more bearish. Notice the amount of red and brown in the table indicating weak markets. The table below, in fact, only has 8 green cells.
Let’s start from the left of the table below in the Asia Pacific region. Asia was looking weak last month and now everything is brown or red, except for Taiwan and India, which are neutral.
In the US, the NASDAQ and SPY are neutral. IIJ, and IJS are neutral. Only IWC is strong bear and the rest of the market is bearish. That pattern continues into the various sectors as discussed below.
The other America’s markets are weak. Canada, Brazil and Chile are neutral while everything else is bearish. Argentina is now strong bear.
Europe is entirely neutral or bearish. Austria, France, Italy, Greece, and the UK are neutral. While the rest are bearish. Germany and Russia are strong bear. The Euro is still the weakest currency, so that doesn’t bode well for Europe over the next few months.
When we look at the fiat currencies, we now have two bullish currencies (the US Dollar and the Yuan). Bitcoin is now bearish. The Swiss Franc and the Japanese Yen are neutral, while everything else is bearish or strong bear. The Euro took the place of the Japanese Yen as worst at -1.33.
In the most talked-about sectors, only 5G is neutral. Everything else is bearish. A new ETF was just formed for Metaverse stock, but we don’t have enough data to track it.
Now let’s look at the individual market sectors. We have three bearish sectors: Biotech, Retail, and AI-powered EQ. There are thirteen bullish sectors with Consumer Staples, Consumer Discretionary, Homebuilders, REIT, Semiconductor, and Technology with SQN scores above 1. The 15 remaining are all neutral.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities are mixed. Global water is strong bear, while steel and silver are bearish. Oil, commodities, and agriculture are all bull. Everything else is neutral.
Two of our real estate sectors are no longer listed and the other two are both bearish.
All of the interest rate sectors are bear and most of them are strong bear.
Among the strongest ETFs this month most are either energy or commodities. Only two of the sectors are strong bull (XLE and IYE). The rest are just bull.
The weakest ETFs, in contrast, are all strong bear with SQN® 100 scores ranging from minus 1.97 to minus 3.50. This month, most of them related to interest rates.
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.
I have been keeping monthly data since January 15, but I decided to only do quarterly data except for the last two years. However, if a row has a record month, then I retained it. You can look at the Aug 2021 issue and get all the months if you wish.
The summary numbers tend to suggest Bearish with 32.6% being Bearish and 31.9% being Very bearish.
Until next month, 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.