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 I see promoted all the time as the hot new areas. Last month, all of them were either bear or neutral, however, almost everything is bullish with just marijuana being neutral.
In January and for much of February, the equity markets made a huge move upward and became mostly green after being neutral last year. Then COVID-19 hit. Even last month the chart was mostly red and brown and very bearish. This month everything is neutral with a few greens and browns.
The chart below is mostly yellow but with enough light green to be interesting. The important ETF is for the US Dollar. It’s now bearish – down from a high of 103 in March to about 93 – that’s a pretty big drop. Why? We had 2nd quarter drop of 32% in the GDP (annualized) which we have not seen before and COVID-19 cases are as bad as they’ve ever been in the US. The US passport had gone from being the best passport in the world to one of the worst with over 100 countries not wanting US Citizens to visit because of our poor response to the pandemic. If your wealth is entirely in the US Dollar, then we’d suggest that you protect yourself by adding cryptos or gold to your portfolio.
In the currencies section this month, the Aussie Dollar and Bitcoin are bullish. The Yen and the US Dollar are bearish. The Indian Rupee is strongly bearish but everything else is neutral.
In Asia, Hong Kong (under pressure from China which wants to remove its freedoms and status) and Singapore are both bearish. China and Taiwan are both bullish and everything else is neutral.
All of the US market segments are bearish except QQQ which is bullish. Elsewhere in the Americas, Mexico is bearish and Argentina is bullish.
In Europe, Austria is bearish and everything else is neutral. And in Africa, everything is neutral except Nigeria which is bearish.
The sectors have improved dramatically from last month when everything was bearish or neutral. REITS and aerospace are both bearish and that’s it. Nothing is strong bull but a lot of sectors are turning up bullish including biotech, basic materials, consumer discretionary, oil and gas exploration, retail, semiconductor, technology, 5G, AI, media, software, and robots and AI. That’s a big change from last month.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities are mixed. Gold and silver are both bullish and near strong bull territory. Oil and natural gas are strong bear which is easy to understand – few people are driving and airplanes are hardly moving. Agriculture and livestock are bearish.
Real estate is generally bearish except for Chinese real estate which is neutral.
Short term interest rates and inflation-protected bonds are both bullish and everything else in the debt category is neutral.
The top 15 list has 5 funds which are strong bull (down from 10 last month) and the rest are just bull. The top scores are for online retail, short term interest rates, and some I don’t clearly recognize.
On the downside, four months ago 13 funds had Market SQN scores above 2.0. This month we only have five strong bear and the lowest score on the list is 1.4. The bottom list includes corn, the Indian Rupee, oil, and gas.
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 –
The overall picture right now is overwhelmingly neutral with over 70% in that category. And we now have 19.8% bullish up from 6.7% last month. And last month 63% were bearish compared with only 9.2% this month.
By the way, the crypto update doesn’t come out until mid-August, but cryptos are as strong as I have seen them. BTC was at $11,758 at 4 PM EDT on Saturday Aug 1st. That means the early adopters in mid-July for our risk free GBTC offer are now up about 40% in two weeks. Perhaps now you can see why I was willing to do the offer.
We are keeping the offer open but I’m not willing to buy GBTC over 12.5 and if we switch to BTC, we are also pretty close to my price ceiling. I’m not willing to do no-risk guarantees at these prices now, however, we will keep the offer open should prices come down again.
Until the end of August, 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.