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 of potential hot areas I see all the time. All of them are cold – being either bear or strong bear.
In January, the equity markets made a huge move upward and became mostly green after being very neutral late last year. And then COVID-19 hit. And today the chart looks as brown/red as I have ever seen it.
The US Dollar moved from bullish to almost zero. And now it’s neutral which is surprising given the stimulus package. However, traders are comparing the US situation with those of other countries – and when they do the US Dollar doesn’t look so bad.
This month the Swedish Krona is green. The Real also looks green but we have no data on that currency this month. So the three strongest currencies are the Krona, the yen, the Swiss Franc and the US Dollar.
Bitcoin is also bearish. It went down with equities in an unusual correlated move. Everything tended to crash with stocks including commodities.
US equities have taken a decided turn to the downside. EVERYTHING is bearish with small caps tending to perform much worse than the large caps. In addition, all of the countries in the Americas are also red or strong bear.
Asia is totally red and brown. Here the strongest country is China (almost neutral) which is surprising since all of this started there. And the worst country is Singapore, which is again surprising as it pretty much has the virus under control.
It’s the same story in Europe – everything is red (strong bear) or brown (bear). The strongest country is Switzerland and the weakest country is Poland.
In Africa, everything is red with Egypt being at minus 1.62.
I no longer talk about every sector and what each is doing. But this month it doesn’t matter. Everything is red and brown with two insignificant sectors. US Technology is neutral (but close to bear) and that same is true of Software. Volatility is green as you would expect in a bear market.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
One commodity is yellow and everything else is brown or red. Global Water which has been strong is now at minus 0.47. The only neutral commodity is Gold, but I’d expect that to get very strong if we are heading for inflation.
US and European Real Estate is bearish with China being neutral.
Interest rates are very strong with most of the short term funds having an SQN over 2.0. However, corporate bonds are neutral and junk bonds are weak.
In March, the top 15 list has 9 strong bull funds and the rest are just bull. The top ones are mostly interest rates and the Swedish Krona. I have no idea why the Krona is green.
On the downside, 13 of the bottom 15 funds have SQNs worse than minus 2.0. They include a lot of energy (oil, gasoline, natural gas) and commodity symbols. When commodities are negative, one could say that inflation doesn’t look likely – but we are in a market where everyone is probably liquidating whatever they can.
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:
Notice that there was a huge move in the database toward bearishness in February and the current market is the worst that we show on the chart. 88.1% of all funds are either bear or strong bear and that we haven’t seen before.
Until early May, 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.