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 table below shows the hot areas that most people constantly talk about and all of them are bullish with GTBC and marijuana stocks being the strongest. 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 green. In Asia, only Malaysia and China are yellow. In the Americas, everything is bullish. In Europe, everything is green. And in Africa, we have a mixture with Africa and South Africa being green, while Egypt and Nigeria are neutral.
The most important ETF in the model is the US Dollar (UUP) – which remains bearish. The USD Index is down from a high of 103 in March 2020 to about 93 now. That’s a pretty big drop. UUP is no longer one of the worst-performing ETFs we track but it’s still brown. 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.
While the crypto market will be discussed thoroughly in the Crypto Update being published on April 21st, we see almost everything is hot and there are a number of cryptos that are up over 1000% in 2021 (that’s in three months). We opened up the Van Tharp Institute crypto account in February and the graph below shows its performance over just one month.
We used about $850,000 to buy crypto positions last month while we have about another $90K still in cash. The cryptos we own have gone up almost 50% in one month.
In the US market sectors (see the table above) there is just one bear sector — volatility and now there are only four neutral sectors – biotech, pharmaceutical, utilities, and software. Everything else is bullish. The strongest sectors are broker-dealers (the market is booming), networking, and financial. 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 2.69 up from 1.47 two months ago – which was strong already.
The only real weakness on the table is in currencies, probably due to COVID-19 spending around the world to try and protect economies. The Japanese Yen is the worst followed by the Swiss Franc. The Indian Rupee ETF, which was the worst, is no longer giving us data. Several currencies, however, are relatively strong and 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 strong bull territory. In fact, commodities, steel, timber, agriculture, and global agribusiness all have Market SQN scores over 2.0.
Real estate ETFs are bullish but we are missing data from half of our real estate ETFs. My thought would be that real estate would be generally down, but real estate is a hedge against the US dollar crashing, and interest is still very 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 anyone want to be in debt paying less than 2-3% when the value of the US Dollar has gone down 10% in the last year? One of the stronger sectors, however, is muni bonds. So, is this where conservative big money is going these days for safety? 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 money really has nowhere else to go right now (and a lot of big money does not consider BTC to be conservative).
The top 15 areas all have Market SQN® scores above 2.60 and one of them is over 3.0. The hot areas on the top 15 list are Europe small-cap, Austria capped ETFs, and small-cap dividend ETFs. 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 but US gasoline has now made it.
BTC at 1.98 is strong bull but it ranks down at number 155 currently. Its strong relative performance compared to bearish gold seems to indicate that institutional investors are preferring 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 and the Japanese Yen.
Summary
Let’s look at the summary table which measures the percentage of all of the ETFs in the database by each strength category: very bullish, bullish, neutral, bearish, and very bearish –
I have highlighted the most extreme values for each column since we started this report in 2015. And you will notice this month still has a very high strong bull percentage for the last six years.
The overall picture of the database is similar to last month. Actually, in the last three months, 75.5% and 69.6% and 78.7% of our database was bullish and now it’s at 73.2%. Most of the change isn’t in the bearish category but in the neutral category.
Our GBTC offer of last summer was hugely successful for the Super Traders who participated. Many of them paid entirely for their second phase of the program through the promotion. We just finished a similar offer in January and February featuring cryptos mostly DeFi area coins. That offer closed recently but we are accepting applications for the ST Foundation program for anyone who wants to start in July or later this year.
Until the April 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.