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. This month, all of them are cold being either strong bear, bear, or neutral. The strongest is BTC.
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 – and today the chart looks as brown/red as I have ever seen it.
The US Dollar moved from bullish to almost zero which is surprising given the size of the multiple stimulus packages. When traders compare the situation in the US to other countries, however, the US Dollar doesn’t look so bad.
This month, no currencies are green although we couldn’t get data for some of them. The Swiss Franc is the strongest currency followed by the Yen and then BTC. The Canadian dollar is the only really weak currency.
US equity segments have taken a decided turn to the downside. EVERYTHING is bearish with the exception of the QQQ. In addition, all of the countries in the Americas are also red or brown.
Asia is totally red and brown. Here the strongest country is China (almost neutral) which is surprising since the pandemic started there. The worst country in Asia is Singapore which is again surprising as it pretty much has the virus under control. Singapore depends upon exports, however, and if it cannot export due to COVID-19 related restrictions, then you can understand why it might be red.
It’s the same story in Europe – everything is red (strong bear) or brown (bear) except Greece which is showing up as green, which I don’t understand. In Africa, everything is red.
I no longer talk about every sector but this month it doesn’t matter. Everything is red and brown or neutral with two exceptions – oil and gas exploration and equipment. Those two sectors make no sense being green as the energy sectors are virtually shut down. Biotech is neutral (finding a vaccine), health care is neutral (they are pretty busy), as are pharmaceuticals and biotech/genome. Technology, semiconductors, and 5G are all neutral. Volatility is green as you would expect in a bear market.
Commodities, Real Estate, Debt, and the Top and Bottom Lists
Commodities are mostly brown or red but three are green: gold, oil, and coal. Gold makes sense but oil and coal being green doesn’t make any sense. Global Water, which has been perpetually bullish is now bear. The weakest symbols in this category are agriculture and livestock.
US and European real estate symbols are strong bear with China real estate being neutral.
Interest rate funds are green overall with most of the short-term funds being strong bull, however, corporate bonds and short term bonds are neutral and junk bonds are weak.
The top 15 list has 7 strong bull funds and the rest are just bull. The top ones are mostly interest rate ETFs and volatility-related. Gold is now bullish.
On the downside, 4 of the 15 funds have Market SQN scores worse than minus 2.0. (as opposed to 13 of them last month). The bottom list includes a lot of energy sectors, currency sectors, and one country – Nigeria.
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 is slightly less bearish this month compared to March but it’s still overwhelmingly bearish – 78.3% of the database is Bear or Strong Bear right now.
Until June, 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.