Wednesday, September 19, 2012

September 19:
Turbulent seas surrounded Wall Street yesterday but when trading was done things looked pretty much the same.  The question is are we at a point of reversal or simply seeing some profit taking ahead of a further move up.  Quant doesn’t make directional bets, rather relative rankings based on metrics addressing valuation and behavioral finance, among others.  The market’s behavior continues to navigate towards the more liquid and somewhat lower risk areas still with a heading towards dollar debasement.  Today’s top ten list has two broad based China funds, GXC and FXI in 2nd and 3rd place; two S&P 500 funds, VOO and SPY in 4th and 5th; two mining funds, GDX and XME in 1st and 8th (tied), and two energy funds, VDE and XLE in 7th and 8th (Check out each ticker on our ETFG Tear Sheets).  The top 10 are rounded out by the SPDR Technology Select Sector Fund (XLK) maintaining its place at number 6 and the iShares MSCI Emerging and France Index funds tied at 10th place.  The top decile of Quant rankers has the lowest average Risk Rating at 4.35 and the bottom decile has the highest average Risk Rating at 5.42 (Risk Ratings are independent of Quant scores). While the correlation is not linear it is pretty close, suggesting a risk aversion in the market which is confirmed by the highest rankers tending to represent the more liquid markets.  Our Risk Ratings are reflective of a given fund’s historical trading activity and its structure as opposed to our Reward Ratings which are predictive of a fund’s future relative performance.  Seas are calm this morning but earnings season awaits and Quant awaits the messages the market sends.

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