While Quant is gearing up for the open, your Data Miner decided to dig into the Grey Market Reports.  I found some interesting information that I wanted to share.

Of the stocks in the S&P 500 Index, Apple is the most widely held based on Long exposure at $394,497,515.89.  The second place company is Microsoft with only $169,450,430.68.  That's roughly 57% lower than Apple.

Although Apple also has the largest Short exposure at $(521,710,944.73), the stock with smallest (most negative) Net exposure is IBM at $(186,456,941.12).

With no new data for Quant to work on, your Data Miner has time to clean up the basement.  Now is a good time to prepare for the Market open tomorrow.  Check out the Tear Sheets or the Liquidation Watch List

Hope everyone on the East coast stayed safe through the storm.

You can call it stormy Monday and Tuesday’s going to be just as bad.  NYSE is closed and NYPD kicked us out of the data mine but Quant is running in the cloud, as long as it doesn't get too Sandy up there.  China is in 1^st and 2^nd place again with other familiar names filling the top ranks.  One noticeable mover is the iShares Dow Jones Transportation Average Index Fund (IYT) that we highlighted last Thursday getting up to 9^th place today.  Maybe it’s just all those trains carrying plywood and generators east or maybe Dow Theory is setting up something nice.  We sent the women and children to higher ground but Data Miner is holed up with plenty of 20 oz sodas and will try to cover developments when markets reopen, don’t tell the mayor.  Let’s hope Wednesday isn't worse and Thursday’s not so sad.  The ETFG eagles fly every day, and we wish you all safety and security through the storm.

We woke up this morning and found our dog and cat sleeping together.  Turning on the news we hear of rivers and seas boiling over.  It’s a disaster of biblical proportions!  However, there’s no need for mass hysteria, it’s only a consumer electronics company and Apple surely isn't going out of business.  In fact, savvy investors may say the stock has been telegraphing yesterday’s rare earnings and guidance miss having already lost almost 14% of its value in the last month.  If you don’t think this rare phenomenon will lead to 40 years of darkness you might want to look among the wreckage to seize the opportunity.  One fund that might get slimed today is the iShares Dow Jones U.S. Technology Index Fund (IYW) with over 24% of its assets in Apple Inc., a higher weight than the more well known QQQ and XLK, which could also take it on the chin at the open.  Indeed there are 94 funds that will be affected by Apple’s stock price today and you can see them all on our ETP Grey Market Summary, just enter the ticker AAPL in the search box on the upper right part of the site.  Other sources may tell you the funds that actually hold Apple but only ETF Global includes all those leveraged and inverse products that will also be affected.  If you think this stock has further to fall and you want a leveraged play, the ProShares UltraPro Short QQQ Fund (SQQQ) is inversely leveraged by three times to the NASDAQ 100 Index that weights Apple at 19.19% and will be a winner at today’s open if Apple opens down.  We don’t assign Reward Ratings to leveraged funds but its unleveraged cousin, QQQ, gets 9.1 Green Diamonds, a high rating which suggests the non-inversely leveraged funds may be better plays beyond today’s fire and brimstone.  You can see a list of those by clicking the top of the “Lev Factor” column to sort either in ascending or descending order.  Leveraged and inverse funds are included in our Risk Rating cross ranks and they tend to populate the higher risk scores so use caution and check with your compliance officer before purchasing.  We don't have any unlicensed nuclear accelerators on our backs but when you need some scientists to analyze your ETF choices, who you gonna call?  ETF Global.

When Data Miner was a little boy his dear old Dad told him about Dow Theory that said a move in the Dow Jones Industrial Average needs to be confirmed by increasing volume and a corresponding move in the Dow Jones Transportation Average.  The thought was that if the companies making products were doing well, so should the companies that move those products from the factories to their final markets.  Charles Dow formulated his theory at the dawn of the Industrial Revolution when the transports were the railroad companies.  A look at the tear sheet for the iShares Dow Jones Transportation Average Index Fund (IYT) shows its sub industry exposure to still be weighted towards those railroads comprising 31.6% of the fund with an additional 26.8% in Air Freight & Logistics and 19.2% in Trucking.  The tear sheet also shows a Risk rating of 4.13 (lower than most of the highest ranked funds) and a Reward Rating of 8.8.  These two strong ratings reflect the fund’s Quant rank at 16^th place today, its highest in months except for one day in early October.  The fund is basically where it’s been for a couple of years which has convinced many that the rally we have seen in the Industrials over that time may not be for real.  Those bears can also point to the Transports coming down worse than the Industrials in the developing correction of the last month.  Dow Theory isn't clear on whether that correction has run its course or has more to go so that’s where Quant can help.  Both funds are scoring well today with the SPDR Dow Jones Industrial Average Fund (DIA), also known as the Diamond, coming in at 21^st place close on the heels of IYT and its highest rank in months.  The Diamond’s tear sheet shows much more color on the charts as it is diversified across those industries that comprise the US economy.  Lower Volatility and Deviation scores, seen on the Red Diamond Risk Rating page, give it a lower Risk Rating of 3.04 and it is basically tied on the Reward Rating at 8.81.  The Fundamental measures favor the Industrials while the Behavioral favor the Transports.  These measures don’t say the correction has necessarily run its course because Quant doesn’t make directional calls.  It does say that these two equity funds look to be among the best to hold for the next few months.   We may be setting up for a sustainable rally that even Dow Theorists can accept but Quant’s intermediate time horizon means that may not happen for a couple months.  Maybe we need a big move down with heavy volume to confirm the correction.  If so, Quant still suggests hiding your equity allocation in China where FXI and GXC are back in 1^st and 2^nd place today.

On Monday we reminded you that Quant will not keep you out of a falling market, it is designed to keep you out of the worst parts of one over the intermediate term.  Yesterday’s leaders were not immune to the selloff losing 1.91% on average for the top 25 which is worse than the 1.44% drop in the S&P500.  However, if you have been reading and watching the algorithm’s output you know that China has been Quant’s favorite for quite a while.  Looking at the charts on the tear sheets, you will see the two high ranking China funds, FXI and GXC are still trading near their recent highs.  They got sucked into yesterday’s selling but have been largely immune from the 4% selloff in the S&P 500 over the past month.  The Europe funds we have been writing about, France’s EWQ and Spain’s EWP, are also still trading above their 50 day moving averages as is the pan European FEZ.  Quant is designed to outperform over the intermediate term even if it may not on a given day.

That said, Quant's leaders today include the Vanguard Information Technology Sector Fund (VGT) in second place and the SPDR S&P Metals and Mining Fund (XME) in third.  Yesterday we saw that latter fund to be more economically sensitive than the gold miners fund with which it is often grouped.  We also see emerging markets scoring well with the iShares MSCI Emerging Index Fund (EEM) moving up 14 places into the 5^th position on Quant’s relative rankings.  In what could be a telling message the Vanguard Growth Fund (VUG) moved up 34 positions into 13^th place as the iShares S&P 500 Value Index Fund (IVE) moved down 14 places to Quant’s 23^rd position.  Both moves were largely attributable to the more volatile Sentiment scores but Quant seems to be looking at the  selloff opportunistically rather than fearfully.  But again, it is not a short term trading algorithm so we will see if this message plays out over coming days.

We’re going to take a closer look at two funds mentioned yesterday.  The Market Vectors Gold Miners Fund (GDX) picked up 5 positions today to rank one spot ahead of the SPDR S&P Metals and Mining Fund (XME) which fell 4 positions into 7^th place.  Their overall scores are as close as can be at 73.8 and 73.7 where GDX gets a better Fundamental Score of 79.5 and XME gets the better Behavioral Score of 78.1.  Still very close as both have good scores in each 40% weighted category.  On the Diamond Ratings again we see little daylight between the two where GDX has a 4.95 Risk Rating and a 9.81 Reward Rating, both slightly higher than XME’s 4.91/9.58.  High Risk Ratings are negative, high Reward Ratings are positive so we’ll call this one a draw.  Looking at the ETFG Tear Sheets, the price charts show both funds rising up to meet a downtrend line so we could be at a pivotal point for each (expand the chart to 1 year for XME).  Thus far it looks like these funds could be held interchangeably.  Maybe if you are concerned about Canada you would want to stick with XME which is 98.5% US compared to GDX’s 50.2% Canadian exposure (we calculate this based on the corporate headquarters of each constituent).  It is not until you get to the exclusive ETFG Sub-Industry Exposure chart that you can see these are very different funds to be held for very different reasons.  If you think the world is going someplace bad in a hand basket and you want exposure to gold, then GDX ‘s 89.7% gold exposure and 10.3% exposure to precious metals & minerals is the fund for you.  XME does not fit that bill as its gold and precious metal exposure is only about 20% combined.  XME is a fund for those who see an accelerating world economy as its biggest sub industry exposure is 34% in steel and it has almost 20% in coal.  Don’t judge a book by its cover or a fund by its name.  Only ETF Global provides the granular detail and rigorous quantitative analysis that you need to make a sound investment decision.

The stock market honored the 25^th anniversary of Black Monday with declines across all equity sectors.  The weakest ETF Global Sector Indices held up the best where the Utilities dropped -0.88% to bring its year to date losses to -8.09%.  The Materials Index is only up 7.67% ytd and also kept its losses Friday below 1%. The year’s best performing Consumer Discretionary Index was down -1.2% on Friday which was better than the Health Care and Info Tech Indices which each dropped by -2.15%.  The story was similar in the Geographic Indices where the best ytd led the pack down.  Europe’s leading 25.33% ytd gain is 1.45% lighter after Friday’s selling and the US & Canada, G8 and G20 were all down by -1.64% but up almost 20% ytd.  The Latin America Index is down -12.74% ytd after losing -1.32% and the Middle East & Africa Index lost -1.3% Friday to bring it to -1.44% ytd.  We need to look at the Asset Class Indices to find some green where Fixed Income eked out a 0.07% daily gain to tack onto its 19.17% ytd gain.  The hedge fund masters of the universe must have seen the selling coming as the Multi Asset Index was up 2.78% among Friday’s damage, although ytd it is lagging at 10.84%.

Remember that Quant will not keep us out of a falling market, it is designed to keep your equity allocation out of the worst parts of one over the intermediate term.  The relative rankings saw some change after Friday’s selling with familiar names moving back into the upper ranks.  China’s FXI and GXC are back in the top 5; energy funds VDE, XLE and XOP are ranked 1^st, 11^th and 14^th; metals funds such as XME and GDX are 3^rd and 11^th (tied); and Info Tech sees VGT and QQQ in 4^th and 9^th place.  Quant looks to again be recommending an aversion to the US dollar with emerging markets ranking better as seen by EPP and EEM at 6^th and 8^th place.  S&P 500 companies get almost half their sales outside of the US and all three funds that track the index are in the top 20 today, another familiar positioning.  Whether or not to seize Friday’s equity selling as a buying opportunity is your call, Quant is here to help you allocate after making that call.

Where were you 25 years ago today?  On this silver anniversary of Black Monday, that ultimate buy on the dip opportunity, our rankings are little changed from yesterday.  ETFs didn't exist in 1987 and Quant is only 8 years old so we can’t say what its message would have been back then but today it likes the US stock market with 2 out of 3 S&P 500 funds in the top 10 and the third in 11^th place.  Europe had some positive bond auctions yesterday and Quant still has France in its top spot with the iShares MSCI France Index Fund (EWQ) and Spain moves up to 3^rd place with the iShares MSCI Spain Index Fund (EWP). 

We last looked at Quant’s sector preferences earlier this month and now that we are deep in earnings season we see that distribution is also little changed.  On October 2 there were 9 out of 33 energy funds on the ETFG 100 list making it the favorite sector, today there are 10, still the most.  The SPDR S&P Oil & Gas Exploration & Production Fund (XOP) is the highest ranked energy fund in 5^th place today.  There are also 33 funds devoted to the Basic Materials sector with 8 making the top 100 up from 6 earlier this month.  The Market Vectors Gold Miners Fund (GDX) was in 8^th place then, moved down as far as 24^th but is back at 8^th place today.  We have one Technology fund in the top 10 today, the Vanguard Information Technology Sector Fund (VGT), and 7 out of 33 in the top 100, down from 8 on October 2.  There were 4 out of 22 Industrial funds and 4 out of 25 Health Care funds making that list then but 2 of the Health Care funds are not there today.  Quant’s least desirable sectors on October 2 are still in the dog house with the single Financial fund, out of 38, falling off that list as well as the single Consumer Staples fund, out of 13.  Those two sectors join the three without representation in the top 100 then and now, the 25 Consumer Discretionary funds, 13 Utility funds and 8 Telecomm Services funds that all fail to attract Quant’s affection today.  It still appears that Quant likes the US market but not the US dollar.

We see some subtle moves in our Quant ranks this morning which may be wiggles or could signal trend changes.  The iShares and SPDR China funds, FXI and GXC, have each sat in the top 5 for more than a month and each rallied nicely again yesterday.  Today they have dropped to 8^th place for FXI and 14^th for GXC.  Both are still very high ranks but may signal that wave is about to ebb.  FXI sees its Fundamental Score drop from 87.3 to 80.8 overnight; GXC also sees slight drops in its Fundamental Score from 91.1 to 90.4 and its Technical Score from 72.6 to 71.5.  Quant isn’t saying to avoid these funds it’s just saying it now likes others more.  One of those it prefers is the iShares MSCI France Index Fund (EWQ) which has been in the top 10 for most of this month but has not achieved Quant’s top position until today.  If a country trying to ban homework for school kids isn’t your top choice, Quant also still likes Spain where the iShares MSCI Spain Index Fund (EWP) comes in 9^th place today.  Still too much for your queasy gut to bear?  Try the more diversified iShares MSCI EAFE Index Fund (EFA) in 5^th place today.  The Geographic Exposure chart on its tear sheet shows Great Britain and Japan as its two largest country weights.  

Yesterday we highlighted the three S&P 500 funds all in the top 10, two of them move out of that rarefied space today but remain in the top 25.  They made room for some other US based funds, such as the Vanguard Growth Fund (VUG) in 2^nd place, its highest rank since early September.  That was a one day event but the fund remained on the ETFG 100 list for most of the time since then working its way back up today. If you bought it then you haven’t lost anything but you might want to make sure it sticks around the top ranks for a few more days before committing to it.  Other US funds scoring well today are Vanguard’s Information Technology Sector Fund (VGT) and the SPDR Industrial Select Sector Fund (XLI) in 4th and 7th place.  VGT has spent more time around the top ranks recently and gets there today with a high 89.9 Fundamental Score.  That was driven by price declines in constituents such as IBM and Intel its 3^rd and 5^th top weights respectively.  XLI has been working its way up the ranks gradually and gets into the top 10 for the first time since early August.  It looks like it’s been working on a bearish head and shoulders formation since then but yesterday it rose above that right shoulder.  That move has helped its Technical scores but improving Sentiment scores are most responsible for today’s ranking.  Those are Quant’s more volatile metrics but the fund’s gradually improving ranking over the past month has been mostly driven by improving Technical and Fundamental scores.  XLI is challenging multi year highs and a breakout from such a long consolidation could signal a strong move up and could also signal a move up for the US economy in general.  Growth, Technology and Industrials all moving up, sounds like Quant is looking more favorably on the US economy.  Even the much maligned Dow Transports fund is moving up but we’ll leave that one for another day.  Thanks for reading and please feel free to contact us at support@etfg.com for any help with our offerings.

In an interview with a British newspaper on the eve of another European summit, French President Hollande said "we are near, very near, to an end to the eurozone crisis.”  Quant still likes selected European funds such as the iShares MSCI France and Spain Index Funds (EWQ and EWP) tied at 8^th place but the pan European SPDR DJ EURO STOXX 50 Fund (FEZ) dropped 52 positions into 60^th place.  Maybe President Hollande is whistling past the graveyard or maybe he’s right and an end to that crisis will be good for the USA because the noticeable movers in Quant today are three S&P 500 funds. That index is the only one tracked by three ETFs and they are all in today’s top 10. The iShares (IVV), SPDR (SPY) and Vanguard (VOO) funds rank in 3^rd, 7^th and 8^th place respectively.  All three from large established sponsors have solid Quality Scores in the 90s and middling Global Theme scores.  Slight differences appear in the Fundamental Scores which are attributable to the different lifetimes of each as Quant analyses these metrics with a long term context.  The big differences come in the Sentiment category where Vanguard’s VOO has lower Short Interest and Put/Call scores.  All three do an excellent job of tracking their index so take these different Sentiment scores with a grain of salt, tight tracking will likely outweigh any short covering among the three.  The three cousins moved into the upper ranks driven by improving Technical scores, in the low 70s across the board, with differences again attributable to different lifespans.  As the weakest US earnings season since the Great Recession unfolds it will be interesting to see if the gains can hold.  The group has been ranking highly recently so it may be that the bad earnings are priced in and the market is looking towards improvement in coming quarters.  Or it could be that the S&P 500 is made up of those large US multinationals that benefit from a weak dollar, one of Quant’s consistent messages since the QE3 announcement.  We simply report the data and will let the debate unfold without moderation, please don’t fight about it.

Quant’s movers today include 2 health care funds moving up into the ETFG 25 list.  The iShares Dow Jones U.S. Health Care Index Fund (IYH) gained 160 positions to rank at 18^th place, its highest in months, and the SPDR Health Care Select Sector Fund (XLV) moved up 76 spots to 19^th place, one less than the 18^th place it reached last week which was its highest in months.  Is it good earnings news coming or perhaps a better performance from President Obama in tonight’s debate?  Like Joe Friday, Quant gives “just the facts ma’am” and lets others decide why, so let’s investigate how these two got here. Both come from strong sponsors and get solid Quality Scores of 78.2 for IYH and 76.9 for XLV.  On the other hand, health care has a low sector ranking which gives a low 50’s Global Theme Score for each fund.  Each category gets a 10% weighting.  Fundamental Scores get a higher 40% weighting and are decent for each where IYH gets a 70.9 and XLV 70.  In each case the Price/Cash Flow metric is the best and the Price/Book metric the weakest.   Quant analyses those metrics in the context of where each fund has traded historically so while they may not be as cheap as they have been, they are generating more cash than usual.  Earnings season will reset that bar but trading suggests the positive trend will continue.  We see that in the Behavioral Scores with each in the mid 70s (Behavioral also gets a 40% weighting).  Quant cross ranks on a scale of 100 but it is unusual to see scores better than the low 80s which would require top scores across all the various measurements.  XLV’s 74.9 Behavioral Score and IYH’s 74.6 are better than if they were on your kids’ report cards and each is better on the Technical side than the Sentiment side.  A look at their charts on the tear sheets shows why.   Each fund has come off a minor correction seen on the short term chart which boosts their short term score.  When you expand the time frame of each chart a steep mountain appears.  These 2 funds have been winners and Quant likes winners, especially after they have corrected like these have.  Market skepticism also provides solid Sentiment Scores with put/call ratios and short interest higher than usual for each. Quant looks at sentiment with a contrarian view and the algorithm says these two have further to run.  Maybe it’s politics or maybe it’s aging baby boomers, we’ll let you decide, but the facts predict good relative performance for each fund.

In response to Brazil’s finance minster calling US monetary policy “selfish”, Ben Bernanke told the annual IMF conference that the emerging economies should embrace strong currencies that result from easy US monetary policy.  Money goes where it’s treated best and although Quant doesn't measure a given country’s currency rate, it has been capturing the hot money flows into the emerging markets. The iShares MSCI Emerging Index Fund (EEM) has been ranking highly for months but not as high as today’s 3^rd place.  Large, liquid and from a strong sponsor gives the fund a high 96.9 Quality Score to offset its meager 55.9 Global Theme Score.  Both account for 10% each of the Overall Score which is driven more by Fundamentals which score a pretty good 78, and Behavioral scoring at 72.3.  Within the Behavioral categories, the Technical scores are good but not great at 63.7 on the composite where the short term has been gaining recently.  It’s the 80.9 Sentiment Score that stands out with a 99.8 Short Interest score and an 87.6 Put Call score both implying the market may expect weak exports to hamper the emerging economies.  The past decade should prove to anyone that a weak currency is not the path to national greatness. Quant doesn't need such reminders, it follows the money which these days means into emerging markets.  Another one to watch is the WisdomTree Emerging Markets High-Yielding Fund (DEM) in 13^th place today, its highest rank in several months.  WisdomTree specializes in fundamentally weighted indices and this one scores an 80.4 in the Fundamental category.  Improving technicals are also pushing it up but again its Sentiment scores are higher than most with Put Call and Short Interest scores implying market skepticism on the emerging markets.  Interestingly, both funds have low volatility scores which are scored differently from the Red Diamond Risk Ratings as Quant looks at this category in a contrarian way.  Volatility peaks are more common at bottoms than tops.  Deep Throat told Woodward and Bernstein to follow the money and Quant is telling us that leads to the emerging markets.

The Norwegian Nobel Committee has awarded its Peace Prize to the European Union as a morale boost to the region struggling with its debt issues.  Congratulations Europe and buck up!  Maybe the ECB can use the prize money to buy some Spanish bonds.  Quant doesn’t analyze fixed income, yet, but it has been bucking up the European equity markets for a good part of 2012.  In the beginning of this year, various European funds were populating the upper ranks and the ETF Global Europe Index is our strongest Geographic index year to date.  Currently, the SPDR DJ EURO STOXX 50 Fund (FEZ) has an overall score of 68.7 putting it at a respectable 41^st place in Quant’s ranking of 810 equity ETFs.  Even better is that quintessential European country and its dedicated ETF, the iShares MSCI France Index Fund (EWQ), pulling a score of 77.1 in 2nd place today.  Both funds have spent most of the past month in the top 25.  Even troubled Spain and Italy see their funds, the iShares MSCI Spain Index Fund (EWP) and Italy Index Fund (EWI) in those upper ranks, at 17^th and 42^nd place respectively.  Quant shines its love on the downtrodden but if investing in troubled countries is too much for your gut to bear, look at the iShares MSCI Switzerland Index Fund (EWL), in 12^th place today.  Turkey may or may not make it into the EU but it has achieved 24th place with the iShares MSCI Turkey Investable Market Index Fund (TUR).  We love Norway, Sweden and the Nobel Committee but Quant is lukewarm on that part of Europe.  The Global X FTSE Norway 30 Fund (NORW) ranks at 141^st place and the iShares MSCI Sweden Index Fund (EWD) ranks 125^th; so look to buy where others have sold, Scandinavia doesn’t need any bucking up.  Finding the opportunities in any region can be a complicated endeavor so check Quant each day, it has a proven ability to do exactly that.  Thanks for reading and have a nice weekend!

Quant is feeling better after a short break and is back on the job, today's full output is here.

Data miner has gone fishing but was able to catch today's top 10 funds. Hopefully the striped bass will be as tasty.

GXC ,VOO, FXI, XLE, GDX, VDE, XOP, VGT, EFA, EEM

Quant is under the weather this morning and unable to convey its daily message, it is being attended to and we hope and expect a quick recuperation.  

We’ll use its absence to highlight another ETF Global feature, the ETP Liquidation Watch List.  This is where we try to keep you out of troubled funds that may close, sometimes with troubling consequences such as an inability to redeem shares at NAV. We have found a confluence of circumstances that can lead to such an event.  First, it rarely happens within a fund’s first two years of existence so we screen out all of those newer funds that haven’t had time to prove themselves to the market and their sponsors.  Next, we look at funds with less than $5 million in assets under management, that threshold usually makes it difficult to run the administrative functions necessary to operate and market an Exchange Traded Product.  Third and most importantly, we screen for all those funds that have negative fund flows for the trailing twelve months as that tends to be the final straw for a sponsor to pull the plug on a disappointing fund.  Some funds close without meeting these three criteria and some that meet all three remain open so inclusion is not a sure thing but a warning to check before building a new position.  We compile it monthly and you can see October’s list from the Liquidation Watch List link under the Risk Analytics button.  October’s list has 51 names on it and not surprisingly, they tend to be populated among the higher risk scores.  The average Risk Rating of the funds on this month’s list is 6.51, higher than most of Quant’s top rankers and skewed down by 5 currency funds that tend to have lower price risk as currencies don’t move like other asset classes.  Taking out those 5, the average rises to 6.73.  Those 5 currency funds have a Risk Rating below 5 and 8 more have Risk Ratings below 6, leaving 38 funds with a Risk Rating above 6 Red Diamonds.  If you are not swinging for the fences you probably won’t find any of your positions on this list but if you have some aggressive inclinations or are considering a narrow niche product, check out the ETFG Liquidation Watch List before putting on your trade.

As for Quant, check its page before the open, we hope to have it out of bed and working by then.

Another cold and rainy day on Wall Street as summer gives way to winter and like Magellan, Quant is setting its sights southward to the land of the penguins.  Not Antarctica, there’s no stock market there, but Chile.  The iShares MSCI Chile Index Fund (ECH) has been scoring near the top for most of the past month and today it moved up 33 positions into 6^th place.  Credit its high Fundamental Score of 90.2 which stands out against its other scores hanging around the 60 level.  The fund came down to a support line yesterday so today could be important. Chile gets a respectable country score of 83.15, higher than the good old USA and up there with other countries that are not suffering wrenching fiscal imbalances, they already had theirs in prior decades.  Free market reforms have given the country one of the strongest economies in South America.  So if the cold is making you blue, pour yourself a glass of fine Chilean Merlot or even plan a trip to one of the country’s famous surfing destinations.

Another Quant mover today may also be a cold weather play, or it could be the political season.  Last week we mentioned the Market Vectors Coal Fund (KOL) moving up after Mitt Romney declared his affection for coal in the presidential debate.  The news is filled with stories of Romney’s strong polling since then and KOL has confirmed the polls by gaining 48 positions into Quant’s 10^th place today.  It may just be the weather though as the SPDR Health Care Select Sector Fund (XLV) is also moving up, now in Quant’s 18^th position, its highest in several months.  Dozens of daily quantitative measures drive Quant in mysterious ways so whatever your political inclination, check in with ETF Global each day to keep your portfolio running hot.

Most markets were down yesterday seeing all 10 ETFG Sector indices in the red; all but the Latin America Geographic indices falling; and in the Asset Class group, Fixed Income, Multi Asset and Currency were the only gainers.  Quant still puts China up top with GXC and FXI in their now familiar 1^st and 2^nd positions.  German Chancellor Angela Merkel travels to Greece today and though the riot police stand ready, Quant seems to like the outreach.  The SPDR DJ EURO STOXX 50 Fund (FEZ) moved up 118 places into the top 10 at 8^th place.  The fund has spent the last few months in the top ranks and had dropped down for a few days on deteriorating Sentiment scores.  Heavy put buying has put it back in the upper ranks.  Markets might be expecting some nastiness in Greece today because the iShares MSCI Germany Index Fund (EWG) also saw increased put buying driving it back onto the ETFG 100 list at 62^nd place, that fund’s improving intermediate term Technical Score also played a role.  Looking across Europe, the iShares MSCI Italy Index Fund (EWI) also saw better Sentiment scores (ranked on a contrarian basis) driving it up 101 Quant positions into 84^th place.  Be cautious with that one though as it has a weak 25.3 composite Technical Score. A Quant loser yesterday was our highlighted steel fund, SLX, dropping 114 positions into 157^th place on deteriorating Sentiment scores but its Technical scores all improved as the fund managed a gain on a weak day, we’ll keep watching this one.

New week, same message out of Quant, large and liquid lead the ranks.  China continues to deserve its top rankings with SPDR’s S&P China Fund (GXC) in 1^st place getting all 10 green diamonds on the tear sheet and the iShares FTSE/Xinhua China 25 Index Fund (FXI) in 4^th place with 9.94 green diamonds.  GXC gets a higher diversification score with over 200 holdings compared to FXI’s 25.  Despite GXC’s higher scores, FXI has been the better way to play the surprising Chinese rally.  The strength we are seeing in China and Europe prove the maxim that the best time to buy is when it’s most uncomfortable to do so.  Quantitative analysis overcomes emotion and helps us seize the opportunities presenting themselves.

One such opportunity showing up after Friday’s trading may be the Market Vectors Steel Index Fund (SLX) gaining 146 positions to 43^rd place in the Quant rank.  Sentiment scores are high in this unpopular group and the fund’s Fundamental score rose slightly Friday.  Technical scores are middle of the pack but the short term ticked up a bit as the fund works on putting in a bottom.  A glance at the 1 year chart on its tear sheet shows the price on the cheap side of an upward sloping channel from the beginning of its bottoming formation this summer.  That chart shows a wide band for the fund’s price which explains its relatively high 6.51 Risk Rating, driven by high Volatility and Deviation scores.  If the bottom holds, that kind of risk can be your friend.  The fund scores very well on the other four risk categories shown on the Red Diamond Risk Rating page under the research button, low risk scores in each category are better.  Putting more wind into the steel curtain, the Pittsburgh Steelers stole a victory away from the cross state rival Philadelphia Eagles yesterday (Quant doesn't factor NFL scores however.)  Whether or not the Steelers are Super Bowl bound, we’ll be watching SLX in coming days.

China and energy continue to dominate Quant today and the gold miners’ GDX didn’t like coming out on the losing end of yesterday’s analysis, it had a nice trading reversal and regained 10 Quant positions into 3^rd place.  The noticeable movement in Quant’s upper ranks was among foreign funds however. The iShares MSCI France Index Fund (EWQ) moved back into the top 10 gaining 18 positions into 3^rd place and their MSCI Spain Index Fund (EWP) remains in the top 10 but moved down 2 places into 5^th.  Today’s big mover though is the iShares MSCI Canada Index Fund (EWC) rocketing 131 places into Quant’s 9^th position.  The fund has spent the last month occupying the mid double digit Quant ranks getting as high as 10^th place on September 13^th.  A solid Sentiment score of 85.4 is its highest category which leaves room for its Technical and Fundamental scores to catch up.  Its blended Technical Score of 62.4 had a strong move up from the prior day’s 56.8 as all three sub categories gained ground on the rest of the equity ETF universe.  Not much movement on its Fundamental side which has an impressive 98.3 price/book value cross rank (quantified in our proprietary method) but less impressive price/cash flow and price/earnings ranks.  The improving Technical Scores suggest the market expects those Fundamental Scores to improve after earnings season.

Looking at how the market and Quant reacted to the presidential debate, Mitt Romney said he likes coal and the two narrow niche coal funds in our equity universe both moved up nicely with the Market Vectors Coal Fund (KOL) gaining 64 positions into 22^nd place, higher than it’s been in several months.  This could be a good play if the market begins to price in a Romney win. The president said he's fond of the term "Obamacare” but Quant isn’t very fond of the health care sector, the 25 funds with that focus have an average Quant rank of 371 out of 809 ranked funds and yesterday’s average move was down 22 places.  Only one health care fund sits on the ETFG100 list, the SPDR Health Care Select Sector Fund (XLV) at 68^th place.  There were 4 on that list before Wednesday’s debate.  Your humble data miner’s dearly departed Dad said never talk politics or religion with clients so I’ll stop there.  Have a nice weekend and thanks for using www.etfg.com.  

China holds the top 2 spots today with the familiar GXC and FXI in 1st and 2^nd place and three new funds enter the top 10 all tied at 6^th place.  The Vanguard S&P 500 Fund (VOO) has been lingering near the top for a while and its improving technical scores have put it back in the top 10.  Vanguard’s Growth Fund (VUG) also credits its improving technical scores for its 6^th place position.  The third new entrant tied at 6^th place is the iShares MSCI EAFE Index Fund (EFA) gaining 11 positions on an improving price/book value score.  Also joining the top 10 today is the iShares MSCI Emerging Index Fund (EEM) gaining 14 positions into 4^th place and the first party to today’s Quant debate.  The other half of that debate will be the Market Vectors Gold Miners Fund (GDX) which lost 5 positions into 13^th place.

 

Both funds have failed to take out recent highs and have middling short term Technical scores but EEM’s is a bit better at 57.4 vs GDX’s 46.3. GDX has better intermediate and long term Technical scores however.  EEM has higher implied volatility and put/call ratio (compared to its historical average) leading to better scores on that contrarian metric.  Combining the Technical and Sentiment scores gives GDX the edge on the overall Behavioral Score at 70 vs. EEM’s 67.65.  On the Fundamental side GDX has a better PE score of 96.5 vs. EEM’s 62.8 which means the former has a lower PE compared to its historical average quantified in our proprietary method. The price/book value scores (calculated in a similar fashion) are flipped where EEM’s 95.3 beats GDX’s 69.8. The overall Fundamental Score again favors GDX slightly at 79.5 vs. 77.9.  The overall Behavioral and Fundamental Scores each get a 40% weighting in the total Quant Score with Global Themes and Quality each getting a 10% weighting.  On those the Global Theme is very close at 56.5 vs. 56 with GDX on the winning side again as it has better sector scores vs. EEM’s better country scores (based on the location of each constituent’s corporate headquarters).  So far our debate is closer than last night’s presidential one (according to Bill Maher anyway) and it comes down to the Quality Score where both have excellent liquidity ranks at EEM’s 99.8 vs. GDX’s 99.3.  The firm rank favors iShares over Market Vectors by 98.4 vs. 90.4, advantage EEM.  The deciding factor is the diversification score where EEM’s 92.8 is no comparison to GDX’s 17.7.  Putting those together gives an overall Quality Score of 97 for EEM vs. 69.1 for GDX and leads to EEM winning the higher Quant Score of 73.5 vs. GDX’s 72.4. 

Quant has many moving parts with dozens of daily quantitative measures synthesizing to give the overall score which has a proven ability to identify relative performance.  All the scores mentioned are available on the ETFG Quant screen under the Research tab on www.etfg.com. We hope you enjoy exploring it, feel free to contact us with any questions at support@etfg.com.

We enhanced our algorithm yesterday which may have contributed to a little more turnover than usual but Quant’s song remains the same.  That ultimate heavy metal, gold, sees its Market Vectors Gold Miners Fund (GDX) at 8^th place with 2 energy funds, XLE and XOP, also in the top 10.  The iShares S&P 500 Index Fund (IVV) made 7^th place while its friends, VOO and SPY, barely missed the top 10 at 11^th and 12^th respectively.  Other than those, Quant wants to go over the hills and far away to Europe and Asia.  The SPDR S&P China Fund (GXC) and DJ EURO STOXX 50 ETF (FEZ) are the hot dogs today in 1^st and 2^nd place while iShares also has their FTSE/Xinhua China 25 Index Fund (FXI) and their MSCI Spain Index Fund (EWP) getting a whole lotta love from Quant in 4^th and 6^th place respectively.  Of the two China funds, a glance at our tear sheet for each will show the higher rated GXC having more exposure to countries outside of mainland China so FXI is the purer play on the middle kingdom.  Quant tells us who is going to outperform the market not what the general market is going to do so if the levee breaks the large liquid sectors should provide some safe haven as the rest of the market gets trampled underfoot. Don’t get dazed and confused by the international equity markets, just check in daily with ETFGlobal and Quant will keep you on the stairway to investing heaven.

Two new members of the top 10 today confirm Quant’s recent message of aversion to the US dollar. The iShares Goldman Sachs Natural Resources Index Fund (IGE) gained 60 positions into 5^th place and tied with it at that position is the SPDR Energy Select Sector Fund (XLE), gaining 6 positions to reenter the group it has been hanging around for a while now.  IGE is coded as having a “Theme” focus but if it was coded as a Basic Materials fund it would be the 6^th out of 33 in that sector represented on the ETFG 100 list.  As it is, Basic Materials is the third most represented sector on that list and has the distinction of holding the number 1 rank with GDX, the Market Vectors Gold Miners ETF.  Energy is Quant’s favorite sector with 9 out of 34 funds in the top 100, 2 of them in the top 10.  Technology is considered an inflation hedge as companies spend in that area to increase productivity to counter rising input costs.  It is Quant’s third favorite sector today with 8 out of 34 funds on the ETFG 100.  It’s best scoring fund today is the SPDR Technology Select Sector Fund (XLK) in 15^th place.  Health Care with 25 funds and Industrials with 23 both have 4 in the top 100.  Out of 38 funds devoted to the Financial sector, only 1 made the ETFG 100 today, the PowerShares KBW Insurance Portfolio (KBWI) in 90^th place.  Consumer Staples should outperform if we are entering another recession, but Quant doesn't think that’s going to happen ranking only 1 out of 13 funds in the top 100.  Filling out the ten equity sectors, there are 25 Consumer Discretionary funds, 13 Utility funds and 8 Telecommunications funds, but none made the double digit ranks.  Quant’s message suggests the economy is going to continue to trudge along but inflation is likely to reemerge.

Much of Asia is closed for harvest festivals today; China and Hong Kong are closed all week.  While Quant looks similar to last week, some rearranging in the top ranks suggests Asia is where we should sow some seeds for the fourth quarter.  Two new entrants into the top 10 today are the iShares MSCI Pacific Ex-Japan Index Fund (EPP) moving from 19^th place to 7^th, and the iShares MSCI South Korea Index Fund (EWY) gaining 5 positions into 9^th place.  They join two broad based China funds in the top 3, GXC and FXI at 1st and 3rd respectively, and the iShares MSCI Emerging Index Fund (EEM) with its heavy Asia weighting maintaining 5^th place.  Two S&P 500 funds, VOO and SPY, and two energy funds, VDE and IYE, continue their sectors’ representation in Quant’s top 10 as does the Market Vectors Gold Miners Fund (GDX), names we have seen in the elite ranks since the Fed announced QE3.  If you want to stay exposed to the Bernanke dollar, Quant suggests you stick with the large liquid S&P 500 as two big losers after Friday’s trading were the iShares Russell 2000 Value Fund (IWN) losing 192 positions to rank at 266^th and the iShares S&P MidCap 400 Index Fund (IJH) dropping 158 positions to rank at 241.  The ETF Global Indices were down across the board on Friday with the ETF Global1000, the world’s only benchmark that crosses geographies and asset classes, down 0.43% on the day and up 16.5% year to date.  Many managers are talking about harvesting those double digit annual gains and getting out before we go over the fiscal cliff.  Quant’s highest ranked decile today has the second lowest average risk score so beware, that big harvest moon rising on the fourth quarter may be a bad one.