Monday, October 8, 2012

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 1st place getting all 10 green diamonds on the tear sheet and the iShares FTSE/Xinhua China 25 Index Fund (FXI) in 4th 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 43rd 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.

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