Back on November 14^th we reported Quant’s clear message to look away from the USA as 9 of that day’s top 10 were foreign funds.  On average, that group gained 8.04% since then and all ten have exceeded the 3.46% gain in the S&P 500.  As we close out 2012, we bring this old acquaintance to mind as Quant’s top ranks are now weighted towards the US.

 

We look to 2013 with SPDR’s S&P China Fund (GXC) sitting atop the ranking as it has so often throughout this fourth quarter, but 8 of the other top 10 are US funds.  The 2^nd place iShares Goldman Sachs Technology Index Fund (IGM) is typical of large cap US focused funds scoring better after wandering many a weary foot in recent months.  That one’s highest weighting is 8.25% in Apple Inc.  Today’s 3rd place Vanguard S&P 500 Fund (VOO) has 4.84% in Apple and the 5^th place iShares S&P 500 Index Fund (IVV) and the more widely held SPDR S&P 500 Fund (SPY, 16^th place) have 3.81% in that beleaguered equity.   Among the favored sectors we see the iShares Dow Jones U.S. Basic Materials Index Fund (IYM) in 6^th place followed by the SPDR Industrial Select Sector Fund (XLI) in 7^th and the iShares S&P 500 Value Index Fund (IVE) in 8^th place.  None of those 3 hold Apple which you can see by sorting their constituents by Ticker on their tear sheets.  If you can’t decide on one of those for a dance partner, consider the Vanguard Total Stock Market Fund (VTI) in 9^th place today or the almost as broad iShares Russell 3000 Fund (IWV) closing out the top 10.  We would be remiss to not mention today’s 4^th place iShares MSCI Turkey Investable Market Index Fund (TUR) which has earned its place in the upper echelon where it’s been since we made fun of it on Thanksgiving.

That gives a good look into how the model is positioning in front of the fiscal cliff and all the other issues facing the New Year.  It has run the slopes and picked the daisies fine as it has since we inaugurated on July 2, check our performance pages which will get their monthly updates in the next few days.  If you have been using ETF Global you know how good the performance has been and we thank you for spreading the word, please follow us on Twitter and get this blog delivered to your inbox each morning. 

We’re excited about 2013 and with a trusty hand, 

filling your cup with more kindness yet, 

for auld lang syne. 

Some technology funds are showing up on our screens today with strong Fundamental Scores but mediocre behavioral measures.  The iShares Goldman Sachs Technology Index Fund (IGM) is in 17^th place with a very nice 82.5 Fundamental Score.  On the behavioral side we see an OK 61 Technical Score and a below the mean 49.6 Sentiment Score.  The iShares S&P Global Technology Index Fund (IXN) is even better fundamentally with an 89.5 score in that category but 59.4 and 38.5 in the technical and sentiment categories that all combine to place this fund in Quant’s 18^th position.  Vanguard gets 19^th place with their Information Technology Sector Fund (VGT).  This one is better on the behavioral side with technical and sentiment reading s of 54.4 and 64.9 but a lower Fundamental Score of 75.3, still decent.   Are these three diamonds in the rough about to be discovered by the rest of the market or just value traps?  The New Year will tell but Quant’s track record suggests the former.   Happy weekend and Happy New Year!

Quant still likes those European funds that we haven’t mentioned in a while.  The iShares MSCI Spain Index Fund (EWP) gained 40 positions overnight into 6^th place on higher Technical and Sentiment Scores. Also gaining is the SPDR DJ EURO STOXX 50 Fund (FEZ) up 46 places into Quant’s 19^th position, again on improvements in both Behavioral categories.  Tied at 19^th place is the iShares MSCI France Index Fund (EWQ) which actually dropped 8 places on a lower Sentiment reading.  Some people include it and some don’t but Turkey wants to join the EU.  Readers suffered through our Thanksgiving puns on the iShares MSCI Turkey Investable Market Index Fund (TUR) and it has been near the top ever since, it’s in 2^nd place today.  We’re keeping it short this week so that’s enough for now, thanks for reading.

In case you are doing anything other than year end administrative chores, Quant has a message for us today. The SPDR Materials Select Sector Fund (XLB) has spent most of the past few months in the top 50 with an occasional peek into the top 25 but the past week has seen it solidify its position in that group of 25 with a rank of 16^th place today.  We also see the Global X Silver Miners Fund (SIL) with a big 152 place jump into 40^th place and other basic material funds also scoring better today.  With central banks around the world in a race to the bottom regarding exchange rates perhaps the market is getting ready to play an inflationary theme.  Most desks have skeleton crews so we’ll see if that theme plays out when full staffs return next week.  We hope to be able to button our pants by then but will keep you apprised of any movement in the model in the meantime.  Enjoy the holidays and thanks for checking in today.

Quant likes the S&P 500 even more now that it’s 1% cheaper. The iShares (IVV) and SPDR (SPY) products that track it are in 2^nd and 4^th place with today’s top rank going to the iShares S&P 500 Value Index Fund (IVE). The rest of the top ranks are mostly the familiar names from the last couple of weeks but making a return to the top 25 is the SPDR S&P Metals and Mining Fund (XME) jumping 110 positions after Friday’s action into 20^th place on an improving Technical Score.  It was last in these upper ranks in late October and early November.  We highlighted it on October 23^rd pointing out that XME is more of an economically sensitive industrial metal fund than the silver and gold now adorning our Christmas decorations.  XME has outperformed since then and getting back into the top 25 suggests an economically sensitive posture to the market may be in order.  Washington politicians tying themselves in fiscal knots may be just what the economy needs.  Our last economic boom coincided with a balanced budget, so maybe Quant sees the fiscal cliff as our best shot at getting back to that.  Or maybe Quant sees status quo in Washington as meaning the money will keep flowing to corporate America.  We would caution that value is beating growth, a more defensive posture.  We’ll ponder Quant’s mysterious messages over some egg nog and will be back to box it up for you Wednesday morning.  Until then, God rest you merry ladies and gentlemen, we wish you comfort and joy.

The AP reports the shamans, sufis and swamis gathered on the Yucatan Peninsula declared the “New Era” began at 5am this morning.  Assuming that dawning light on the eastern horizon is the sun and not Nibiru, it looks like our galaxy made it through the Milky Way.  We can’t say we’ll be here to do it again in 26,000 years but we’ll remember this one for what ETFG has simultaneously announced.  In a commitment to transparency, we have quantified the performance of our predictive scores and ratings and posted the results on the publicly available area of ETF Global.  You can find the performance reports on Quant and our Green Diamond Reward Ratings anytime under the ETFG Quant and Analytics buttons.  The links bring glad tidings and we will repeat the sounding joy every month.  Suffice it to say, if you use ETFG to support your investment decisions you will likely outperform the S&P 500 by a wide margin.

In the new era of investing, we have brought you access to an institutional level quantitative algorithm as good as the ones that made billionaires.  No black box here though, you can read all about it in our Quant WhitePaper which is also under the ETFG Quant button.  Our clients can see all the scores in the 15 categories and their 4 sections on the entire universe of over 800 equity ETFs every day.  Institutions use our various scores in their own models and advisors rely on our ratings when selecting appropriate investments for their clients.  Professional and self directed investors alike have found there is no other source that provides such reliable performance.   Compiling all the measurements that drive the models also enables us to offer our clients access to unparalleled data on the world of exchange traded products.   All that, plus a staff of responsive financial industry professionals making spirits bright.

With all the menorah candles already burning bright and the New Age safely established on this side of the galactic alignment, the world now turns its attention to that greatest story ever told about a poor baby born in Bethlehem.  We’re excited to tell our story too and ask you to help us strike the harp and join the chorus.  Use our services and tell your friends, you won’t be disappointed.  There’s not too much new to tell about Quant’s rankings today, the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) gets the top score and the First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) gets today’s 10 Green Reward Diamonds, both have been scoring well recently.  Futures signal a rough day today so we expect some movement in Monday’s run and we will let you know what Quant has to say before next week’s trading days but it may not be at dawn’s early light.  That said, our dedicated staff of professionals stands ready to assist you and we all wish you a Merry Christmas and a Happy New Year!

Tell your wife and kids you love them and buckle your seat belt, it only happens every 26,000 years and today our galaxy will travel through the Milky Way, or something like that.  Quant sees 4 Russell funds as good vehicles for our magic carpet ride.  All are among today’s 20 A rated funds that score above that magical 70 Quant mark.  So on this dawning of the Age of Aquarius let’s shine some sunlight into these 4 funds.

Leading the pack in 4^th place today is the small cap iShares Russell 2000 Growth Fund (IWO).  Coming from iShares and having 2000 constituents gives it a very high Quality Score of 96.3 but that has always been the case and didn't move the fund into Quant’s upper ranks today.  Its Sentiment Score of 80.8 moved up more than 20 points which is responsible for it gaining 16 Quant positions overnight.  Option activity was the driver here with the Put/Call score rising from 28.7 to 76.  On the large cap value side Quant also likes the iShares Russell 1000 Value Fund (IWD) in 15^th place today also driven by a rising Put/Call Score as well as a rising Implied Volatility Score.  Maybe it’s going to be a bumpy ride across the universe.  If you can’t decide between growth and value, the broad large cap iShares Russell 1000 Fund (IWB) and broad small cap iShares Russell 2000 Fund (IWM) are in 18^th and 20^th place respectively.  Someone with a lot of money thinks something bad is going to happen because heavy put buying is also responsible for these two gaining dozens of Quant positions overnight.  However, not so bad that they won’t be able to cash in those puts on the other side of the galactic alignment.  Aside from those rising Sentiment Scores and very high Quality Scores, all 4 funds have decent but not great Technical Scores in the 60s with the broad small cap IWM scoring best at 65.4.  On the Fundamental Side the small cap growth IWO is best at 70.8.

If the planet Nibiru doesn't collide with earth today those puts will have to be covered which should give these funds a boost in the new age of spiritual transformation.  We hope they still have ETFs then and we hope you all still come here to transform your portfolios into outperformers.  We hope it all goes well and we’ll see you on the other side. Godspeed friends.

NASA says there is no credible evidence that the world will end when we cross to the other side of the galactic alignment in a couple of days.  But will we experience something worse than Y2K?  Will the earth’s magnetic poles reverse, rendering our electrical grid obsolete?   Quant doesn't do astrophysics or electrical engineering but its biggest mover today may be a favorite among the Preppers stocking their bunkers.  The Powershares WilderHill Progressive Energy Portfolio (PUW) gained 341 positions overnight into Quant’s 70^th place rank.

Moves like that are usually confined to the lower ranks and are driven by spikes in various sentiment measures.   PUW did see a rise in its Sentiment Score from 41.4 to 54.8 but its rank today is driven by an overnight jump in its Technical Score from a lowly 32 to a respectable 68.6 with all three time frames seeing strong gains.  Those gains can be explained with a look at its chart that shows the fund preparing for a breakout from a multiyear downtrend.   The constituents listed on its tear sheet make products in the areas of alternative energy, better energy efficiency and new energy activity.  They are currently trading at levels that give PUW a decent Fundamental Score of 69.8, although that is down from recent levels as the fund has been performing better.

We will be watching what happens to that 70^th place rank if Friday’s chance of showers weather forecast for Wall Street is correct and the apocalypse doesn't happen.  If Preppers emerge from their bunkers Saturday morning and find they are alone with the cockroaches and the few remaining Twinkies, it won’t matter what ETF they purchased today.  But how will this fund look if the world looks the same Saturday?  Maybe it will drop back down into Quant’s bunker.  But maybe its move up today has nothing to do with astrological cycles or Mayan predictions.  Maybe it has more to do with expectations that the Republicans will revert to form and give President Obama everything he wants, fueling the tanks of these green energy companies for the next four years.  We like to say that Quant moves in mysterious ways but when a fund gets to the double digit ranks, it has a good chance of outperforming the market over the next few months.  Assuming of course we don’t all get sucked into a black hole.  We hold no such assumption and are continuing to prepare for Christmas and a prosperous 2013, Quant will help with the latter.

As Santa gets his reindeer in game day shape someone got a message to Obama and Boehner that they have yet to get on his nice list.  Obama now looks willing to raise the millionaire/billionaire threshold to $400k and Boehner seems ready to include a debt limit increase with any fiscal cliff deal, sparing us all another round of silly Treasury default fears.  When these kids play nicely the markets take note, the Dow rose over 100 points yesterday and interest rates actually rose a bit – someone bring Bernanke some figgy pudding right now. 

Quant isn't worried about higher US rates as 7 of today’s top 10 are US funds.  All 7 are familiar to those top ranks recently led by the SPDR Industrial Select Sector Fund (XLI) in 2^nd place followed by the SPDR S&P 500 Fund (SPY) and the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) tied at 3^rd.  Technology is also represented on that list with the iShares Dow Jones U.S. Technology Index Fund (IYW) in 7^th and the tech heavy Powershares QQQ Trust (QQQ) in 10^th place.  Quant still likes that Powershares Dynamic MagniQuant Fund (PIQ) in 8^th place today, down from 3 days at 1^st place.  It has lagged slightly since gaining the top 10 earlier this month so it is still buyable.  Rounding out the US group is the iShares S&P 500 Value Index Fund (IVE) in 9^th place, its second day in the top 10 after spending a couple of weeks closer to 50^th place, but even those lower ranked funds tend to outperform as IVE has.

The other three names in today’s top 10 are the two China funds that have been ruling Quant all fall.  A quick look at the charts for 1^st place GXC and 5^th place FXI shows why, they have blown the doors off Santa’s sleigh.  Almost as good has been the iShares MSCI Turkey Investable Market Index Fund (TUR) up almost 13% since we first mentioned it as an up and comer on October 12^th, a period in which the S&P 500 was flat.  Turkey has seen debt upgrades since then as fiscal reforms are lowering their national debt to GDP ratio.  If that’s not a message for our kids in DC what is?  The next few weeks will show if the Obama/Boehner happy talk is real or just sugar plum dreams, in the meantime, Quant likes the US market.

Those whose lives have been touched by someone suffering with mental illness know how important it is for patients to get plenty of love and treatment.  Money can’t buy love, but investing in the companies developing treatments strengthens them and helps provide breakthrough medications that can prevent seriously ill people from harming their neighbors and themselves.  One such treatment is a drug called Clozapine made by Novartis (NVS) for people suffering from schizophrenia.  Keeping on topic of this blog just a bit, we can enter NVS in the upper right search box and see that equity’s grey market report which lists all those ETFs that hold or have exposure to Novartis.  Maybe you know someone who is helped by another company’s product and can likewise search for funds that hold their equity.  Treating mental illness is very difficult in that every brain is unique and many of those that need treatment refuse it.  There are thorny civil liberty issues involved in protecting these people and their communities.   Fortunately, the companies developing today’s modern treatments enable many patients to live productive lives that can inspire the rest of us.  However, as a society we need to find ways to reach those not as lucky, for their sake and ours. 

God bless Newtown , CT.

Happy Friday!  Very little change in today’s top Quant ranks so we thought it is a good opportunity to walk you through an offering we haven’t discussed in a while, the ETF Global Liquidation Watch List.  Found under the Risk Analytics button, this monthly compilation looks to alert you to those funds that are at a higher risk of closing.  When a sponsor pulls the plug on a fund the market makers often do too which can result in tracking error spikes and difficulty getting out of a position.  It usually occurs when a fund hasn't gathered the assets that its sponsor deems necessary to support the operations and marketing of the fund.  We begin our screen for all those Exchange Traded Products with less than $5 million in Assets Under Management which returned 254 ETPs this month.  A sponsor will usually give a fund time to prove itself so we also screen for only those that have existed for more than two years and that returned 1,025 ETPs for December’s list.  Finally we look at those products that have had negative performance for the trailing twelve months and we get 399 names that meet that criterion.  Those products that fall into all three categories get added to the monthly list which amounts to 39 products this month.  That number is lower than usual but this year has already seen more than a usual amount of closures.  Not surprisingly, the average risk score of the funds on the list is a high 6.665 largely due to a skew towards leveraged and inverse products that carry more risk.  Those leveraged and inverse products do not get scored in Quant, nor do non-equity products, but there are 6 of those 39 funds that do and they have a lower than average 48.27 overall Quant score and none are in Quant’s top 100.  So if you are buying the ETFG top Quant rankers you are safe from these funds but if you are planning to build a position in any Exchange Traded Product it can’t hurt to check this list first.  Inclusion doesn't guarantee closure and exclusion doesn't guarantee longevity but a quick look at the ETF Global Liquidation Watch List is a good step in your diligence process.  If you have questions or comments on anything you see at ETF Global please let us know at support@etfg.com or call your sales rep.  Thanks for reading and have a nice weekend.

We like to use this space to not only highlight Quant’s top rankers but also those up and comers.  Two recent mentions, PIQ and SOXX have come all the way up to 1^st and 2^nd place today from the mid teen ranks when we mentioned them.  They have outperformed since those mentions and their ranks today suggests that outperformance has only just begun.  It has been about a month since we mentioned the SPDR DJ EURO STOXX 50 Fund (FEZ) and it too has outperformed since then even though it dropped out of Quant’s top 50 ranks.  Today it is back at 20^th place and back on our up and comer list.  It is joined by a new entry in this space, the iShares S&P Europe 350 Index Fund (IEV) that has peeked into the top 100 a couple times in recent months but finds itself rocketing 127 places overnight into Quant’s 28^th rank.  A big move like that usually results from some heavy option activity skewing the Sentiment Score higher, not this time.  IEV gets up there today on an unusually large rise in the more durable Technical Score going from 42.1 up to 74.6. Last night we saw Mick Jagger call the 121212 concert the greatest collection of aging British rocks stars ever assembled at Madison Square Garden, we thought the Americans generally outperformed but didn’t stay up to watch Sir Paul.  IEV also has a collection of British stars with 34.2% of AUM in British headquartered companies, its biggest weight.  Quant likes France and Germany more which helps account for FEZ’s higher rank even though IEV gets better scores across the other categories.  Comparing the two side by side in our ETFG Scanner we can see some differences.  Both funds have a little over $1 billion in AUM with FEZ getting the edge as it does in most categories.  Each one has earned 8 Green Reward Diamonds and 5 Red Risk Diamonds but the actual ratings carried to two decimal places again favor FEZ which has better recent performance and slightly better fundamentals.  Even though FEZ looks a little cheaper than IEV, the latter wins out when analyzed in its historical perspective giving it a Fundamental Score of 70 compared to FEZ’s 66.8, but FEZ gets a couple more points on the overall Quant Score leading to its higher rank.  8 Quant positions out of more than 800 entries isn’t too much, so if you are looking to invest in Europe either one looks good.  The decision should come down to whether you like France and Germany more than Great Britain.  At ETF Global we like all of Europe and welcome business from any corner there.  We also like aging British rock stars and look forward to watching Sir Paul’s performance last night on the DVR.

We spend a lot of time in this space on Quant’s top 10 rankers but we have found the top 100 actually have a very good record of beating the market, so today we look throughout those broader ranks to help with your year end shopping list.  Focusing on the ten S&P equity sectors, we see 12 Technology funds in the top 100 today led by the iShares Dow Jones U.S. Technology Index Fund (IYW) in 7^th place.  There are three other technology funds in the top 25 with SOXX in 12^th place, IGM in 19^th, VGT in 20^th and QTEC in 21^st place today.  That clearly makes Technology Quant’s favorite sector with 12 out of 31 funds in the top 100 ranks.  Industrials are the second most represented sector with 8 out of 22 funds making the list led by SDPR’s Industrial Select Sector Fund (XLI) staying in the top 10 at 4^th place.  Quant’s third favorite sector today is Energy with 7 out of 40 funds in the top 100.  The SPDR S&P Oil & Gas Exploration & Production Fund (XOP) leads that sector in 17^th place this morning, down a few places over recent days but still consistently scoring well.  The market expects Chairman Bernanke to throw more money out of his helicopter later today and that helps the Basic Materials sector that is seen as an inflation hedge.   5 out of that sector’s 40 funds are in the top 100 today but none make the top 25, XLB gets the highest rank at 31^st place, around where it has been for a couple of months now.  Looking at the less favored sectors, Quant must know that Santa hasn't gotten around to our kids’ lists yet, the Consumer Discretionary sector only has 1 out of 24 funds in today’s top 100 with the SPDR S&P Retail Fund (XRT) in 97^th place.  Our sweet little 4 year old with the sore throat says all he wants for Christmas is healthy snacks which fall under the Consumer Staples sector.  Only 1 out of those 13 funds makes the top 100 and that is the SPDR Consumer Staples Select Sector Fund (XLP).  That one holds his favorite providers of those healthy snacks, Kraft Foods who owns Oscar Meyer hot dogs and HJ Heinz for the ketchup.  President Obama’s favorite sector is Health Care but only 1 out 25 funds in that group make the top 100, another SDPR in XLV at 59^th place.  Despite all the money falling from Bernanke’s helicopter, none of the 38 Financial sector funds make the top 100, the closest is IXG in 288^th place.  However, that liquidity looks like it will keep us out of a recession as those macro bomb shelters, Telecoms and Utilities, are also absent from today’s top 100.  Of the 13 Utilities funds, the highest ranking is PSCU in 240^th place today, and the highest ranking of the 8 Telcomm funds is IXP a tad higher at 207^th.  Reading this distribution we are left to conclude that Quant isn't too worried about the fiscal cliff although the upward creep in risk ratings we have seen over recent weeks has reversed a little bit.  The top 10 have an average risk score of 4.46 today, higher than the top 100 average of 4.09 but lower than the all equity fund average of 4.8.  We hope the above helps with your shopping list, now we need to go out and get some discretionary consumables for our kids’ stockings.

Quant is feeling a little Loonie this morning, not the Daffy Duck way but the Canadian way as the iShares MSCI Canada Index Fund (EWC) jumped 43 positions into a 3 way tie for 8^th place with two of the tech funds mentioned yesterday.  It gets up there on a spike in its Sentiment Score which saw big gains in the Put/Call and Short Interest measures.  Other measures come in the high 60s, not bad but not great, so we will see if those sentiment measures drive up the technicals over coming days.  The fund is weighted towards the financial industry that funds Canada’s natural resource based economy and those energy and mining companies come right behind financials in the fund’s higher weightings.  It gets a high 9.21 Reward Rating while carrying a low 3.1 Risk Rating.  Not bad eh?  But if you don’t think this one will turn your Loonies into Twonies, take a look down south at another natural resource driven economy, Peru.  Here we see the iShares MSCI All Peru Capped Index Fund (EPU) jumping 188 positions into 23^rd place, one of Quant’s biggest movers today.  That jump is partially accounted for by a large drop in the prior day’s Sentiment Score which regular readers know is Quant’s more volatile score.  But even if we take that out, the fund has been trending along the high double digit ranks recently and today we see it back in the top 25 where it got a few times over the past month.  We hope its return to those upper ranks will bring some outperformance this time.  This fund gets a 9.61 Reward Rating with another low 3.94 Risk Rating.  If you like Canada more because it has an English Common Law legal system, you might also like Malaysia.  Like Canada and Peru, it also has a resource based economy. Also like those other two, the iShares MSCI Malaysia Index Fund (EWM) has heavy weightings in the financial sector.  Unlike the other two, EWM has not been seen in the upper ranks until today’s 94 place jump into Quant’s 20^th position.  It gets an above 9 Reward Rating at 9.07 but this time we see an even lower Risk Rating of 1.33 which can be explained by the tight trading range on its 1 year price chart.  Its 72.7 Behavioral Score suggests it may be ready to break out of that range.  Its Fundamental Score of 69.2 is held back by its lower than usual yield and middling P/E but its Price/Cash Flow and Price/Book Value ratios are about as low as they have ever been.  Asia, South America, or our neighbors in the Great White North; wherever your sentiments lay, Quant has investing ideas for you today. 

A couple of recent top 10 members are back in that group as iShares sees its MSCI Spain and Emerging Markets Index Funds (EWP and EEM) back at 8^th and 9^th place this Monday morning. In 10^th place is the iShares Dow Jones US Technology Index Fund (IYW) which has been quietly climbing the Quant ranks for the last couple of months.  The fund has about 85% of its assets evenly split between the Software & Services and the Hardware & Equipment industry groups.  You could consider Apple Inc. to also straddle those groups and it comprises almost 22% of the fund, and similarly straddling IBM comprises 8.51%.  Microsoft is trying to become a hardware provider and it takes 8.42% of IYW. Having almost 40% of its assets in 3 names doesn't leave much room for the other 142 constituents to effect the performance so make sure you like those companies before buying this fund.  Another 8 Green Diamond fund this morning is considered a tech fund and has almost 60% of its assets split between software and hardware but the rest is allocated to the consumer and health care.  That would be today’s 17^th place Powershares QQQ Trust Fund (QQQ) tracking the NASDAQ 100.  Apple and Microsoft have lesser 17% and 7.5% weightings and no NYSE listed IBM.  This one has also been climbing quietly over recent months.  Besides those big positions, both funds share very strong Fundamental Scores in the 90s but very weak Technical Scores in the 20s.  It is rare to see such weak Technical Scores in the top ranks but these two have high Sentiment Scores boosting their overall Behavioral Scores which will hopefully boost those technicals soon.  A third technology fund scoring well today has also been a quiet riser and is beginning to outperform the general market.  That one is the iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) in 15^th place today. No straddles in this industry specific fund and no Apple either but we do see 3 constituents accounting for more than a quarter of AUM.  The largest, Taiwan Semiconductor Mfg, has gotten a lift on hopes it could replace Samsung as Apple’s primary chip supplier.  Fundamentals here score a very respectable 81.1 and the Behavioral Score is more evenly divided between technicals and sentiment both scoring in the mid 60s.  Its P/E is higher than the other two but its other fundamental measures compare more favorably.  All three funds get 8 Green Reward Diamonds and 4 Red Risk Diamonds but SOXX actually has a lower 3.81 Risk Rating.  Other than that we are seeing higher risk ratings creep into Quant’s higher ranks with the top 10 having an average Risk Rating of 4.7, higher than the top 100 average of 4.26 but still lower than the all equity ETF average of 4.8 Red Diamonds.  We will follow this rising risk theme and thank you for following us, please share any questions or feedback with us at support@etfg.com and have a nice week.

Ladies and gentlemen, start your engines!  It may be almost 6 months until the 97^th running of the greatest spectacle in sports but we have Indy on our mind this morning.  That’s because sitting in Quant’s 6^th position is INDY whose nifty ticker belongs to the iShares S&P India Nifty 50 Index Fund.   The fund made a big push to pass 47 other funds overnight to get into Quant’s lead lap with those US and China funds that we have been following.  A quick look at its chart shows why.  The S&P 500 has gained almost 4.5% since it bottomed on November 15^th, INDY has been burning rubber since then gaining 7.27%.  That has turbocharged its Technical Score up to 75.3 this morning from 44 yesterday with all three time frames leaving the competition in its dust.  Its Sentiment Score of 71.8 has been elevated since that rally began to gather steam in late November but is down a few points over recent days.  Quant loves that kind of momentum but a look beneath the hood shows the fundamentals to be just as impressive.  A yield of 0.47% may not look too impressive but it is about as high as it has ever been, as its Price/Cash Flow ratio of 2.81 is about as low as it has ever been.  Tempering those hot numbers are Price/Earnings and Price/Book Value ratios that come in the middle of their historical range but still contribute to a high 78.1 Fundamental Score.  The Indy Racing League has yet to schedule a race in India and Quant only gives it a 67.9 Country Score which contributes to INDY’s low 56 Global Theme Score.  The low number of constituents also restrains its Quality Score but good liquidity and a strong sponsor in iShares get that one above 70.  All in all those are nicely balanced scores and like the word racecar itself, this one looks just as good whether you see it frontwards or backwards.  We have a long cold winter ahead before race fans come back home to Indiana next Memorial Day weekend but in the meantime Quant thinks we should take a ride in INDY.  Thanks for reading and happy racing!

This morning’s Wall Street Journal says a government study recommends the United States begin exporting some of our newly found abundant natural gas.  Quant doesn't read newspapers but coincidentally ranked the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) in 5^th place this morning, its highest rank since early October.  Since that prior high ranking, it has performed mostly in line with the S&P 500 but maybe that was just a false start and this is the time that it will begin to truly outperform. It is poised for a pop in that all three of its sentiment measures are scoring above 90.  Eventually all those puts and shorts will have to be covered and Quant thinks that will be sooner rather than later.  That’s confirmed by its 90.5 Volatility Score which suggests the selloff it has seen since mid September has indeed run its course for now.  Those Sentiment Scores account for half of the overall Behavioral Score which combines them with the Technical Scores which are OK but not great at 60s across the three sub categories.  On those the short term is better than the intermediate term which is better than the long term.  We can use our ETFG Scanner and adjust the filter to display its fundamentals and compare them to the market and other sector funds.  Here we see a P/E less than 11, a Price/Book Value of 1.37 and a Price/Cash Flow of 3.68, all cheaper ratios than the market and broad energy sector ETFs.  Only its yield of 0.90% compares unfavorably but that shouldn't be surprising as these companies are busy plowing all available capital into drilling projects.  Despite those cheap valuation metrics, they have been cheaper historically which keeps XOP’s overall Fundamental Score at 64.4 today.  There is palpable fear that the companies comprising this fund are sowing their own destruction by producing more energy than the market can consume.  Natural gas and oil prices have recovered from their summer lows but many of these companies have stretched their balance sheets so far that the recovery in prices may not be enough.  Having new markets open for their products should help but we all know government studies often do not get past the front page fanfare of their announcement day.  However, Quant suggests the fanfare today may be enough to shake out those shorts and fire up this fund for the next few months.

Guten Morgen. We have been highlighting some weak sisters of Europe lately where the iShares MSCI France and Spain Index funds (EWQ and EWP) have been scoring well and performing well.  Each is up during the recent selloff.  We haven’t had a chance to write about Europe’s sugar daddy, Germany, because it hasn’t been scoring as well.  Until today as the iShares MSCI Germany Index Fund (EWG) jumped 46 positions overnight into Quant’s 12^th position, tied with iShares’ Emerging Markets and S&P 500 Index Funds (EEM and IVV).  The fundamentals of Germany’s fiscally balanced economy are strong but this fund’s Fundamental Score is a middling 63.1 today which doesn't mean it’s fundamentally weak but just not cheap on a historical basis.  iShares funds usually have very good Quality Scores but this one’s 52 constituents limit its Diversification Score to only 35.2 which keeps its Quality Score at 76.5, not bad but not the reason for its high rank today.  For that we need to look into its 80.5 Behavioral Score.  It gets that high on a very high 82.3 Sentiment Score and a solid 78.7 Technical Score.  The former is driven by a persistently high Short Interest Score and a rising Put/Call Score.   On the technical side we see its recent good performance reflected in an 87.3 Short Term Score but its Intermediate and Long term scores of 81 and 74 are sweet tortes too.  It has a low Red Diamond Risk Rating of 3.9 providing yet another example of Quant favoring the lower risk names, so proceed mit vorsicht.  Yesterday’s Wall Street Journal had an interesting interview with Germany’s Finance Minister Wolfgang Schäuble which we recommend for anyone following the Euro story.  In it he explains his country’s strategy to make the rest of Europe more like Germany, at least as far as fiscal policy is concerned.  He likens himself to Sisyphus constantly rolling a boulder up a hill.  That mythical Greek figure was condemned to do that forever only to see the bolder roll back down each time.  We hope for a better outcome regarding Herr Schäuble’s efforts and Quant thinks he may at least have a breeze at his back for the next few months.  So if it has been too much for your gut to bear investing in France and Spain, you now have a go ahead to allocate some of your equity dollars to Europe’s strong horse.  Viel Glück und auf wiedersehen.

It is going to be difficult for the  average performance of today’s top 25 ranked funds to beat the S&P 500, even the top 10 will be encumbered versus that benchmark.  The reason is because the three S&P 500 index funds all make the top 25 today with Vanguard’s VOO in 4^th place.  The iShares (IVV) and SPDR (SPY) versions come in 8^th and 12^th place.  VOO gets the higher rank on a higher Fundamental Score but of course the fundamentals of all three are the same.  The reason is the Vanguard fund has only been around since late 2010 and Quant’s fundamental measures cover a longer time frame, in this case a time that included some better measures that make the others look not as cheap in the larger context.  So disregard VOO’s 85.7 Fundamental Score and assume it is more like the other two’s still strong 74.  On the behavioral side we see some similar quirks accounting for differences where we wouldn’t expect.  The two older funds get a Technical Score of 60.7 while the higher ranked VOO gets 61.8, historical context is the reason again so go with the lower scores that include Quant’s full time span.  All three have long term scores better than intermediate term and better still than the short term measures so a time out in the rally may be in order.  A shorter life is not the reason for VOO’s lower Sentiment Score of 60.7 which is more than 10 points lower than the other two.  Size is what matters here as the bigger funds have greater short interest and option activity making them easier subjects for bearish speculative trades.  Since all three do an excellent job of tracking the index, you shouldn’t expect a high put call ratio or short interest to boost performance of one versus the others.  All three funds get very high Quality Scores in the 90s with the older two getting a slight edge.  Summing it all up, if VOO had been around longer it would probably be ranking a few points lower, and the discrepancy between IVV and SPY is not as large as it looks as the former is in a 3 way tie for 8^th place so only one fund separates them; that would be the iShares S&P 500 Value Index Fund (IVE) which we highlighted Friday.  It is rare for three funds to track the same index and it helps provide a good primer on how Quant works.  That said we have been hearing a clear message that the S&P 500 is a good place for your equity allocation over the next few months.  It may lead to today’s lists being among the few that do not beat that index but Quant says on average they will beat most other benchmarks over that time.  If you would like an in depth explanation of how Quant works, please let us know at support@etfg.com or call your sales rep.  We are here to help.

A couple of weeks ago on November 16^th we mentioned the Powershares Dynamic MagniQuant Fund (PIQ) as a quiet riser in Quant that we were going to keep our eye on.  It ranked in 14^th place then, dropped down out of the top 25 but is back in 14^th place this morning so we decided to put our second eye on it too.  It’s different from Quant’s other ranked funds in that its portfolio is reconstituted every quarter, most recently in November.  That adds a different dynamic to the Fundamental Score which is usually calculated on the same constituents.  So today’s 89.2 Fundamental Score doesn't necessarily imply that those constituents are as cheap as they have been almost 90% of the time but that  the fund is holding positions that are as fundamentally cheap as they have held almost 90% of the time.  Those positions are selected using a quantitative algorithm that analyses the 2000 largest US companies that it predicts will have the greatest potential for capital appreciation.  That recent reconstitution skewed its 198 holdings towards the small cap and consumer discretionary sectors; we are seeing a lot of small cap funds score better but not too many consumer funds (although Friday’s top ranked IVE also had large exposure there).  Historically it has not proven to be as good as ETFG’s Quant model in that it has lagged the S&P 500 in most years but this year it is slightly outperforming as it has over the past two weeks as well.  That has boosted its Technical Score to 73.6 and put it back into Quant’s upper ranks.  Our interest in this fund is a bit parochial in that it may give a hint to how Quant will perform when managed equity ETFs become more popular as we expect will happen over coming years.  While this one isn't actually managed, it isn't as static as most other index based funds.  We have been hinting about Quant’s outperformance quite a bit in this space and are getting ready to put some meat on those bones.  We have been conducting an exhaustive study of Quant’s overall performance which we will announce in coming days, so keep your eyes on this space for that exciting news.  Suffice it to say we have found the ETF Global Quant model to be better than others even though it likes the Powershares Dynamic MagniQuant Fund today.