Let’s take a trip across the grand whiskey river to our south with the iShares Latin America 40 Index Fund (ILF).  It is not an elite ranker but does find itself in Quant’s 65^th place today, its highest yet.  You may think an investment idea in the land of drug cartels and even worse politics is the last thing you needed first thing this morning but we have been noticing the fund creeping up in our models lately.   While institutional money is reportedly all going to Mexico, ILF pairs Poncho with Lefty and the 7 countries represented within are not all Spanish angels.

Mexico accounts for over 27% of AUM but they speak Portuguese in Brazil which accounts for more than 52%.  The US may not be Latin America but Southern Copper pretty much is and accounts for a little over 1% and Peru has one company accounting for less but Bermuda has 2% that is really Peruvian. Chile and Columbia combine for another 16% so all told, the words fit the picture.  ILF’s better scores recently have been driven by its high 91.1 sentiment score showing the market about as bearish as it can get.  That bearishness is understandable with a look at its poor chart which explains its 48.8 technical score that tastes like yesterday’s wine.  Its 56.2 Fundamental Score isn’t much better saying its valuation is in the middle of its range over more than a decade of trading.  All that combines for a respectable 7.44 Green Diamond Reward Rating while its 5.42 Red Diamond Risk Rating is higher than average for equity ETFs but is driven by high volatility and deviation which may appeal to the real cowboys out there.

So why do you have to choose between BRIC or MIST?  ILF gives you some of each and its 7% correction over the last three months has wound the bearish spring tightly.  Unwinding those positions will help its technicals and could have traders living in the Promiseland but long term fundamental investors may want to find a cleaner shirt.  Bringing ETF ideas to you is always on our mind and we will be back on the road again tomorrow morning with more.  In the meantime we want to wish a happy 80^th birthday to the Red Headed Stranger, Willie Nelson.

The ETF Global Quant and Green Diamond models are closely related predictive ranking systems applied to the universe of equity ETFs in existence for a year or more.  The heart of each is our Fundamental and Behavioral scoring methods that combine traditional security analysis with modern behavioral finance.  The Fundamental Scores analyze ratios of price to earnings, cash flow, book value and dividends in an historical context while the Behavioral Scores look at technical factors like momentum and relative strength over various time spans, as well as contrarian sentiment measures.  Quant includes other measures relating to global themes and quality, some of which get incorporated into the broad Red Diamond Risk Ratings which are not predictive but cover all products.  A good way to see how the models differ is in the ETFG^sm Scanner.

Risk, Reward, and Quant are default displays in Scanner but you can set many more with the Filter function; Focus gives a feel for what is ranking well in the models. Clicking twice on Quant will sort the population with today’s highest ranked SPDR S&P 500 Fund (SPY) up top.  A quick glance shows Quant’s focus continues to be US broad market funds but some sector funds also appear.  Clicking twice on Reward sorts by the highest Green Diamond Reward Ratings led by the PowerShares KBW Insurance Portfolio Fund (KBWI) as today’s 10 Green Diamond fund.  You can read about that one on Thursday’s post or take a closer look at it and any other funds by checking their Compare boxes and then the Compare button next to Filter.  We like to display fundamental and performance measures which show KBWI as cheaper than SPY and outperforming it recently.  Clicking on Quant Report shows our selections on a dedicated Quant screen for a different kind of detail. 

KBWI’s recent performance gives it a very strong 80.2 technical score but SPY does better on sentiment so each balance out to decent high 60s Behavioral Scores.  Even though insurance typically trades at a discount to the market, KBWI’s fundamentals are cheaper than usual expressed in its very high 91 Fundamental Score so they have kept pace with the strong chart.  Being all US gives SPY a better country score then KBWI’s Ireland and Bermuda exposure and size and diversification also boost SPY on those lesser weighted categories. 

Country, liquidity and diversification are factors in the Red Diamond Risk Ratings that was covered last Wednesday.  We have noticed the average of the top ranked funds creeping up with today’s top 10 at 4.63 compared to today’s all equity average of 4.78.  If you have questions on anything you see at ETF Global please ask us at support@etfg.com.

Yesterday’s Bloomberg story about central banks buying equities explains much.   Having 12% of the Swiss National Bank’s assets going into broad market ETFs would account for the dominance of US broad market funds this year, and that’s just one example in the report.  We are glad our models picked up on the trend before it was known as those are the funds that have dominated our ranks all year.  Within those ranks there are always plenty of other regions and sectors and having looked at the former Tuesday, we’ll look at the sectors today.

Energy is Quant’s favorite sector today with 9 funds in the top 100, 5 of which rank 11^th or better.  The Vanguard Energy Sector Fund (VDE) is best at 4^th place with an 8.22 Reward Rating and XLE and XOP are close behind.  There are also 9 basic materials funds in the group led by the 20^th place Market Vectors-Agribusiness Fund with the unforgettable ticker MOO.  The Global X Silver Miners Fund (SIL) does better in the Diamond model with an 8.09 Green Diamond Reward Rating.  Three PowerShares funds are among the 6 from the industrial sector with PSCI in 20^th place but PRN gets a better Reward Rating of 8.23.  Two technology funds make today’s top 10, IYW and SOXX in 9^th and 10^th, and three others make the top 100.  There are also 5 health care funds, three of which are biotech, like 44^th place PBE with an 8.16 Reward Rating.  Quant has yet to embrace the consumer sectors this year despite their good performance but we do see 3 staples funds and 2 discretionary with 37^th place IYK leading the former and 52^nd place XRT the latter, both are 7 Green Diamond funds.  Similar story with financials but yesterday’s KBWI is still in 5^th place with a 9.63 Reward Rating and XLF also makes the top 100 at 69^th place and 7.32 Green Diamonds.  The telecomm sector gets one fund in today’s top 100, Vanguard’s VOX in 67^th place which is better than Quant’s least loved sector today, the utilities with XLU  the highest ranking at 162^nd and a 6.21 Reward Rating.  Those are two tough sectors in a risk on world.

The central bank news not only confirms a source of the huge asset flows, it also confirms the validity of ETFs as a security type to gain exposure to the asset classes you need.  Financial repression from unprecedented monetary policy has rendered so many models obsolete but not ours.  ETF Global’s predictive quantitative models have been favoring US broad market funds all year but favored Europe and emerging markets at the right times last year.  We are waiting for the next turn and will keep you posted.  Thanks for reading and have a nice weekend.

We often say our models will not pick all the winners, some sectors or regions that do not score well can rally anyway.  One such sector this year has been financials but we have been glad in recent days to see the PowerShares KBW Insurance Portfolio Fund (KBWI) ranking as high as today’s 5^th place.  Glad to have a financial fund in our elite ranks and glad to see that KBW name living on after its acquisition by Stifel Financial, another good guy firm.  The fund jumped from 106^th place to 7^th last Friday and we were not sure if it was a mistake.  Three days holding the 10 Green Diamond distinction allayed that concern and it still gets an impressive 9.69 Green Diamond Reward Rating today.

Many financial funds are not scoring well in our models because despite recent outperformance, their charts still bear the bruises of the 2008 crash, as do their fundamental metrics.  KBWI’s young year and a half age unburdens it from those comparisons.  That jump last Friday is something that happens during earnings season as our models pick up and process the results, KBWI had a composite P/E over 13 before earnings season and it is less than 10 now.  Such a big drop, and the fund’s short life, drove Quant’s PE and PB scores from 45.6 to 97 in each case last Friday where they remain today.  Technical scores were already high as its mountain chart has yet to see a meaningful valley but sentiment scores are restrained by the lack of options and low trading volume.  That low volume need not be a worry as the 24 constituents you can see on its tear sheet are plenty liquid, if you need to buy a block your PowerShares representative should be able to arrange appropriate liquidity.

Although some risk measures go into the high 72.5 Quant score, the separate Red Diamond Risk model rates KBWI at 6.41, among the highest 13% of all equity ETFs.  That is driven by its 9.29 deviation and 8.54 liquidity scores, where the former has been upwardly biased.  So if you are bullish the high risk is the favorable kind but if you are bearish this may not be the fund to outperform a falling market.  That is for you to decide, we are here to support that decision and since the suits don’t give us good enough spell check let us correct yesterday’s error, the email is support@etfg.com.

Apple reports its first profit drop in a decade but the stock is up pre-market, as is the S&P 500 whose aggregate earnings are on track for their second decline in three quarters. Europe’s economies are imploding, even bringing Germany’s PMI below the crucial 50 mark but their markets are rising on hopes of ECB printing.  China’s PMI is barely above 50 as they fight the inflation being fanned by Bank of Japan Governor Kuroda scattering yen from the back of his Toyota.  Other emerging economies are slowing in the same inflation battle even as resource based economies see commodity prices plummeting.  Through it all we hear about our “low tail risk” environment, the swan is shaking her tail feathers but none appear to be black.

If 2008 makes you skeptical of Wall Street’s modern risk models, you can rest assured that ETF Global’s Red Diamond Risk Ratings do not include monetary policy in any of the 15 metrics we score each day.  They are grouped into 6 categories under the Analytics button where Volatility includes our proprietary ETFG^sm Implied Volatility score and a couple of other industry standards, while Deviation also includes common metrics weighted towards downside deviation.  Country is the score from Quant and Structure borrows other metrics from Quant regarding diversification, sponsoring firm and use of derivatives.  Liquidity is also a compilation of industry standards and includes our Liquidation Watch List while Efficiency looks at tracking error and expense ratios.

You can see the weightings of each category at the bottom of the page and can click on their column headers to sort by any of them (a feature available through most of etfg.com).  You won’t be surprised to see the highest Red Diamond Risk Ratings distributed among the leveraged and inverse population.  Bulls or bears can sort by Volatility to see which funds should expect the best ride or best place to hide.  If you want to see how a particular fund scores, sort by ticker or description or enter part of either in the search box.  Entering “gold” in the search box brings up 30 different products tracking the bullion, miners or various derivatives tracking both.

Risk has a way of making itself felt when least expected so don’t be lulled by the low tail risk models.  The ETFG^sm Red Diamond Risk Ratings are quantitative and objective where all exchange traded products are cross ranked against each other.  Whether you are concerned about the price of an ETF or its integrity, ETF Global gives you what you need to fully assess how a given product fits into your own risk tolerance guidelines.  As always, send any questions to suppoet@etfg.com.

On March 26^th we took a look at the foreign funds in Quant’s top 100 ranks and things look similar today.  There were a scant 16 funds devoted to regions other than the US last month and the same small number appear today, mostly the same names with a few exceptions.  Quant clearly continues to favor the broad US market but does have some ideas for those who need to fill their international allocation.

The iShares MSCI Australia Index Fund (EWA) topped out in mid March but has held up better than most regions and is the top ranking foreign fund today at 13^th place.  Canada’s EWC hasn’t held up as well over the last month but is in 15^th place and Spain’s EWP is in the middle both performance wise and at 14^th place.  EWP has done better over the last month than Germany’s EWG and Frances’s EWQ which rank in 36^th and 56^th respectively and better than the pan European FEZ in 35^th place today.  Switzerland’s EWL provides that rare foreign exposure that has kept pace with the US market recently and it holds 23^rd place today with a decent 78.4 Fundamental Score.  The iShares MSCI EAFE Index Fund (EFA), with more than 20% of AUM in Japan, has also been insulated from the worst of the world selloff recently.  Its tear sheet shows Europe with lesser weights but they add up to more than 27% exposure to the common currency and it holds 83^rd place this morning.  Japan has not been scoring well generally but the iShares MSCI Japan Small Cap Fund (SCJ) has a steep mountain chart and mid 60s Quant scores that get it into the top 100 at 92^nd place.  China’s FXI performed so well for us last fall and is the highest ranking Asia fund today at 18^th place followed by South Korea’s EWY in 47^th and the Developed Asia ex-Japan EPP in 52^nd.   The iShares MSCI Emerging Index Fund (EEM) was also a big winner for us last fall and is climbing the ranks again at 26^th place today.  Quant may smell a bottom in the emerging markets as a few others make the top 100 with GMF, VWO and DEM in 67^th, 68^th and 77^th place.

With only 16 foreign funds in the top 100, Quant’s US focus is about as pronounced as it has been since our inception last summer.  The model did a great job picking a wide array of international funds that provided outstanding performance in 2012 but 2013 has been a US year with the exception of Japan’s central bank fueled run which has yet to score well.  The ETFG^sm models continue to predict outperformance for the broad US market but it’s always good to look around.  Thank you for looking around at ETF Global, send any questions to support@etfg.com.

Quant begins the week with the US broad market focus that has dominated so much this year with small, mid and large cap all represented in the upper ranks.  Friday’s 1^st place Vanguard Information Technology Fund (VGT) leads again this morning and the damage in the tech sector has brought the iShares Dow Jones U.S. Technology Index Fund (IYW) up to 13^th place, lower than last Monday but higher than most of last week.  Another Vanguard sector fund, Energy (VDE), gets 3^rd place followed in 4^th by the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) which has scored so well so often this year.

Looking at those four on the ETFG^sm Scanner, we can see the energy funds have lower valuations but higher Risk Ratings driven by more volatile price risk measures.  Despite their higher valuations, the tech funds score better in Quant’s Fundamental calculations that reference a fund to its own history. VGT’s excellent 98 edges out IYW’s 97 but both are about as high as can be. The energy funds also score well fundamentally but have better balance with their behavioral side.  XOP’s 71.5 Fundamental Score couldn’t be much closer to its 71.7 Behavioral Score.

The trade may be reliant on value investors coming in because the technical scores are not pretty with high 40s for all but IYW’s even worse 16.4.  XOP probably has the best short term prospects signaled by favorable sentiment measures led by a very high 94.7 implied volatility score, a proprietary calculation that our institutional clients have found to be an excellent input in their models. 

You can see some other sectors and countries represented among the US broad market funds in Quant’s upper ranks but the message remains consistent.  With few exceptions, the US market should remain the island in the storm that world markets have become.  ETF Global has identified the leading sectors and regions of the international equity markets since our inceptions last summer so whatever you decide should be your equity allocation, Quant suggests keeping that US focus that has worked so well this year.  You can find plenty of other suggestions among the upper ranks and the committed ETFG^sm team stands ready to assist at support@etfg.com.   

When we wrote on October 26^th about waking to find our cat and dog sleeping together, we had no idea that Apple’s rare earnings miss the prior evening would lead it to lose another third of its value.  The Vanguard Information Technology Fund (VGT) was not among those mentioned with the highest weights in Apple that morning but it is today.  We mention it because it is also Quant’s top ranked fund today.

We have to think its 17.29% weight in Apple Inc. (the highest of any ETF) is boosting VGT’s very high 97.7 Fundamental Score with high 90s in all the sub categories except for the 100 yield score.  The 58.6 Behavioral Score you see on its ETFG^sm tear sheet is nothing to get excited about and its subcomponent technical score, seen on the Quant page, is even worse at 50.3 and falling.  Sentiment is improving at 66.8 today as bears are circling the wounded technology sector, especially with another rare earnings miss, this time from IBM which has VGT’s second highest weight at 7.2% and could hold it back short term. The beautiful pie charts on its tear sheet show diversification within the technology sector among hardware, software and services.  You can see all 419 constituents including all the big names but also most of the little ones you may not recognize.

Our models are not designed to call bottoms but to recognize a confluence of factors that produce a high probability of outperformance in the intermediate term.  The market is shunning technology but the strong fundamentals the sector enjoys should eventually bring out the value buyers and Quant likes VGT more than any of the other 737 equity ETFs in today’s scoring.  IBM says that “Big Data” will drive their future and we are believers in the power of data to illuminate otherwise hidden information.  The ETF Global models were not possible before voluminous data became available in recent years but now deliver to you something that was only possible before in the highest priced hedge funds or university research departments.  The performance reports we covered the past two days is testament to the value that ETF Global adds.  

We will now let you get back to the exciting movie unfolding on our TV screens this morning, congratulations to the Boston and Federal authorities on a job well done. Don’t mess with the USA, especially on Patriots Day!

Like our Quant model, we also report on the performance of its sister Green Diamond Reward model covering all equity ETFs.  Some of Quant’s risk metrics are incorporated in our Red Diamond Risk model covering all products but that is reflective not predictive, so we don’t assign performance to it.  Like Quant, the funds that have earned the highest Green Diamond Reward Ratings have an excellent record of outperformance that you can see on the monthly reports under the Analytics tab.  Each day, one fund earns all 10 Green Diamonds which today happens to also be Quant’s 1^st place SPDR S&P 500 Fund (SPY).  Having the same fund lead each model is not typical but the general makeup of the top ranks is typically similar.

The distribution of Green Diamonds below 10 varies slightly with the shape of each day’s bell curve and 10 funds getting 9 Green Diamonds today is a bit low while the 58 that earn 8 and 128 that earn 7 are more typical numbers.  Those 9s are all US today except for Canada’s EWC but unlike Quant we see more sectors represented in this top group which you can sort by on the ETFG^sm scanner.  If you must venture off the US island in the storm there are plenty of ideas among the 8s and 7s to fill out your international allocation. 

The performance report shows that the 7s beat the S&P 500 on average, but by a lesser amount than the 8s which get beaten by the 9s and all return less on average than the 10.  Today’s top ranking SPY traveled through all those levels in recent months.  It was a 7 Green Diamond fund on December 3, before the models turned their focus to the US market; it then earned mostly 8s in January and 9s in February when it also earned 10 on 4 different days.  4 days in March saw it get 8 Green Diamonds with 9s for the rest of the month.  It’s been 9s all April except for last Friday and Monday with high 8s and today’s 10.

2013 has seen those high Diamond Ratings consistently assigned to various US broad market funds which makes our outperformance versus the S&P 500 all the more impressive.  However, any day sees a multitude of choices across regions and sectors rating 7 Green Diamonds or better.  They won’t all outperform but the performance reports speak for themselves. No other ratings provider offers a selection process as dynamic and none of them report on their top rated funds the way ETF Global does.  Thank you for helping us spread the word.

How many ratings firms ever announce that their performance reports have been posted?  Ours have, as they are every month, and the good news is ETF Global has consistently identified the best areas of the international equity markets.  The bad news is our outperformance versus the S&P500 has come down.  It really had nowhere else to go when our top Quant rankers more than doubled that benchmark on average last year.  That was after five months when the model correctly called moves in Europe, China and other emerging markets.  Quant turned its focus to the broad US market in December and has seen little movement from that stance since.  Indeed, Quant’s top position today is held by the SPDR S&P 500 Fund (SPY), in 1^st place for all but three days this month when it was in 2^nd.

2013 has been a rocky year for most of the world equity markets so we are glad to have kept you on the US island in the storm.  The two other funds that track the S&P 500 have also ranked well as have funds tracking the various Russell indices where Quant has done a good job of calling wiggles between the different market caps.  Several of those funds outperformed the popular benchmark as did most of the smart beta funds that Quant has highlighted.  Other selections aside from the broad US market also helped our numbers.  You can follow the evolution of Quant’s message over the months by reading prior blog posts or check our Twitter feed, @ETF_Global, if you prfr msg < 140 char.  We are not too proud to say it hasn’t all been so stellar.  We knew we had a penance to pay for the high scores assigned to the Market Vectors Gold Miners Fund (GDX).  You are probably not too happy if you bought it when it scored so well in February and we will have to live with it for a couple more months since Quant seemed to miscall a bottom again in late March.  Think of it as a diversifier.  It even earned the daily 10 Green Diamond distinction on several days but we will cover that model tomorrow.

On net, Quant’s top 10 ETFs as a group each day have outperformed the S&P500 by more than 46% on average for the next month.  That covers all rolling periods since our July 2^nd inception and not much has outperformed that benchmark in the last few months.  The report, available on the publicly accessible part of our website, also includes wider groupings and longer periods that have beaten the index almost 70% of the time.   We are looking forward to Quant’s next call but for now the model says to stay on that US island, 6 of today’s top 10 are US broad market funds.

An old wise man of the market used to tell us “it’s not the snake you see that bites you.”  As our eyes were fixated on the gold led commodity selloff, evil in the form of terror at the finish line sunk its fangs into America’s psyche again. US equities accelerated their selloff immediately following the twin blasts at the Boston Marathon and ETFs tracking international indices experienced similar declines.  The SPDR S&P 500 Fund (SPY) was down almost 1.5% before the attack and closed down by 2.32% which must have been the bid because the index closed down a slightly lesser 2.30% for the day.  The fund is back to its now familiar 1^st place Quant ranking today.

Europe and Asia were closed in that last hour of US trading and time will tell the quality of the price discovery the funds tracking those markets provided.  So far on this April 16^th Asian markets are mixed and Europe is down less than 1% across the board so the international ETFs that fell in concert with the US market were more right than wrong.  Our models saw little change overnight but the top ranks see even more US funds and the average Red Diamond Risk Rating of those top ranks has climbed with additional small cap, mid cap and energy funds pushing it up.  Yesterday we mentioned the models being relevant to traders and investors but they are not designed for very short term trading.  That post provided data points showing how Quant can miss some wiggles so we would like to give global markets a day or two to asses any reaction to this. 

There is more to process than the terror in Boston.  Was the selloff in gold and commodities from central bank and hedge fund liquidation or signals of a slowing world economy?  Time will provide clear answers but markets will provide earlier ones.  Quantitative analysis is the science of interpreting those important market signals and ETF Global has models that have proven as good as any and we will keep you apprised of the messages they convey.  Being from the Bronx, we are not going to call ourselves Red Sox fans but are proud to say we all Bostonians today.  Our thoughts and prayers are with our friends in The Cradle of Liberty.

Congratulations to Australia’s Adam Scott on winning that quintessential American golf tournament, although we were pulling for the Argentine old boy at the end.  We want to use the occasion to take a look at today’s 11^th place iShares MSCI Australia Index Fund (EWA) which has been a persistent top 100 fund since our inception last summer.  If you take a look at its price chart since then you will see why.

November saw the fund in the top 10 on 7 days including 6^th place on November 14^th when we wrote about Quant’s aversion to the USA.  It was among the leaders of that great run in foreign markets last fall.  Even when our models began to turn their gaze back to the US in December, EWA has always remained in the top 100 and most of the time in the top 50 since then.  Traders could have interpreted its 83^rd place rank on December 24^th as a sell signal but longer term investors would probably be satisfied with its close to 9% gain so far in 2013.  We don’t state sell signals because different investors have different objectives and our models are relevant to any of them.  EWA got back into the top 10 on January 30^th and again on a handful of days in mid to late February.  March only saw one top 10 day when it reached 8^th place on March 6^th but it stayed in the top 50 all month, although April has been more volatile thus far with an 84^th place rank on April 8^th.  That was somewhat of an outlier and it got back to 12^th place the next day and 4^th place last Wednesday.

Following those rankings with the fund’s price action will give you a sense of how Quant and its sister Green Diamond Reward models work.  They won’t call every wiggle and every one of their wiggles isn’t necessarily actionable but it only takes a few days to get a good feel for a given fund’s prospects in the coming months.  If you would like some historical data on a fund you are looking at please let us know at support@etfg.com, we are here to help.  Following our models takes less commitment than golf and will help you a lot more than an anchored putter.  But that’s not to take anything away from Adam Scott’s remarkable 25 footer in the rain.

Very little change in the models today, the SPDR S&P 500 Fund (SPY) swapped yesterday’s 1^st place for today’s 2^nd with the Powershares: Dynamic OTC Portfolio  (PWO) which has held the daily 10 Green Diamond distinction for 8 straight days.  Quant’s top 10 is almost all US except for Canada’s EWC and Switzerland’s EWL in 4^th and 8^th place. Sound familiar?  What’s remarkable is that after calculating dozens of quantitative measurements for each fund every day, in an international equity market as diverse as ETFs cover, these same funds are consistently scoring best.  The good news is they are consistently performing best too.

Underneath those scores and ranks, the component scores are constantly changing and sometimes in interesting ways.  PWO and SPY have similar looking charts over the last month but PWO’s technical score has declined slightly in the past two weeks as its short term has come down while SPY’s has improved.  On the sentiment side of our Behavioral Score SPY’s 64.4 is about where it was a month ago but down over recent weeks as its put/call score has declined with the bullish fever.  PWO’s 59.6 sentiment score is about 9 points better than a month ago but more than 20 point better than two weeks ago as its implied volatility score has correctly called the wiggles.  As both funds have performed so well we would expect their Fundamental Scores to come down but the opposite has occurred over the last month.  PWO’s has increased from 89.9 to 98.2 on an improving PE score and SPY’s has increased from 74.4 to 82 on a bump up in its cash flow score.  So the companies within each fund have reported results that justify the bullish moves.  Our risk model also shows some interesting movement in the two hot funds where SPY’s 3.81 is trending down slightly as PWO’s 4.26 is trending higher.  Their constituents, structures and sponsors haven’t changed so it has to be the way their trading has affected the models.  Our Red Diamond Risk Ratings are not predictive but reflective of those characteristics of a given fund. 

Through all the daily changes, Quant and its sister Green Diamond Reward model have consistently identified top performing funds for the intermediate term.  With global markets as volatile as today’s you need ratings that respond to that volatility and you can be sure that ETF Global’s are not decided by a committee several months ago.  Our vigorous quantitative models are updated daily and free of human bias and we will publish their monthly performance reports next week.  If you have any questions on a fund you are following, ask us at support@etfg.com. Thanks for reading and have a nice weekend.

A popular ETFG^sm tool is our monthly Liquidation Watch List that alerts you to products with a higher likelihood of closing.   Advisors have found a scan of the list before recommending a product to clients is a worthwhile step in their diligence process and managers like to consult it to avoid getting stuck in a fund that authorized participants are abandoning.  You can find April’s list under the Analytics button and we are pleased to announce, also at WealthManagement.com.

It is compiled each month by screening for three criteria that raise the risk of closure.  We begin by looking only at funds open for a minimum of two years as most sponsors will give a new product at least that amount of time to prove itself.  After two years, a fund that has failed to acquire a minimum of $5 million under management becomes eligible for the list. The third criteria is having negative performance for the trailing twelve month period, as sponsors know investors are less likely to allocate to a loser.  This month’s list highlights 59 exchange traded products that meet all three criteria which is a bump up from recent months. There are plenty of the typical leveraged and inverse ETNs based on niche markets,  but there are a few more plain vanilla ETFs tracking sectors of emerging markets like Argentina, Brazil and China.

Financial advisors know that an ETF closure can be a disruptive event and don’t want their clients subjected to the wild swings in tracking error that can occur.  Financial advisors also know that WealthManagement.com is the leading source for the news and information they need to stay abreast of their industry which is why we are so excited to be contributing a monthly column on this topic.  You can read our inaugural article at this link.  The ETFG^sm Liquidation Watch List is but one of ETF Global’s many tools that financial professionals have come to rely on and is posted on the publicly accessible part of www.etfg.com.  Thanks for checking it out there or at WealthManagement.com. 

Wall Street is turning on the air conditioning for the first time this year and energy funds are rising in the ranks.  You won’t be surprised to see the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) in 3^rd place today as it has been right around there all year.  The SPDR Energy Select Sector Fund (XLE) has also been consistently scoring well though usually not as high as today’s 8^th place.  The Market Vectors Oil Services Fund (OIH) has reached the top 10 occasionally in 2013 and is tied at 10^th place today.  Digging a little deeper finds the Vanguard Energy Sector ETF (VDE) and the SPDR S&P Oil & Gas Equipment & Services Fund (XES) in 14^th and 17^th place which is less familiar territory for each this year.

Using the ETFG^sm Scanner we can select Energy under Focus from the Filter menu and see all the energy funds in our database.  To narrow it down, we can sort by high Quant Scores and then select those 5, and a few more with high scores, by checking their Compare boxes and then the Compare button up top.  We notice most have performed well and still have healthy valuations. We also notice that most have higher than average Risk Ratings and only XOP earns a Reward Rating above 8.  This shows a difference between Quant and the Diamond models where the latter is not as excited about the energy sector.  Clicking the Quant Report button up top brings up our selections on their own Quant screen showing most scoring well fundamentally with scores in the 60s and similar good but not great technical scores.  Our higher ranking funds get there on high sentiment scores mostly driven by option activity.

Energy is the rare sector that has scored well consistently this year and it is one of the few sectors that have consistently kept pace with the US market’s monster run.  Maybe it’s the heat in the east or the snowstorm in the plains today, or maybe investors are accumulating positions in this fundamentally healthy sector.  We often say Quant moves in mysterious ways but the performance of the ETFG^sm models is no mystery because we publish them monthly.  Those updates will be up any day so don’t forget to check in for that check up. Thanks for reading and stay cool today.

They were fighting in the streets with their children at their feet but that was to get into to Apple stores, not JC Penny.  Now the board that spurred Ron Johnson on, sits in judgment of his wrongs and the shotgun sings the song.  So it’s meet the new boss, same as the old boss Myron Ullman, who gets to fool them again.  We know nothing about retail but we know which exchange traded products are exposed to JC Penny.  Entering the ticker JCP in the upper right search box brings up the equity’s ETFG^sm Grey Market Report.

Under the data box and price chart you will see the summary showing the dollar value of JCP to which all exchange traded products are exposed. We express it as Long, Short, Net and Absolute and next to each value is its percentage of the company’s total market capitalization.  Below that you will find detail not available anywhere else.  Not only do we show the 53 ETFs that actually hold the shares but we also include the 14 leveraged and inverse funds that track an index that includes the company.  Those funds usually get their exposure through swaps or futures but those ultimately get hedged with the equity.  If you want to see how much one of your funds is exposed to the stock you can click on the Ticker column header to sort.  Or if you think the news might provide a trading opportunity you can sort the Leverage Factor or Equity Weight columns to see which funds should experience the most impact.

So tell your colleagues that have yet to use ETFs that ETF Global is relevant to them too, especially with earnings season upon us.  Not only do equity managers use our Grey Market work but our Quant model provides region and sector ideas for their portfolio selections.  ETF investors have done well buying the top ranked funds and equity managers have done well by looking for names within them.  Whatever your focus, ETFG^sm gives you the information you need so you can smile and grin at the change all around.  We are available to walk you through it all, just send us an email to support@etfg.com or call our New York City office at 212-223-ETFG. Thank you for helping us grow and congratulations to Rick Pitino and the Louisville Cardinals. 

When our models began to favor the broad US market last December it was signaled by the SPDR S&P 500 Fund (SPY) and iShares Russell 2000 Growth Fund (IWO) bouncing in and out of the top 10 ranks as the market bounced along the edge of the fiscal cliff.  January saw the small caps take the lead in the rankings and the market but February saw a shift to large cap where SPY spent most of the month at 1^st place and got all ten Green Diamonds on 4 days. Small caps continued in the top ranks and scored even better as they began to falter late in the month.  By March, the mid caps joined the party with the SPDR S&P MidCap 400 Fund (MDY) getting to 9^th place on March 6^th with a few more top 10 days later in the month.  Here on April 8^th Quant continues to favor the broad US market with SPY, IWO and MDY ranking in 1^st, 3^rd and 5^th place.

Since all three have been leading the world this year it is not surprising to see solid Behavioral Scores around 70 for each.  That score comes from equally weighting the technical and sentiment scores which in the case of IWO is somewhat lopsided with an 81.7 sentiment score representing bears smelling blood as the technical score has deteriorated down to a still OK 59.7.  SPY’s 65.7 sentiment score has also deteriorated over the past couple of weeks which could signal a market becoming overly complacent.  There is reason for complacency perhaps as all three get solid Fundamental Scores led by SPY’s 83.5 while IWO’s 72.3 and MDY’s 70.2 do not suggest valuations are getting stretched yet.  The last 2 have identical 4.67 Red Diamond Risk Ratings, just a teeny bit above today’s all equity ETF average of 4.64.  While that has brought the top 10 average Risk Rating above 4, the top 25 and top 100 still average below that mark. 

With so much political and economic trouble around the world, the US has been an island in the storm.  We like to remind you that the ETFG^sm models do not make directional calls but predict relative outperformance.  So if those troubled waters do reach our shores, the broad US market should withstand it better than other areas of the globe.  A quick check of the Quant page each day will give you suggestions of where to allocate your equity allocation; it has had an uncanny ability to consistently identify the best performing equity ETFs for the intermediate term.

Regular readers know our fondness for the smart beta category.  When you have quantitative algorithms that work as well as ours, you believe in the methodology.  PowerShares is the leader in this space between active and passive management and their Dynamic OTC Portfolio (PWO) is today’s 10 Green Diamond Fund.  If you bought it when it earned that distinction in January you are happy now.  The nature of smart beta however is that fund from January is not the same as the one today.

PWO tracks the Dynamic OTC Intellidex Index which makes quarterly selections from the NASDAQ Market that it views as having superior risk-return profiles, February’s reconstitution will remain in place until May.  Infotech makes up slightly more than half of AUM down a bit from 54% when it got 10 Green Diamonds in January.  Consumer discretionary and health care round out three quarters of AUM but are all lower weights than the NASDAQ Index.  The selection process has produced about double the benchmark’s performance this year, a record becoming commonplace with these Intellidex funds.  This portfolio earned 10 Green Diamonds as recently as March 15^th which happened to be the selection day for ETF Global’s own smart beta indices when PWO joined the ETFG^sm Quant Equity 10 Index (ETFGQE10).  Thin trading disqualifies it from our Golden Dozen (ETFGQE12) but its tear sheet shows all 100 constituents with recognizable names and plenty of liquidity.  If you are considering a sizable block, your PowerShares representative should be able to facilitate it smoothly.

If you have yet to consider a smart beta fund, you ought to take a look.  In the age of Big Data, quantitative analysis has become an important driver of market returns and PowerShares has an impressive lineup.  The ETF Global^sm quantitative models incorporate modern behavioral finance based on voluminous empirical data with traditional Graham-Dodd fundamental analysis.  We may not call them all as our models have yet to favor Japan and financials but since inception last summer, ETFG^sm has consistently identified the leading areas which thus far in 2013 has been the broad US market with few exceptions.  Slightly different from the Diamonds, Quant’s top rank today is held again by SPY.  That will bring our performance versus the S&P 500 down when we publish our monthly report next week but we are happy to be steering you to the best parts of the diverse world of ETFs.  Thank you for reading and have a nice weekend. 

One of the objectives with Daily Perspectives is to give you actionable ideas.  Those primarily come from the predictive ETFG^sm Quant and Green Diamond Reward models which have correctly identified the leading sectors and regions of the market since our inception last summer.  Those models are limited to equity ETFs but our reflective Red Diamond Risk Ratings apply to all exchange traded products.  The ETFG^sm Scanner is a powerful tool to search by more factors than you will find anywhere else and our indices provide a quick glance at various asset classes, regions and sectors.

ETFs represent the only security type that crosses all those different categories and ETF Global is the only place you can see indices representing them all.  Begin on the homepage with our benchmark ETFG Global 500 Index published under the ticker ETFG500.  It covers the 500 largest exchange traded products by market cap, excluding leveraged and inverse.  It is the world’s only benchmark that crosses all categories so manager’s using ETFs to also cover them all should be happy to be outperforming its’ 5.14% gain this year.  If you manage only equities but cover the globe, don’t feel bad if you are lagging the S&P500 but fell good if you are outperforming the 4.79% ytd gain in the ETFG Global Equity Index.  Clicking the Geographic tab will show indices covering the various regions with their daily and ytd performance and the Sectors tab has even more.  Clicking on any index will bring up its constituents and clicking on any of them will bring up their tear sheet.  Value investors can look for actionable ideas among the laggards while momentum managers will want to click on the green ones to see what’s hot.  The first 3 tabs cover simple market performance indices while the Dynamic tab shows our published smart beta indices based on monthly selections from the ETFG^sm Quant model. 

Quant continues to favor broad US market funds despite today’s 1^st place rank being held by Switzerland’s EWL.  The low risk theme has become even more pronounced with the average Red Diamond Risk Rating of the top 10 falling to a very low 3.44 and even the top 100 falling down to 3.78; today’s all equity fund average is 4.6.  If you have questions regarding any ETFG^sm tools, or ideas on things you want to see, please email us at support@etfg.com .  We appreciate the feedback and thank you for being part of ETF Global^sm. 

Everyone likes to think about the reward an investment may bring but subconsciously or not we also consider the risk of adverse results.   Only ETFG^sm breaks out its ratings in that way and our Green Diamond Reward Ratings have done an excellent job keeping our clients in the sweet spots of the market.  Our Red Diamond Risk Ratings are not predictive of future performance but reflective of a given product’s trading history and composition.  However, as a group they can convey other interesting information.

When we sorted the daily scanner output by highest Quant Score this morning we noticed a lot of low Risk Ratings up top. Low risk is good but when the funds predicted to outperform are lower risk, it could signal a market top. Today’s average for the top 10 is only 3.5, about as low as we have ever seen.  Comparing the ones below that average, we see Malaysia’s EWM (see yesterday) with only 1.93 today and Switzerland’s EWL with only 2.56.  We wrote about EWL on January 22^nd saying it has outperformed whenever ranking as high as the teens and that record remains intact.   The other funds on that Compare screen, IVW IWV and IWB, track the S&P 500 Growth Index and the Russell 3000 and 1000, the kind of US broad market funds that have been scoring and performing so well all year.  Clicking the Quant Report button shows the group sharing strong technical scores in the 70s with lower sentiment scores in the 60s which could be a cautionary signal of an overly complacent market.  However the also strong Fundamental Scores say valuations are not yet stretched.

So as the US market has enjoyed a world leading 10% quarter, it has been driven by the lower risk segments of the market, pretty sweet.  Looking at the full Red Diamond Risk Ratings for the various high rankers shows a variety of reasons for their low overall Risk Ratings but consistently low Country Risk.  If you think we have further to run you can see some with higher volatility and deviation scores, or choose one with lower scores in those categories if you interpret the low average among the top ranks as a red flag.  The beauty of quantitative analysis is not that it tells you what to do, it gives you tools and information to make better decisions for yourself.  Thank you for deciding to use ETF Global’s market leading tools.

Another alternative to the broad US market has emerged into today’s top 10 ranks.  The 10th place iShares MSCI Malaysia Index Fund (EWM) has been lagging the world leading S&P 500 year to date but our models see opportunity in the rapidly developing country with one of Asia’s best economic records.  The world’s tallest twin towers in Kuala Lumpur symbolize that economic strength and are named for the state oil company Petronas which sees a few of its subsidiaries among the fund’s 43 constituents.

Those 43 names seek to replicate the performance of the MSCI Malaysia Index and are not beholden to the materials sectors that have historically driven the economy.  The financial sector carries the highest weight at 41.2% of AUM followed by consumer staples and discretionaries at about 10% each, all thriving on the country’s growing middle class.  Seeing a developing Asian market in the top 10 ranks does not mean our models are seeking out higher risk as this one carries a very low 1.75 Red Diamond Risk Rating.  Putting that alongside its very high 9.32 Green Diamond Reward Rating shows a spread about as wide as you will see in our models.  That high Reward Rating is driven by a very healthy 74.9 Behavioral Score deriving from a middling technical score of 63.7 combined with a strong 86.1 sentiment score as bears have positioned themselves for further lagging performance.  It’s 66.2 Fundamental Score is nothing to get excited about but with earnings season approaching that could rise as the Asian economies are stronger than most of the world.

Yesterday we wrote that we have yet to see a shift in the models’ fondness for the broad US market and indeed today’s top 2 ranks are held by SPY and MDY, the SPDR S&P 500 and Midcap 400 funds.  But below that we are seeing sectors and regions appearing on our radar.  A hint to a possible trend is the iShares MSCI Emerging Index Fund (EEM) climbing up to 14^th place this morning.  Like EWM, that had been as low as the triple digits a couple of weeks ago but our users will remember doing very well with it when it ranked among the elite last fall.  Only time will tell if a similar shift away from the US is underway but ETF Global will keep you posted.

As the US military makes a show of force on the Korean peninsula, the iShares MSCI South Korea Index Fund (EWY) made a show of force of its own climbing into Quant’s top 10 for the first time this year.  Like a stealth bomber dropping its payload before anyone notices it, this one has been a bomb before it appeared on our radar.  It ranked as low as 344^th early last month and 135^th the week before last when it seems to have put in a bottom after falling 12% this year.  It gained altitude last week climbing the double digit ranks into this morning’s 8^th place.

You don’t have to be the only fat guy in an entire country to know how to read a chart as even amateur technicians can see that EWYs correction has brought it down to its magnetic 200 day moving average.  Getting your ruler out will show it also sitting on an uptrend line from the major 2009 bottom.  That has helped its technical score recover from 45.1 at the bottom to 55.6 today.  Heightened political tensions have pushed the sentiment score up to a high 91.1 which is most responsible for the fund’s good showing lately.  Fundamentally it is OK but not great scoring in the mid 60s.  Our behavioral and fundamental measures comprise EWY’s Green Diamond Reward Rating which has crossed above 9 today.  Quant also likes South Korea giving it an 80.6 country score and iShares can’t do much better than its 98.4 firm score.  Those two measures factor into the fund’s 4.87 Red Diamond Risk Rating which regular readers will notice is higher than average for top rankers lately.

You don’t have to like the rapper Psy to like EWY but you do have to like Samsung which accounts for more than 22% of AUM.  Better earnings out of the gadget maker could boost those fundamentals and drive the fund higher on that uptrend line from 2009.  Even without that, the 73.4 Behavioral Score suggests this one’s going to do it “Gangnam Style” for a little while.  We don’t know what that means but after a 10% quarter we are glad to see our models suggest alternatives to the broad US market.  We are not seeing a shift yet as Canada is the only other country represented in the top 10 but our eyes are on our radar screens.  Thank you for keeping your eyes on ETFG^sm, have a good week.