Friday, May 31, 2013

Anyone want to get back on that gold bandwagon?  As fear is gripping world markets, those gold mining sisters are getting sweet kisses, each jumping more than 5% yesterday with a long way to still recover their recent declines.   Their return to Quant’s top 10 is indicative of subtle changes in the rankings recently.  We covered the countries in Quant’s top 100 Wednesday and today we will cover the 35 sector funds among that group.

Energy is no longer the clear favorite but still has XOP and IEO in 2nd and 6th place with 5 other funds bringing the sector’s average Quant score within the top 100 to 67.39.  Technology has 8 funds in the top 100 led by IYW and VGT tied for 7th place.  The sector has 1 more fund and a higher average Green Diamond Reward rating but lower average Quant Score of 66.6.  When we did a similar sector look on April 26th we saw 9 basic materials funds but only 5 today.  However the aforementioned mining sisters, GDX and GDXJ have moved up to 3rd and 4th place closely followed by industrial metal fund XME in 5th place.  Two other mining funds give the sector the best average rank of 24, best average Quant Score of 69.2 and best average Reward Rating of 8.83, among the top 100.  So it looks like the mining sub sector of basic materials is Quant’s favorite today.

There are 5 industrial funds on our list but only PRN makes the top 25 at 18th place.  The consumer staples sector has 3 funds led by VDC also making the top 25 at 23rd place which is slightly better than health care with 3 funds but the highest ranking is IHI at 44th.  Telecomm only has 1 fund in the top 100 but IYZ is in 10th place scoring 69.2.  Offering something for everyone today, the remaining three sectors are also represented with XLF as the best financial fund in 59th place and utilities at 95th with VPU.  Consumer staples also has 1 fund but it is Chinese based CHIQ ranked 87th today.

Quant’s top 100 ranked funds have an excellent record of outperforming the S&P 500 and all ten sectors represented in that group today signals a transitioning market; precious metals funds scoring so well suggests fear is playing a role in the transition.  The economy can probably handle long term rates above 2% but can all the leveraged bond managers? Maybe it’s Japan’s inability to bring rates down despite massive liquidity or maybe it’s the Mets sweeping the Yankees – something feels amiss.  Fortunately Quant doesn’t have feelings, just proven objective analysis so check in each day to see what the ETFGsm models have to say.  Thanks for reading and stay cool this weekend.

Thursday, May 30, 2013

We have noticed gold back in the news reading about renewed central bank purchases at the same time as record COMEX short positions.  The popular SPDR Gold Shares Fund (GLD) has experienced huge outflows in our new low tail risk world and is down about as much as stocks are up this year.  Performing even worse is our old darling Market Vectors Gold Miners Fund (GDX) down almost 40% in 2013 and worse than that is her little sister Market Vectors Junior Gold Miners Fund (GDXJ).  Our predictive reward models do not evaluate commodity funds like GLD but Quant ranks the latter two at 4th and 7th place today.  GDX was the single worst call our models have made so we will forgive your skepticism but feel compelled to report the new rankings.

We say new rankings because GDX fell out of the top 100 in early April, only days after its last of many 10 Green Diamond days, and GDXJ has never seen the top 10 until today.  Both funds experienced high volume selloffs culminating on April 17th but traded lower until their most recent bottoms on May 17th.  Since that date however both are outperforming the stock market.  A week and a half does not make a trend but both funds enjoyed big jumps in their technical scores overnight from the single digits to above 47 for each. Sentiment has been bearish with the more liquid GDX scoring above 80 but little sister GDXJ is also elevated at 73.9.  If you sort our Quant page by Fundamental Scores you will see each of them in the top 10 scoring above 80.  GDX ranks higher and gets a better Green Diamond Reward Rating of 9.13 to GDXJ’s 8.73 and it also has lower risk at 5.4 compared to 6.57, each represents significantly higher risk than the average equity ETF as does GLD’s 5.51 Risk Rating.

With Japan’s Nikkei sustaining another multi handle move down overnight maybe the low tail risk premise is misplaced.  Often called a fear gauge, gold has been a good diversifier for those looking for non-correlated assets in our exuberant markets and we noticed something else.  Looking at a chart of 2008’s crash we see that gold broke down prior to equities in the spring and summer and held up better when the meteor hit in the fall.  If you have full faith in Bernanke and Kuroda disregard this as another of Quant’s rare errors but if risk is on your radar this may be an opportune time to put on one of the all time classic hedges.

Wednesday, May 29, 2013

We have been mentioning more foreign funds lately and we see 24 of them in Quant’s top 100 ranked funds today, up from 16 when we took a similar look on April 23rd and the highest we have seen this year.  That still leaves 79 US based funds (since there is a four way tie for 100th place) representing the model’s continued affection for the US market.  The international funds run the gamut of development class and risk level providing something for everyone looking for international exposure.

The broadest exposure of the bunch is found in the 46th place iShares MSCI EAFE Index Fund (EFA) with pie charts using all the colors of the rainbow but more than 40% of AUM split between Japan and Great Britain.  Sticking with the more developed regions we see Canada’s EWC and Australia’s EWA in 5th and 13th place and the mostly Canadian but higher risk gold miners in GDX at 74th place.  Developed Europe has the broad FEZ in 30th place behind Switzerland’s EWL and Spain’s EWP in 7th and 11th.  France, Germany and Sweden also appear with EWQ, EWG and EWD ranked 16th, 21st and 28th

Moving to Asia we see the broad EPP and AAXJ at 8th and 91st place and both are noticeable for excluding the Japanese market.  Japan does have the small cap SCJ quietly climbing the ranks up to 25th place today (Friday’s DFJ has fallen out of the top 100).  China gets two funds in the group with PGJ and FXI in 37th and 51st place.  IShares also sees their 4 funds tracking Malaysia (EWM), Indonesia (EIDO) South Korea (EWY) and Taiwan (EWT) spelling MIST a different way with all four in the bottom half of the top 100.  That brings us to the 5 emerging markets funds which is reminiscent of last fall.  20th place EEM was a great performer then and is joined in the top 100 today by GMF at 23rd, VWO at 74th, ADRE at 85th and GMM in 89th place.

All of those get 7 Green Diamonds or better and range in Risk Ratings between Switzerland’s EWL on the low risk side with 2.1, akin to a short term bond fund, up to GMM’s high Risk Rating of 6.21 which is typical of the more esoteric equity ETFs.  Quant’s top 100 ranked funds have an excellent record of outperformance so click on any of their tickers to see their tear sheets and full ratings and constituent information.  If you haven’t signed up for ETF Globalsm yet, click the link in the welcome message on the home screen for a free trial and please send any questions to us at  Thanks for reading and have a good day.

Tuesday, May 28, 2013

Energy prices are in a multiyear downtrend yet 4 energy ETFs are among today’s top 10, keeping it as Quant’s favorite sector.  The front page of today’s Wall Street Journal provides a hint why with its story about US energy production causing rifts in the OPEC cartel.   The Vanguard Energy Sector Fund (VDE) and the SPDR Energy Select Sector Fund (XLE) in 7th and 8th place have similar constituents dominated by the integrated oil and gas producers and more than a third of AUM held in the oil and gas exploration and production sector that makes up the 1st place SPDR S&P Oil & Gas Exploration & Production Fund (XOP) and 6th place iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO).  All are benefiting from the renaissance in US energy production.

The story says US fracking is a profitable way to extract oil as long as prices remain above $70 per barrel which is far below current prices.  All 4 funds have solid charts this year and technical scores around 70 but wider spreads on their sentiment scores.  The SPDR products have higher put/call and short interest scores while the two E&P funds have higher volatility scores which leads to XOP’s 1st place rank.  Fundamentally the spreads are closer where VDE gets the highest score at 65.3 which is not too far above XLE’s low at 58.2.  The most noticeable differentiator is the weightings of each funds’ constituents.  The broader XLE and VDE see the same top 5 holdings accounting for almost half of AUM.  On the E&P side, we also see similar constituents but IEO’s top 5 account for about 40% of AUM while XOP’s equally weighted strategy sees its top 5 holdings accounting for less than 9%.

Maybe it’s the Memorial Day blizzard in the northeast or the race fans wearing jackets at this year’s Indy 500.  We often see energy stocks do well on cold winter days and will see how they do on cold summer days.  Whatever the reason, energy funds have done well this year despite the downtrend in their commodity prices.  With all four funds getting 8 Green Reward Diamonds, the ETFGsm models say that solid performance is going to continue.  If risk is on your mind you might want to stick with XLE and its 3.71 Red Diamond Risk Rating, low among the group that sees higher than average risk generally.  We are pleased to see the sheiks and tyrants of OPEC cope with a diminished role over our economy and we are also pleased to congratulate Tony Kanaan on winning the Indy 500.

Friday, May 24, 2013

Meeting you in the mornings here throughout 2013 we have been reporting Quant’s consistent focus on US broad market funds which have spent the year knockin' on heaven's door.  Our words may have sounded like an idiot wind at times because the ETFGsm models did not recognize the huge run in the Japanese market which scored well fundamentally but not technically.  Those fundamentals have come down, and not only because the prices were going up, even though the strong charts have not boosted the technical scores as much as you might expect.  The short term charts look good but long term charts still reflect the rollin and tumblin Nikkei index over the prior two decades.  Today we have a Japanese fund finally making the top 10 as the WisdomTree Japan SmallCap Fund (DFJ) jumped 52 positions overnight into 7th place this morning.

If 7th place looks lucky, its alright 66.6 Fundamental Score may raise fears that this is a Jokerman.  That high rank is most attributable to a rising sentiment score driven by its put/call score almost doubling which could just as easily fall by half.  Its 91.4 volatility score is more encouraging as our institutional clients have found that metric to be an excellent secondary screen in their models.  The technical scores, which are driven by relative strength and moving averages, have been rising through the year from the 20s to the high 60s early this month but came down to the low 50s before yesterday’s hurricane on the Nikkei.  That decline actually helped DFJ’s technical score as the fund is now less overbought.  The verdict on Abenomics is still out but as the Japanese market sheds tears of rage, DFJ’s 8.48 Reward Rating suggests its nimble small caps may grow like they are forever young.

Looking across the desolation row of world markets yesterday, Quant has once again proven to be a handy dandy with its US focus. Aside from the addition of DFJ, the ranks look similar today with a few foreign and sector funds among those exposed to the US broad market.  When it looks like everything is broken, don’t let the markets make you a po’ boy and get you tangled up in blue.   With ETF Global identifying the best opportunities blowing in the wind, your ship has come in and ye shall be changed.  You gotta serve somebody and in the summertime and all the time we will paint our masterpiece for you.  While remembering the reason for Monday’s holiday, we wish you all a happy summer and we wish a happy birthday to Bob Dylan.

Thursday, May 23, 2013

We have felt almost silly writing about low risk funds leading the ranks recently.  With central banks around the globe printing at an unprecedented rate, economists say we are in a low tail risk environment, so risk on!  Quant has disagreed by mostly favoring the US broad market funds that have lower Red Diamond Risk Ratings and have performed so well in 2013.  The various energy funds that have also scored well are the exception but the models have not favored the Japanese funds that have led world markets this year, until today.

It is looking like a red day on those world markets that reminds us to take a look at the risk levels in our portfolios.  ETF Globalsm assigns Red Diamond Risk Ratings to all 1,473 exchange traded products and we break them out beyond the overall ratings seen on a product’s tear sheet.  Under the Analytics button, the ETFGsm Red Diamond Risk Ratings page lists all those products and their risk broken out into 6 categories.  The three categories dealing with price risk are volatility, deviation and country risk where each score represents a quantitative measurement of various industry metrics.  Higher scores mean higher risk and all products are cross ranked against the population to get their score.  It is the same process with integrity risk that assesses the structure, liquidity and efficiency of a given product.  Concentrated funds using swaps with wide bid ask spreads and high expense ratios will raise the score in all three categories which measure other factors as well.  The weighting of each category is shown at the bottom of the page and each product’s overall Risk Rating is calculated in the same cross ranked method.

The ETFGsm Red Diamond Risk Ratings are reflective of those attributes and not predictive of future performance.  That is why Japanese funds have seen lower risk ratings even though that market is looking at a 7% decline today.  Our Green Diamond Reward Ratings have not been favoring those funds and we are feeling better about that today.  Time will tell if our market has risen on an improving economy or because of unprecedented Fed liquidity.  The mere hint that the Fed’s fat lady is warming up her vocal chords is sending some dancers back to their chairs.  You can decide for yourself on the appropriate level of risk for your portfolios, ETF Globalsm is here to help you select those exchange traded products that fit your needs.  Please send any questions to

Wednesday, May 22, 2013

Don’t bother crossing the world’s largest land border into the second largest country if you have any conviction worse than a speeding ticket in the last 5 years, Canada’s strict character criteria in its immigration policies will prevent your entry.   The country’s culture has helped sustain a strong economy and earned a higher ETFGsm country score than the US which has helped the iShares MSCI Canada Index Fund (EWC) get up to 1st place in today’s Quant ranking.   We have mentioned the fund to varying degrees over recent months and highlighted it on March 20th when it jumped up to 3rd place.

That was an early call for those looking for a long term position in a country with a solid currency.  We say early because it subsequently corrected by 7% but as we said on May 16th, a rebound is boosting its Behavioral Score, up to 72.9 today and almost perfectly balanced with its 72.8 Fundamental Score.  It’s Quality and country scores are higher but its sectors counter that strength giving EWC a Total Score right at those other numbers, 72.9, which has been trending upwards in a way that has become more rare lately.  The weaker sector score reflects more than 36% of AUM in financials, with energy, materials and industrials accounting for another half.  IShares uses a “portfolio sampling” technique to track the MSCI Canada Index which has selected 95 constituents with the top 5 accounting for more than 25% and the top 10 more than 41% of AUM.

Keeping felons and US economists out of the country has helped Canada recover from the brutal 2008 recession better than other G8 countries thanks to heavy bank regulation, a pre-crisis budget surplus and increasing energy exports to Asia.  That explains it’s lower than average 3.43 Red Diamond Risk Rating which has trended higher over the year as the fund’s performance has lagged.  That said, its 9.28 Green Diamond Reward Rating predicts that lagging performance has run its course and EWC is ready to lead.   If you like the US because it is the cleanest dirty shirt, take a look at Canada whose shirt is even cleaner.

Tuesday, May 21, 2013

Yesterday’s quiet market triggered some movement in our rankings with 4 new names in the top 10.  New may not be the best term though as they are familiar funds and the overall message of the models continues to favor US broad market products with energy still the favorite sector and a couple of European funds also among the elite ranks.  The less familiar of those 4 is the iShares Russell Midcap Index Fund (IWR) jumping 48 positions into 9th place.  We don’t write about it much but we did cover it on January 28th when it had a similar move.

Back then as now the move was attributable to option activity boosting the sentiment score which is a solid 74.9 today and matched by an even better 75.1 technical score, both higher than January’s levels.  It was a one day trip to the top 10 then but the fund continued to rank well and perform well until early April when it dropped out of the top 100 until a couple of weeks ago.  Outperforming the market year to date has brought its Fundamental Score down to a middling 57.6 which is becoming more common as the market has risen faster than earnings.  A strengthening dollar favors America’s mid caps with less overseas exposure than the large multinationals which could account for those pretty technicals.  We are seeing other small and mid cap funds also scoring better though none as well as IWR with its 8.16 Green Diamond Reward Rating and a Red Diamond Risk Rating of 4.38 which is slightly less than the all equity average.  We don’t write about one day movers too much but this one performed so well last time and is confirmed by similar funds also moving up in the rankings.

The other funds joining today’s top 10 are France’s EWQ at 6th place, its highest rank this year, the very familiar SPY back at 10th and its growth cousin IVW in 5th place.  All of them do better on the Behavioral Scores than the Fundamentals.

Seeing the devastation in Oklahoma, you don’t need to be a parent to be heartsick over the loss.  On this 132nd birthday of the American Red Cross, our thoughts and prayers are with the people of Moore in hopes that the survivors will be OK.

Monday, May 20, 2013

There has been remarkable stability in the rankings over the last week with the mentioned energy and foreign funds still occupying similar positions and the PowerShares Dynamic OTC Portfolio Fund (PWO) still leading both Quant and the Green Diamond Reward models.  Scoring better for the last few weeks and making the top 10 for most of the past week is today’s 9th place iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) with 8.6 Green Reward Diamonds and a lower than average 4 Red Risk Diamonds.

SOXX has usually scored and ranked well but the only time it was in the top 10 as consistently as the past week was back in December when it went on to outperform a strong US market in subsequent months.  Falling out of the top 100 on February 6th signaled a period of underperformance that ensued until mid April.  Its 3rd place rank driven by a high sentiment score on April 2nd was an early signal that it was ready to rally again and those sentiment readings are most responsible for its top 10 position for 4 of the last 5 days.  Sentiment scores are the more volatile of the ETFGsm models and SOXX has varied option activity making its scores more volatile than many.  A one day zero put/call score pushed it out of the top 100 on May 8th which is a reason to look at this one over a period of days and the last week has seen those puts elevated the whole time.

It is ranking better now than it was during that stretch in December but on lower Total Quant Scores.  Back then SOXX had a Fundamental Score above 80 which after rallying more than 20% has come down to 62.8.  Its Behavioral Score is better now with technical above 70 and sentiment above 80 all distilling to a Total Score of 68.9.   Only 5 funds have Total Quant Scores above 70 today compared to 20 or more typically scoring above that level in December.   SOXX looks like its recent outperformance will continue but at 1,000 points above the S&P 500’s 2009 low, we probably shouldn’t expect another 20% before year end.  If you would like some historical perspective on a fund you follow, please ask us at  Thanks for reading and good luck this week.

Friday, May 17, 2013

With energy and foreign funds scoring better, you might think the ETFGsm models are selecting higher risk funds to outperform over coming months but the opposite is the case.   7 of Quant’s top 10 fit those categories  but the average Red Diamond Risk Rating of the 10 is a low 3.79 compared to today’s all equity ETF average of 4.49.  Part of the reason is the relative risk of the equity ETF category has come down recently in our all product reflective risk model but the predictive reward models are also choosing the lower risk among them.

The 3 energy funds we wrote about on Monday are the exceptions along with the iShares MSCI Spain Index Fund (EWP) in 7th place with 4.89 Red Diamonds.  All 4 have higher than average Risk Ratings and have lagged the S&P 500 most of the year so that risk may have already been realized.  Their relative outperformance over the last month however has put them in the elite group.  The other 3 foreign funds that we wrote about yesterday, EWL, EWC, and EWA in 3rd, 5th and 8th place all bring that average Risk Rating down and have yet to show the outperformance that their high ranks predict.

Our Risk Ratings are not predictive but we like to highlight those times when the average of the top ranked funds comes down like it has today.  We see it as a cautionary signal but the elimination of risk in 2013’s straight up market has rendered risk analysis meaningless, for now anyway.  For those who still believe in risk management, The ETFGsm models suggest now is one of those times to pay close attention.  For the rest who have been correct to eschew risk this year, in Bernanke we trust.  Spring has finally sprung on Wall Street so we’ll keep it brief today, enjoy the weather and have a nice weekend.

Thursday, May 16, 2013

On May 8th we wrote about Quant’s eye wandering overseas as a potential shift away from the US broad market funds that have dominated the ranks all year.  4 foreign funds made the top 10 that morning and 2 others were close; today we see 3 in the top 10 and another in 11th place.  Only some of them are the same.

Today’s 5th place iShares MSCI Switzerland Index Fund (EWL) has been one of the better ranking foreign funds this year with a few visits to the top 10 since gaining 8th place on February 8th and has mostly kept pace with the US market since then.  It has been ranking better since early April on high 70s Fundamental Scores with low 60s on the Behavioral side which we like to say are better scores than if they appeared on your kids’ report card.

The iShares MSCI Australia Index Fund (EWA) has also been one of the better ranking foreign funds this year getting as high as today’s 6th place a few times since we wrote about it on February 15th.  It also mostly kept pace with the US since then until we wrote about it again on April 15th highlighting the times it ranked well which provides a primer on how Quant reacts to price wiggles.  There was a good trade since that April 15th post but it dropped as low as 58th place on April 22nd and the price peaked on April 30th.  Today’s 82.7 sentiment score suggests it could be ready to wiggle back up.

Ranking above both of those is today’s 4th place iShares MSCI Canada Index Fund (EWC).  It ranked well in our early days last summer but had not seen much to get excited about this year until mid March and then became more durable in the upper ranks in early April.  We highlighted its 3rd place driven by a high 81.5 Fundamental Score on March 20th just before it took a 7% correction.  The market knew something because that Fundamental Score has deteriorated down to a still good 73.4 today even though the price is slightly lower.  Rebounding from its correction has boosted its technical score and helped EWC maintain a mid 60s Behavioral Score.

Almost making the top 10 today is Spain’s EWP in 11th place and trending better but its 5.1 Risk Rating differentiates it from the other three.  Those all share low Risk Ratings below 4 which has brought the average of the top 10 below 4 again.  The models still favor the US but there are a few ideas from a few continents for your international allocation.

Wednesday, May 15, 2013

Quant’s favorite fund of 2013 has been the SPDR S&P 500 Fund (SPY) but the Green Diamond Reward model has favored the PowerShares Dynamic OTC Portfolio Fund (PWO) more than any other this year.  It gets today’s 10 Green Diamond distinction for the 34th time since January 4th and the 25th time since April 3rd, all but 7 days since then.  Numbers like that command attention and PWO has gotten quite a bit in this space this year.

After a couple of mentions in January we highlighted it with some related smart beta funds on February 1st when we noticed it was a rare OTC fund that did not own Apple.  That was a signal that their model works but the chart speaks loudly enough.  Not many funds are ahead of the S&P 500’s almost 16% year to date run but PWO beats it by more than 5%.  Steering clear of Apple early this year helped but the portfolio changes quarterly and has been nimble in its selections that cross various market capitalizations and styles while underweighting tech versus the NASDAQ 100, albeit still at half of AUM.  May 1st was one of those few recent days when it did not earn all 10 Green Diamonds and we mentioned a deteriorating short term technical score as a red flag, nevermind, the green flag is back out with a high 77.9 short term score today.  It got back to 10 Green Diamonds on May 3rd and has held them since then.

ETFGsm ratings and scores change daily and PWO’s 4.63 Red Diamond Risk Rating has been more volatile than most.  Some of Quant’s qualitative measures contribute to the Risk Ratings which get broken out on their page under the Analytics button.  We mentioned PWO’s high liquidity risk on May 5th when the fund’s overall Risk Rating was below 4 but it is now above today’s all equity fund average of 4.62, still nothing to lose sleep over.  Our Risk Ratings are not predictive but reflective and when a fund performs so well its trading bands widen which elevate the volatility and deviation risk scores.

Regular readers know our fondness for smart beta funds and PowerShares has a few that confirm the merits of the quantitative method.  It is not just about big data and fast processors but algorithms that recognize the conditions prevalent in selections that outperform.  We are happy to write so often about PWO which has consistently confirmed the merits of the ETFGsm quantitative models by performing so well for our clients.

Tuesday, May 14, 2013

The first thing you see at is our family of indices led by the benchmark ETFG Global 500 Index covering all asset classes and regions.  Increasing numbers of asset managers are taking advantage of that unique attribute of ETFs enabling them to give their clients exposure to any asset classes, anywhere, with the liquidity of equities.  Until recently, those managers had no choice but to benchmark against indices not relevant to their portfolios or construct composite indices that simply mirrored them.  The ETFG 500 provides the solution reflecting the capitalization weighted performance of the 500 largest ETFs excluding leveraged and inverse products, reconstituted annually and rebalanced quarterly.  As of last night’s close it is up 8.57% year to date.  Below it on the home page you will see the global ETF market sliced into the various ETFGsm asset class indices.

Leading that group this year is the Real Estate Index followed by Equities with the Commodities and  Multi Asset Indices lagging the rest.  Clicking the Geographic tab reveals 7 indices slicing the globe in the way our institutional clients asked for when we devised them in 2011 and the Sector tab reveals the global equity ETF market sliced into the ten common industry sectors.

ETF Globalsm is the only provider of benchmarks as broad and relevant to the world of ETFs but our clients asked for more and we love it when they do.  The Dynamic tab displays our two smart beta indices driven by our Quant model.  The daily selections of the model are too much for most managers so we reconstruct the constituents monthly on a rules based basis.  The ETFG Quant Equity 10 Index equal weights the 10 highest ranked funds on selection day and the Golden Dozen takes the top 12 that meet minimum liquidity requirements common to many institutional managers.  Their year to date performance may not look too special as central banks around the world have inflated the S&P 500 in 2013 but since inception last July both Dynamic indices are ahead of the S&P and the MSCI All Country World Index.

We also devise custom indices for clients and have others in development.  If you want to benchmark against any of them please let us know at or call our office at 212-223-ETFG (3834).  We offer data on the ETFG Global 500 for free and the two Dynamic indices are priced based on AUM.  Those three are published out of Stuttgart and available widely so if your quote provider doesn’t display them please ask them to.  And please ask us any questions at that email above.

Monday, May 13, 2013

We begin the week with an eclectic mix in Quant’s top 10 ranked funds.  US broad market funds are joined by high and low risk foreign funds as well as three energy funds.  You can see all the equity ETFs ranked each day on the ETFGsm Quant page but today we will look at the three energy funds.  Readers are familiar with today’s 5th place SPDR S&P Oil & Gas Exploration & Production Fund (XOP) as it has spent most of 2013 in the top 10 even as it recovers from a 10% correction last month.  Not as familiar to this space is the iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO) which has spent most of the year in the top 100 with a handful of days in the top 10 where it has not matched today’s 3rd place since January 30th. Rounding out the group is the SPDR Energy Select Sector Fund (XLE) in 9th place today near where it has spent much of 2013.

Comparing all three in the ETFGsm Scanner, we see they all trade at discounts to the market which makes sense considering they have lagged the market this year.  Clicking the Quant Report button shows that has not helped their Fundamental Scores too much because they usually trade at discounts.  All three also have middling low 60s technical scores reflective of that performance.  They get into the top 10 today on higher sentiment scores as the market expects them to continue to lag.  Those bears are feeling some hurt over the last month with all three ahead of the market since their mid April corrections.  If you think those corrections are over, you might prefer the more narrow E&P funds with higher risk ratings driven by high volatility and deviation scores.  If you are looking to reduce risk but still have exposure to Quant’s favorite sector today then the broader XLE is a better choice with its lower overall 3.78 Red Diamond Risk Rating.

If energy does not fit your allocation needs, the Quant page will provide many other ideas in sectors and regions across a wide range of Risk Ratings, or you can sort the Scanner output by high Reward Ratings. Like it has all year, the overriding message of both models continues to favor US broad market funds; we have been waiting for a shift but cannot call it yet.  If you have any questions about anything you see at ETF Globalsm, please let us know at, we are here to help.

Friday, May 10, 2013

As the ETFGsm Risk and Reward Ratings become more popular with the advisory community, our Quant model has been gaining popularity among institutional asset managers.  Integrating modern academic research in behavioral finance with traditional fundamental analysis, the quantitative approach takes advantage of today’s big data to identify those areas of the global equity ETF markets that are most likely to outperform the rest.  Our clients do not need to be told how well the model has worked but we feel our performance disclosures set us apart from competitors and further our acceptance in the marketplace.  Yesterday we covered the Green Diamond Reward Ratings so today we will cover Quant (the Red Diamond Risk Ratings are not predictive).

The timeframes are the same, July 2, 2012 through April 1, 2013, the last selection day for which we have 1 month performance as of April 30, 2013, but the groupings are different.  You can find the May performance report under the ETFGsm Quant button where we look at the rolling average returns for the top 10, 25, 50 and 100 ranked funds each day over 1, 2, and 3 months.  Readers know the model has been favoring US broad market funds since late last year which accounts for almost half of our total timeframe.  That makes our outperformance versus the S&P 500 all the more remarkable even as none of our competitors choose to remark on their performance.  The four groupings over the three timeframes produce 1,980 data sets of which the ETFGsm selection group outperformed the S&P 500 1,189 times or slightly more than 60% of the time.   That’s not easy to do especially when the SPDR S&P 500 Fund (SPY) has been in the top 10 more than half of the days and other similar funds have ranked almost as well.

Until earlier this week, SPY had not been out of the top 10 since a couple of days in March.  Today’s 12th place is the third consecutive day out of that top grouping but still a very good rank and its iShares competitor, IVV, tracking the same index is in 6th place.  The iShares funds tracking the Russell 2000, IWO, and 3000, IWV hold 9th and 12th (tied) place showing Quant still likes the US broad market.  Some energy and tech funds rank better and international funds are beginning to score better recently although not yet to a great enough extent to call a turn.  We not only keep you posted on how well the models perform but also on their daily messages, so check in each day to see what ETF Globalsm has to say.  Thanks for reading and have a nice weekend.

Thursday, May 9, 2013

We can use this space to boast sometimes because we face the music monthly on the performance of our ratings.  The May files have been posted and today we’ll cover the ETFGsm Green Diamond Reward Ratings under the Analytics button.  We segregate the selections by number of Diamonds and the 10s are comprised of one equity ETF each day.  Beginning with our inception on July 2, 2012, there have been 186 trading days through April 1, 2013 which is the latest day for which we have one month performance as of April 30 (we use a 21 trading day month).

Typically, the 10s beat the 9s which beat the 8s ahead of the 7s but this month reflects the dramatic decline in the Market Vectors Gold Miners Fund (GDX) which was the 10 Green Diamond fund on 13 unlucky days in 2013 and has skewed the averages down.  We hope you all used stops on it but the numbers are the numbers.  The outperformance versus the S&P 500 has also closed from its huge gap at the beginning of the year as the SPDR S&P 500 Fund (SPY) has scored 9 Green Diamonds or better more than two thirds of the year and never below 8 in 2013.  Readers of this space are well aware of the many other US broad market funds across various market caps that have also populated the upper ranks and their charts look similar to the S&P 500’s beautiful run.  We miss the triple digit outperformance but are happy to be keeping you in the best areas of the global equity markets.

Even though we have chosen the highest benchmark, the selections grouped at the various Diamond levels each day have outperformed the S&P 500 over the stated timeframes more than 60% of the time.  Not many ratings providers can say that, especially this year.  Although that assumes there are any other ratings providers that report on the performance of their ratings.  ETF Globalsm is the only comprehensive information source for ETF investors providing predictive ratings that you can trust to perform.  Today’s 10 Green Diamond fund is the PowerShares Dynamic OTC Portfolio Fund (PWO) for the 19th day since April 3rd, which will help our numbers next month.  Thanks for trusting ETF Globalsm to support your ETF investment decisions, we’ll cover our Quant model tomorrow.

Wednesday, May 8, 2013

As we celebrate Dow 15,000 Quant is looking for the next party.  4 foreign funds are in today’s top 10 which is reminiscent of last fall when foreign markets were leading.  We have been sensing a shift for a couple of weeks but are hesitant to declare it yet as some US broad market funds still hold elite ranks such as today’s 1st place PowerShares Dynamic OTC Portfolio Fund (PWO) which has scored well all year with performance to justify.  It is also today’s 10 Green Diamond fund for the 14th time in the past month.

Those foreign names are led by the 2nd place iShares MSCI Malaysia Index Fund (EWM) at its best score and rank all year.  Markets have applauded the status quo elections there boosting the Behavioral Score which does better than the Fundamental but we are seeing a lot of that lately as world markets shrug off economic troubles and ride the wave of central bank liquidity.  Canada is the opposite however with a lagging chart restraining the Behavioral metrics on 6th place EWC but its Fundamental Score is a healthy 73, albeit down from the low 80s in recent weeks.  We wrote about France’s EWQ on Monday and it continues to score well in 7th place today driven by a high 90.2 sentiment score which suggest the technicals will also soon improve but we can only hope for its mediocre 63 Fundamental Score to see better days.  Economic optimism may be more reasonable in Australia where EWA is tied at 7th place with similar scores led by its 88.5 sentiment score but middle of the pack technicals at 51.3 and a little better Fundamental Score of 67.7.  Almost making the top 10 are Germany’s EWG and Switzerland’s EWL at 12th and 14th place with the former getting there on sentiment but the latter on fundamentals.

We have been getting tired of Quant’s US focus making it impossible for our top ranked funds to outperform the S&P 500 since December, so these international ideas are welcome.  Those US funds have been leading world markets all year so as long as our users are happy we are happy.  We will see how this international message develops over coming days so please check in each morning to stay abreast.  The ETFGsm models have consistently identified the best performing equity ETFs for the intermediate term and are saying it may be time to venture off the US island in the storm.

Tuesday, May 7, 2013

Be careful what you wish for because you might just get it.  Those who bought commodity funds last year looking for non correlation have gotten it with most of those products negative on the trailing twelve months that have seen equities race to new highs.  The products that are also at least two years old and have less than $5 million in AUM meet the three criteria for inclusion on the ETFGsm Liquidation Watch List.  May’s list has been posted under the Analytics button and make sure you can see all three pages.

The73 products represent a new high as the ETF industry consolidates and more funds fall below the $5 million AUM threshold that makes it difficult for a sponsor to meet the obligations of running a public fund.  26 of the 73 are commodity funds, mostly ETNs that present distinct risks involving how backwardation or contango affects tracking error versus their spot markets at the time of liquidation.  Not many long equity funds are down for the past year but some basic materials and emerging market sector funds are.  20 of the 28 equity funds on the list are inverse products and many are close to or even below $1 million in AUM which won’t provide much to the sponsors who typically charge less than 1% in expenses.  The 4 fixed income and 7 currency funds tend to have even lower expense ratios and the 8 multi asset products vary more widely.  Their small size and negative performance casts doubt on the longevity of these funds that have already had two years to prove themselves. 

Larger funds that do not meet all the criteria also close but these 73 have heightened risks of liquidation.  You will notice mostly esoteric products that have elevated risk ratings so if you dabble in those make sure they are not on the list.  The ETF industry has been masterful at bringing innovative products to market and there are plenty if vibrant ones to meet most objectives.  Check the ETFG Scanner to find what you are looking for but make sure any exchange traded products you hold are not on the ETFG Liquidation Watch List.

Monday, May 6, 2013

We begin the week with the SPDR S&P 500 Fund (SPY) in Quant’s 3rd place, familiar territory as it has been in the top three almost every day since early February.  Its Total Score peaked at 81.4 on February 27th, drifted as low as 70.8 in mid March when it fell out of the top 10 for a day and is at 72 today.  Although it is trending down, the fund continues at the top of our relative ranks as most high ranking funds also see down trending Quant Scores.  Two of Europe’s largest economies see their iShares funds, France’s EWQ and Germany’s EWG, in the top 10 at their highest ranks this year, despite scores that peaked in February.

Each saw higher Total Scores back then when a 70 was good enough for top 50 status but today EWQ’s 69.4 is good enough for 8th place and EWG’s 68.7 is good enough for 10th.  The funds had higher Fundamental Scores in February than now but their recent rallies may be signaling the bottom of their recessions that we speculated about on Thursday.  Both have slightly higher technical scores now but their sentiment scores are below the levels reached when the bears were having their way in February, although still elevated at almost 89 for each.  EWQ and EWG have traded in tandem all year and are matching their year to date peaks reached on February 1st so time will tell if Thursday was as pivotal as we speculated but we do seem to be at an important juncture for Europe’s equity markets.  Within the slightly better technical scores are deteriorating long term scores suggesting their charts need to break out of the downtrends since their 2007 tops. We are not likely to see better fundamental measures anytime soon unless the markets drop as much as their economies have.

Fundamentals are not looking good anywhere in the world so the US is still the cleanest shirt in the hamper.  Despite the economic turbulence, markets are rising on the tsunami of central bank liquidity with some of the world’s central banks even buying stocks (see April 26 post).  The ETF Global models have proven adept at predicting where that money will go and they still say the broad US market will gain most of it with Europe beginning to also rank better.  We will be following this developing trend and we thank you for following ETF Global, have a good week.

Friday, May 3, 2013

We have been fielding questions on how funds with such low liquidity like the PowerShares Dynamic OTC Portfolio Fund (PWO) can score so well in our models.  Indeed the fund is in Quant’s 10th position today and is once again the ETFGsm 10 Green Diamond fund.  Whereas Quant incorporates liquidity in its Quality Score the fund does better in the Green Diamond Reward model because liquidity is measured on the risk side.  Despite high Liquidity Risk scored at 7.1, PWO’s overall Red Diamond Risk Rating comes in low at 3.88 helped by low Country , Efficiency, Volatility and Structure Risk.

That high Liquidity Risk score is on a scale of 10 and translates into Quant’s very low 8.1 liquidity score on a scale of 100.  Numbers like that warrant attention so it is probably best to avoid market orders with PWO.  Those scores calculate measures relating to average bid ask spreads and trading volume and the former is on the high side while the latter is very low.  However liquidity is not weighted higher in our models because the unique attributes of ETFs make it less important than other security types.   Since the authorized participants are incentivized to provide any necessary liquidity, your concerns should be focused on the liquidity of the underlying which are comprised of 99 well traded US equities spanning sectors and market caps.  It is the attributes of those constituents that ultimately determine the fund’s overall risk and you can sleep well at night holding less than 4 Red Diamonds.

We mentioned PWO has been scoring well and you can read more about the fund on our posts from April 5th and 12th.  Not many funds have been consistently outperforming the S&P 500 this year but this smart beta fund has since it broke into Quant's top 10 in January.  If you are trading more than the quoted size use a limit order or call your PowerShares representative to move a block.  There’s no need to worry about the low volume and if you cannot get filled between the spread a few basis points isn’t going to hurt you too much when the fund performs as well as PWO has.  We appreciate the questions so please keep them coming at Thanks for reading and have a nice weekend.

Thursday, May 2, 2013

The Fed backed off the taper talk but the US market seemed more concerned that all the liquidity hasn’t helped employment yet.  Over in Europe, the ECB just announced it will cut its lending rate to 0.50% to help rescue Europe’s worsening economy.  ECB Chairman Mario Draghi is on record saying solutions need to come from the political realm but he’s under pressure to buy more of the bonds the politicians are issuing.  European markets have been doing better in recent weeks exemplified by a 7% rally in the SPDR DJ Euro STOXX 50 Fund (FEZ) after correcting by 11% from its February 1 high.   That has broken a downtrend but its Quant Score has not yet broken out in a similar way.

The fund performed very well since scoring well last year and despite a difficult 2013 it has mostly held those gains.  It maintained high Quant scores into late February when its Total Score peaked above 74 but dropped through most of March to a low of 62.7 on March 27th which pushed it out of the top 100 but only for a couple of days.  That marked a lower low in its price which was successfully retested a couple of weeks ago.  Its Total Score got as low as 65.6 a few days before that retest but rallied up to 70 and 11th place overall on April 25th.  Its Behavioral Score took a mysterious hit the next day but good price action has brought it back and today’s 68.5 Total Score is good enough for 17th place and an 8.19 Reward Rating.

European markets are mixed on the ECB decision awaiting what Chairman Draghi has to say in his press conference before US markets open.  They say the best time to buy stocks is in the depths of a recession but only hindsight tells when those depths have been reached.    Even though FEZ’s 5.05 Risk Rating is higher than most equity funds, sitting so close to its 200 day moving average should mitigate some of that risk compared to the 8% gap for the S&P.  Still closer to its 2009 low than its 2007 high, FEZ has been outperforming the US benchmark for a couple of weeks but today looks to be pivotal for Europe’s equity markets and how they score in the ETFGsm models.  Those models continue to favor the US market which will get its own test with tomorrow’s employment report.  So check back each day for the models’ message which is bound to shift eventually.

Wednesday, May 1, 2013

The traditionally strong November to April period sure didn’t disappoint and with the S&P 500 more than 13% higher we need to ask ourselves if it’s time to sell in May and go away.  The ETFGsm models do not predict market direction but do predict the US market will continue to outperform in the upcoming months and we see some lagging names scoring better.  It is not all US though as today’s top 10 are bookended by Canada’s EWC in 1st place and Australia’s EWA in 10th.

Between those two are funds in the energy, technology and financial sectors as well as the broad US market.  In energy, 4th place XLE leads XOP and OIH tied at 7th with better technical and Fundamental scores and all three can thank their high sentiment scores for their top 10 ranks.  Technology is scoring better on good fundamentals although 6th place VGT’s Fundamental Score has come down as the fund has rallied over recent days.  That has boosted its technical score and brought out the bears to also boost its contrarian sentiment score.  PWO is broad market but has half of AUM in tech which hasn’t hurt it too much, it is ahead of the market year to date and still gets a 98.2 Fundamental Score.  PWO has been scoring well all year but its 38.5 short term technical score could be warning of a correction.  The financials are represented by insurance fund KBWI in 5th place and holding today’s 10 Green Diamond distinction again with a 91 Fundamental Score and a 76.4 technical score. Looking at the broad market, the best scoring fund all year has been today’s 2nd place SPY which has been a great way to ride the huge asset flows into equities and still gets a very strong 81.5 Fundamental Score.  Mid cap MDY in 9th place on a higher sentiment score has also scored well all year and has outperformed SPY.

Maybe you’ll spend May Day protesting or maybe dancing around the May pole, or maybe you see it as the classic distress call.  You have to decide for yourself how much to keep on the table for the historically weak part of the year but ETF Globalsm can help you find the prettiest flowers for your portfolios.  Look beyond those top 10 names because our top 100 ranked funds outperform the S&P 500 on average as do those with 7 or more Green Diamonds.  If you want help with anything you see on please ask us at