Market Sector Update

The regular season for Major League Baseball concluded this weekend – with the exception of the Tampa Bay/Texas tie breaker tonight- and congratulations to those teams who performed well enough to be participating in the post season.  With 162 games in the books, the statistics for the 2013 season are being tallied for the various offensive and defensive performance categories.  We thought that this may spell a good point to stop and take a look under the surface of the equity markets to determine some performance numbers as well – in this case, by market sector.

Let’s look at the performance of some of the sectors for the most recent one month period.  The Consumer Discretionary sector is leading the pack with a 5.31% trailing one month return, followed by the Telecommunications sector with a 4.38% return and the Industrials close behind at 4.24% for the most recent one month period.  

The worst performing sector over this most recent one month period is Basic Materials with an -8.05% trailing one month return.  As an aside, the Utilities group has only returned 0.86% over the same time period after being the leading performer up until the summer.  Will Utilities shine again with a new rush for yield? Only time will tell.

Obtaining a quick view of how the various equity sectors have been performing throughout the month has recently become very easy by simply checking out the ETFG Heatmap  By going to the ETFG Heatmap, you can easily see both the performance and the Quant information for all 10 equity sectors. We calculate the trailing 1 month return each day for all ETPs, aggregate them into various buckets by their respective Asset Class, Region and Sector.  As with most heatmaps, you can quickly see the relative difference between sectors by the color and shades of the cells (squares).  The key for the ETFG Heatmap is located at the bottom of the page

In looking forward for these sectors, currently, the ETF Global® Quant model favors the Basic Materials sector and specifically the energy and metals/mining industries with XOP garnering the top ranked spot and XME ranked number four.  Perhaps this may spell a turnaround for this sector?  Again only time will tell, but keep an eye on the ETFG^sm Quant model for early signs of strength.

Thank you for reading ETFG Daily Perspectives.

A Truly Global Perspective

One of the terrific benefits of employing ETFs within your investment strategy is the ability to gain immediate exposure to many distant and often niche markets and sectors with only one trade.  This global reach brings the world’s markets right to your doorstep and to the evaluation of the ETFG Quant Model.  This global reach is certainly evident as today’s ETFG Quant Daily Top 10 rated equity ETFs are a diverse compilation of the world markets and sectors.

While the top two ranked funds are domestic with the #1 ranked XOP followed by #2 ranked XME, these are the only US focused funds in the Top 10.  The remaining eight equity ETFS are comprised of two China Funds (GXC & FXI), an India fund in INCO, two European funds (EWO & FEZ) and finally, two Emerging Markets Funds (EMIF & ADRE).

Just as interesting as today’s geographic representation of ETFG Quant’s Top 10, is the model’s ability to identify opportunity for premium returns within niche sectors.  Within today’s Top 10, we find a diverse cut of market capitalizations, industries and sectors.  Of particular note are the various sectors in favor which range from Oil & Gas to Metals & Mining to Financials.  Please be sure to take a deeper look at http://www.etfg.com/research/quant

On a different note, we recently heard from several of our Asset Manager clients and in particular those who run Fund-of-Funds about the application of the ETFG Portfolio Tearsheets.  These managers have found these aggregated tearsheets particularly valuable to review portfolios of ETFs often while replicating and/or benchmarking the performance and strategies of their underlying managers.  We encourage all of our readers to take a look at http://www.etfg.com/research/portfolio  to see if this application may prove valuable to you as well.  These Portfolio Tearsheets allow a portfolio manager to comprehensively review and analyze a portfolio of up to 12 ETFs.

Thank you for reading ETFG Daily Perspectives and congratulations to The SOJ on its Anniversary.

The ETFG Golden Dozen

The ETFG Golden Dozen

As the end of the third quarter approaches next week, many eyes are on performance as Chief Investment Officers and Portfolio Managers wrap up their 3^rd quarter and look towards year end.  This was certainly some of the chatter we heard around the ETFG Forum last Friday in NYC as Institutional Investors and Financial Professionals from many different vantage points talked about wrapping this quarter on a strong note.

As we touched on in yesterday’s note, the ETFG Golden Dozen conducted its monthly rebalance yesterday and now heads out into its 15^th month of existence.  Given the performance discussions that arose at the forum on Friday, we thought this would be an opportune time to take a look at the performance of our lead Index, the ETFG Golden Dozen.

By way of background, the ETFG Golden Dozen is comprised of the top 12 equity ETFs as ranked by the ETF Global (Index Sponsor) Quant model that also meet the liquidity requirement.  The selection pool includes all U.S. listed, equity ETFs, excluding levered and inverse funds, as well as, those funds with average daily trading value of less than 5M USD. The ETFG Quant model assigns a daily ranking to all relevant products using proprietary algorithms and employing dozens of industry metrics to gauge how likely an equity ETF will outperform the market in the foreseeable future.  Selection is performed prior to trading on the third Friday of each month.  The portfolio is equally weighted and reconstitutes monthly on the second trading day following selection.

Now let’s take a look at the performance of the ETFG Golden Dozen:  Since its inception in July of 2012, the ETFG Golden Dozen has returned 33.52% vs. 26.81% for ACWI and 25.79% for SPY.  For the last 12 months, the ETFG Golden Dozen has returned 20.94% vs. 15.01% for ACWI and 16.67% for SPY.  Finally, in the last 6 month period, the ETFG Golden Dozen has returned 11.03% vs. 7.79% for ACWI and 9.21% for SPY.

Congratulations to the ETFG Golden Dozen on its performance and for more detail, information and statistics on this Index and other ETFG Indices, please go to www.etfg.com/research/indices

ETFG Forum

A heartfelt thank you to all of those who either attended or participated in the ETF Global, Fall Forum last Friday at the New York Society of Securities Analysts in NYC.  We received incredible feedback from the attendees that we had achieved our goal of creating a dynamic and unique experience for this event and not another industry marketing conference.  Specifically, the ETFG Fall ETP Investing and Trading Forum delivered a level of understanding and detail around cutting edge topics through the eyes of recognized experts from the ETF and securities industry, all within an intimate academic setting.  For those who were unable to attend the event, you can view the agenda here: www.expertseries.org and please keep that URL handy as the “Save the Date” for the ETF Global, Winter ETP Investing Trading Forum will be announced next week.

Today is also the day our smart beta indexes are rebalanced.  For those of you who might have missed it, we have two smart beta indexes that are rebalanced and reallocated on a monthly basis.  The holdings are driven by the ETF Global® Quant model.  In the QE 10 Index, the China exposure has dropped from around 25% down to almost 10% of the allocation while Canada saw a big jump from less than 6% up to the second highest country exposure of over 15%.  Is Quant trying to say something? Only time will tell.  For more information about these and the other ETFGsm Indices, click here

FEZ Likes Angie

We reported yesterday about Quant’s prescient emerging markets call in front of the Fed’s no taper announcement and today the algorithm seems to be predicting a Merkel win in the German elections.  Not because we see German funds scoring well, we don’t, but because once again we see the SPDR DJ Euro STOXX 50 Fund (FEZ) in the top 10 at 3^rd place.  We mentioned it holding 2^nd place on Monday and if you go back to last month, we wrote about it on August 7^th pointing out how well it has done whenever it ranked this high.

That was when markets were celebrating new Bank of England Governor Mark Carney’s dovish policy announcement and that day’s post goes through the fund’s history in Quant which has done a very good job calling the wiggles.  That record is intact as FEZ is up more than 6% since then as the S&P 500 is up about 2%.  The reasons for the high ranks have shifted however.  On August 7^th FEZ’s 9^th place rank was driven by its Fundamental Score of 76.8 supported by a solid technical score of 73.  Sentiment was weaker at 59.8 as bullishness pervaded on the BOE’s new dovish Governor.  Today’s 3^rd place rank comes about from a different perspective.  The fund’s big rally has actually brought its technical score down to 65.5 signaling it may be getting overbought.  Fundamentals have also come down to 66 as the price has risen.  Those circumstances have the bears smelling blood with its sentiment score rising up to 72.7 with solid numbers in all three subcategories.  We have seen some powerful short squeezes this week and there could be more in store for FEZ.

Expectations are for an Angela Merkel victory in this weekend’s elections despite her poor showing last week.  Even though German ETFs are not scoring well, we do see the Netherland’s in the top 10 with EWN at 9^th place and performing well since we mentioned it Wednesday.  It is newly elite this month with no such rich history like FEZ but is off to a great start.  It ranks well today with 68.8 in both technicals and Fundamentals with sentiment lagging at 58.8. 

After 259 posts bringing you the best ideas from the world class ETF Global^® models, your humbled blogger is taking a long deserved vacation.  As always, thank you for reading ETF Global^® Daily Perspectives.

Diamonds in Bernanke’s Head

The ETF Global^® algorithms calculate dozens of daily metrics on the world of exchange traded products but the inner deliberations of Ben Bernanke’s mind are not among them.  However, quantitative analysis has an ability to pick up unavailable information and somehow the models knew that Ben was going to let the good times roll.  Financial assets rallied on the surprise absence of any taper and the emerging markets funds that have been scoring so well blew the doors off the US market.  The SPDR S&P China Fund (GXC) has dominated the Green Diamond Reward model lately like no other getting the 10 Diamond distinction for the 30^th time since July 12^th.  It gained almost 2% yesterday and is up almost 18% since then while the S&P gained about 2.7%.  The other high scoring emerging markets funds performed even better yesterday padding our performance numbers since beginning to score well in the early summer.

Our latest performance report on the Green Diamond Reward model is available under the Analytics button where it appears with all prior months.  Like Quant, the Green Diamond model has begun to provide positive separation from the S&P 500 since being so weighted towards that benchmark for most of 2013.  Each day, one equity ETF gets the 10 Green Diamond Reward Rating with the rest scaled from 1 to 10 according to their Behavioral and Fundamental Scores.  On the report we segregate the 7s, 8s, 9s and 10s, calculate their performance over 1, 2 and 3 months and compare to the S&P 500 over the same time.  September’s report shows the 8s beating the 9s and 10s for most time frames and we should note there were no 9s for many of those days that GXC dominated so much, like today.  Like the other emerging markets funds that have been getting a lot of 8s lately, it was negative for some of those periods that ended in August but is off to the races in September.

If you want to learn more about the ETF Global^® models, please come to our forum tomorrow at the New York Society for Security Analysts,  mentioned Monday.  You can sign up at www.expertseries.org.  If you are not in the area, always feel free to send any questions to support@etfg.com, we are here to help.  Thanks for reading ETF Global^® Daily Perspectives, we hope to see you at the forum tomorrow. 

ETFG Quant Outperforms Again

It is that time of the month again when we do what nobody else does, report on the performance of our scores and ratings.  We will cover Quant today.  The report can be found under the ETFG Quant button with all the prior months and this one shows further improvement versus the S&P 500 that emerged in the summer.  It was impossible to beat the benchmark in the first half being weighted towards US broad market funds but those were leading the world so that is all that matters.

That was not the case to begin 2013 as you can see on January’s report reflecting the model’s European and emerging markets stance last fall.  Those markets rallied as ours was mired in Washington DC nonsense and had Quant outperforming by triple digits.  But Quant began to turn its focus to the US in December and was heavily weighted to those US broad market funds into May.  That brought the outperformance down which was helped along by the gold miners in GDX.  May began to see a shift towards emerging markets and other non US funds like Canada’s EWC and Australia’s EWA.  Those latter 2 did not help and some of the emerging markets funds generated negative 3 month relative performance in this report but have rallied strongly so far in September.  GXC made it back into the mix in May, was negative as of August 30^th, but is now outperforming strongly with many of the other emerging markets selections.

We segregate the top 10, 25, 50 and 100 ranked funds each day and compare their 1, 2 and 3 month performance to the S&P 500.  Quant has beaten the benchmark 57.77% of the time even though the benchmark has dominated the rankings for about that same amount of time.  The groupings have outperformed by more than 20% on average one month from selection and September is off to a great start.  1^st place XOP has always been solid even if lagging slightly.  It is outperforming recently as is the aforementioned 2^nd place GXC.  The industrial miners in 3^rd place XME have also been outperforming.  4^th place VGT has bounced in and out of the top 10 but has also outperformed and tied at 4^th is the Netherlands’ EWN outperforming since scoring well in the last couple of weeks.  Thanks for checking into ETFG^sm, we will cover the Green Diamonds tomorrow.

Emerging Markets Fear Not the Taper

The Fed’s weekly disclosures show their tapering has already begun but markets are undeterred with hopes that Janet Yellen will keep the party going.  Emerging markets are supposedly most sensitive to the taper but there should be plenty of yen to offset any fewer dollars sloshing around those markets.  7 of today’s top 10 funds are emerging markets funds including China and they generally lagged yesterday but have outperformed since scoring well earlier this summer.

GXC holds today’s top rank in both models again and has gained more than 23% since the June 24^th shift which is padding our performance numbers that should be posted today.  That was the story last fall when it and other emerging markets funds were giving our users huge outperformance.  As we have been reporting, things are looking very much like they did back then. We mentioned ADRE as a mover on July 1^st, it made the top 10 later that month and holds 3^rd place today, suggesting its outperformance is going to continue.  Same story with 6^th place DEM also mentioned as an up and comer on that July 1^st post and also padding our performance numbers.  WisdomTree’s EM small cap DGS jumped almost 200 positions into 12^th place on August 5^th when we reiterated Quant’s EM stance.  It has been less durable in the rankings but is back to 7^th place today and has returned to outperforming after lagging into the late August scare.  When we highlighted EEM and Malaysia’s EWM on April 2^nd, it turned out to be a late April Fool’s Day joke.  EEM has maintained top 100 status for most days since but EWM dropped down into the 200s on volatile sentiment scores.  EWM had a big move overnight into 9^th place joining 8^th place EEM who has spent most of September in the top 10.  Quant has no emotion but we must admit a fondness for EEM which performed so well for our users last fall.  Bookending the top 10 with China is FXI, another ETFG^sm winner from last fall which achieved top 20 status on that June 24^th shift and top 10 in July where it has remained since, except for 2 of the prior 3 days.

So fear not the taper. Maybe we should save that fear for the upcoming budget fight in Washington, another flashback to the fall of 2012.  Thanks for reading ETFG^sm Daily Perspectives.

Join Us at the Forum

World markets are excited about the doves winning the Fed stakes even though the latest release shows the Fed balance sheet growing at less than $85 billion over the past month.  Maybe the taper has already begun.  In our new world of asymmetric financial risks, find out how one of the largest quantitative hedge funds manages their risk.  Join us this Friday at the NY Society for Security Analysts for our ETP Investing & Trading Forum where AQR Capital Management’s Risk Manager, Aaron Brown, will be just one of the distinguished speakers.  His presentation on Dynamic Risk Management will be must see for any institutional manager.

The other speakers are similarly esteemed.  Interested in Twitter’s use of the JOBS Act for their IPO?  One of its authors, David Weild will be presenting on the ACT’s impact on ETPs.  High Frequency Trading has been in the news lately and one of the wisest voices on that topic, Sal Arnuk of Themis Trading, will present and so will the Godfather of ETFs, Reggie Browne; nobody knows more about ETF trading than Reggie.  Fixed Income managers will want to see BMO’s William Kirby present on how ETPs live in that market and Hapoalim Securities’ Raymond Potter will present on emerging markets debt.  Brendan Conway who covers ETFs and much more at Barron’s will present on Emerging ETF Trends and his colleague, The Striking Price author Steve Sears will present on Options on ETPs.  Those are just the headliners. There will be others, as well as panels and lunch and cocktail networking sessions.

The agenda should appeal to any institutional asset or risk manger, wealth advisor or analyst who is interested in the growing influence of Exchange Traded Products in our financial markets.  The NYSSA will provide their state of the art conference facility in Times Square for the September 20^th event from 8am to 6:30pm.  Register at www.expertseries.org.

It has been a few days since we examined the rankings but our old friend XOP leads in 1^st place followed by Europe’s FEZ in 2^nd and emerging markets’ ADRE in 3^rd.  The top 10 sees a few new names including First Trust’s Value Line 100 Fund (FVL) in 5^th and their ISE Global Engineering and Construction Index Fund (FLM) in 10^th.  The newly elite Market Vectors Environment Index Fund (EVX) is in 7^th place today.  Thanks for reading and good luck this week.

Happy Anniversary to Us

A year ago tomorrow we reported: the kinetic energy from Bernanke’s bazooka lifted most sectors yesterday.  Referring to the announcement of QE3, it was the first line we wrote here at ETFG^sm Daily Perspectives.  Over the following days we watched the China funds, GXC and FXI emerge into the top ranks with a handful of European funds and the gold miners in GDX which actually performed well back then.  It took some time to find our voice but each day in the year since we have brought you the message of our world class quantitative models that until now were the exclusive province of billion dollar hedge funds.

Those mentioned funds rallied strongly last fall as the US market faltered under the weight of fiscal cliff fears.  On November 14^th we wrote: Quant has a clear message today, avoid the USA.  That happened to be a bottom for the S&P 500 but Quant’s favored funds continued to handsomely outperform.  Who else was recommending the iShares MSCI Turkey Investable Market Index Fund (TUR) around Thanksgiving time?  We had fun with the pun on November 12^th when we said the little plastic thing was popping up, it rallied over 20% to a peak on January 23^rd while the S&P gained about 8%; but Quant had called another shift by then.  On the day after Thanksgiving, we reported that Santa looked especially jolly closing out the Macy’s Parade and Quant had 3 US broad market Russell funds in the top 10.  By that time other sites were on the emerging markets bandwagon but Quant was positioning you for a good old Santa Claus rally.  On December 31^st we declared our November 14^th call reversed as 8 of the top 10 were US funds and 2 of those were S&P 500 funds.

The three funds tracking that index were top rankers throughout 2013's first half which made it difficult for us to beat the benchmark but we were happy to keep you on the US island in the world storm as we characterized it on April 8^th when we highlighted a handful of Russell funds.  The granddaddy of all ETFs, the SPDR S&P 500 Fund (SPY) was a top 10 fund for all but 2 days from February 5^th through May 7^th, and top 3 for all but 12.  Anyone who owned it then was happy.  Quant’s latest call was the move back to China and emerging markets after the June swoon, providing us positive separation from the benchmark yet again.  1^st place GXC is also today’s 10 Green Diamond fund.

Regular readers recognize the value of ETF Global^® and we thank you for all the feedback and suggestions.  Please help us spread the word and if 400 words each morning is too much, follow us on twitter @ETF_Global. We went a little long this morning but it is an important day for us.  We’re gonna have a cigar because ETFG^sm is going far!  Thanks for being a part and have a nice weekend.

Europe's FEZ Finds Quant’s Love

All in the run of one day, Quant looks all around the world for the equity ETFs with the highest probability of outperformance.  As time goes by we had some low rides but it has mostly been good dancing music.  Today we see one high steppin’ hip dressin’ fella who brings back our yesterday returning to the top 10.  The 6^th place SPDR DJ Euro STOXX 50 Fund (FEZ) first made that elite group in August 2012 and was one of our top performers after the month it spent there.  We wished it could do it again when it returned for a shorter stay in November and it made our lives easy living.  What a groove. But falling in love is a no no with quantitative analysis and FEZ began to rank lower towards year end and into 2013.

It had staying power and remained in the top 100 for most of the winter but did not seem to know which way is up and walking in the rain with the one it loves is not Quant’s thing.  It fell out of the top 100 in May and got as low as 224^th place on June 16^th, a few days before a 5% drop to those June 24^th lows.  Quant’s affection for the emerging markets has been most pronounced since then but FEZ came out of the shadows with a 128 position move to 49^th place on July 9^th and has gained more than 12% since then and gradually moved up the rankings.

If you follow that you will see that Quant has called FEZ well over the early year+ here at ETF Global^®.  It says the time is right to put it back in your mix so take a good look.  Time will tell if Europe is alive and well, we have not seen many individual European country funds in the top ranks, Austria and Sweden get 19^th and 25^th place with EWO and EWD.

If you are a registered user of ETF Global^®, welcome aboard, if not click here for a trial, it’s free.  When you step into our secret garden you will see how we make it happen.  Managing portfolios is getting harder all the time but ETFG^sm will keep you in a mellow mood.  Thank you for turnin’ on and tunin’ in, we can’t get enough of your love.  Happy Birthday to the late Barry White.

DEM Surges Back Into the Top 10

Quant’s recent affection for the emerging markets has been well documented here at Daily Perspectives but we must admit to being anxious when some of those top ranking funds underperformed in late August.  One of them, the WisdomTree Emerging Markets Equity Income Fund (DEM), ranked as high as 4^th place on August 13^th but fell out of the top 100 on the 28^th where it remained until last night.  Today it is one of Quant’s big movers gaining 107 positions into 6^th place.

Moves like that are more common among smaller funds than $5 billion ones like this because they have less liquid options and share lending markets leading to more volatile sentiment scores.  DEM’s put/call score has ranged from 41 to 91 over the past month and is at 68.4 today.  Our new Fund Statistics Tearsheet tab shows yesterday’s option volume registering in the dozens of contracts compared to thousands for similarly sized EM funds.  Also resembling a smaller fund, short interest has ranged an even wider 57.4 to today’s low of 14.7.  Implied volatility has been more stable around today’s score of 71.9.  Fundamentals are still solid at 78.8 although off their recent high of 90.2 with cash flow and yield both scoring in the high 90s.  Most responsible for the big move is its technical score jumping from yesterday’s 40.5 to today’s 70.8, not so much because it was up 50 bps yesterday but that it held a 10% gain from the August 27^th low.  The algorithm was apparently skeptical about that rally until today.

We were not as skeptical because we saw other EM funds scoring better after getting dinged in August.  Highlighting 4 others on the 26^th we channeled Karen Carpenter declaring the rally has only just begun.  They got beaten down by the war drums over the next couple of days but that too seems to have passed.  The remaining threat is Fed tapering and we have noticed the Fed balance sheet growing below the $85 billion monthly rate in recent weeks but remember, tapering does not mean tightening.  Emerging markets do carry more risk and DEM’s 6.02 Red Diamond Risk Rating is above today’s all equity ETF average of 4.6 but less than most other EM funds.  Today’s 9.51 Green Diamond Reward Rating suggests it is a good time to assume that risk.  Thanks for reading ETFG^sm Daily Perspectives on this solemn day.

GXC Rallies On

Secretary Kerry says it will be an “unbelievably small” war but that may be enough to keep the Fed printing an unbelievably large amount of money for our markets to absorb.  Traders partied on with the S&P 500 gaining 1% and the ETFG QE10 gaining almost 2% for the day.  The SPDR S&P China Fund (GXC) is a constituent in both of our smart beta indices and was up 2% yesterday, more than 7% over the past week and more than 12% since it earned the 10 Green Diamond Reward Rating on July 12^th.  It gets that distinction today for the 24^th time since then.  This is no fading star as it also holds Quant’s 1^st place and dominates the Diamond model to such an extent that we have no 9s again today.

That big rally over the last 8 weeks will pad our performance numbers but does not help GXC’s Fundamental Score which has come down from the high 90s last month to 89.5 today.  That is still best among all of the 730 equity ETFs getting scored.  Its technical score has risen with its mountain chart, up to 70.6 from the high 50s at the late June low.  Sentiment has been volatile ranging from the 30s to the 70s recently and comes in at 63.4 today.  That mountain chart was a black diamond ski slope in the first half when GXC sustained a 20% decline, so pay attention to its above average 5.44 Red Diamond Risk Rating driven by a high 8.08 Deviation score.  It still trades below its early year high and lower still than a double top formed in April 2011.  The fund’s 213 constituents are 91% exposed to the Hong Kong dollar with more than 8% in US ADRs.  If you have trouble following its benchmark S&P China BMI Index, it closely tracks the widely published Hang Sang Index.  Fund flows have been mostly negative over recent weeks but the price jump in recent days is turning its 5 day flow curve towards the positive side.

GXC is just one of the emerging markets funds that have been scoring and performing well since that late June low.  Conventional wisdom then was to avoid the emerging markets in front of the Fed’s tapering but if you follow our models, you know that ETFG provides anything but conventional wisdom.  Thanks for checking into ETF Global^® Daily Perspectives.

Silver Fox Creeping Higher

After a brutal 2½ year bear market, today's 2^nd place Global X Silver Miners Fund (SIL) is up more than 35% since breaking into Quant’s top 100 on June 24^th, near its low point.  If you waited for it to break into the top 10 a few days later you are still enjoying strong gains only a couple of percent less.  Our models say it is just beginning as SIL is today’s 10 Green Diamond Fund for the first time.  It has had a volatile ride in the rankings but has scored well enough to also be a constituent this month in the ETFG Quant Equity 10 Index, one of our smart beta indices compiled by Solactive who also calculate SIL’s underlying index.  It does not meet the liquidity requirements for the Golden Dozen and even its constituents would fail liquidity tests for some mangers.

Those liquidity characteristics contribute to its 6.19 Red Diamond Risk Rating which is higher than most equity ETFs. Its 65% drawdown since April 2011 also plays a role in that.  Such price volatility has fed into its Quant scores where its rocky ride in the rankings mostly results from choppy option activity moving its sentiment score widely.  Scoring 87.8 on put/call today gets that sentiment score to 84.3 which is better than its combined technical score of 49.3.  A pretty 3 month chart masks the bruises of the past 2½ years but Quant sees all.  Although the miners did not enjoy the big price gains of the underlying metal in recent years, they suffered through the pullback since late last year.  They must have shared in the profits because SIL carries a strong 81.5 Fundamental Score thanks to 98.1 in both earnings and cash flow.  Book value and yield both score in the 60s so they haven’t been immune from the metal’s volatility.

ETF Global’s® quantitative models are designed to highlight opportunities that would otherwise be overlooked.  Some top ranking funds get there by performing well but some get there after suffering setbacks like SIL has.  It is not just about having good fundamental value but also behavioral characteristics that signal outperformance to come.  SIL resides in that sweet spot today and we will keep an eye on its technicals for more solid scores to come. Congratulations to Serena Williams for her 5^th opportunity to hoist the silver cup in Queens as US Open Champion.

Redemption Run for XME

We have been a little hesitant to highlight a recent high ranker because it burned us in the past.  Today’s 5^th place SPDR S&P Metals and Mining Fund (XME) spent 14 out of 16 days in January holding  top 10 rankings before falling out of the top 100 in early February.  It then sustained a bear market for most of 2013 until the late June lows.  It began to score well again in June and since July 2^nd, it has spent a remarkable 42 out of 47 days in the top 10. 

It declined by 3% over that January run before Quant corrected the bad call but has gained 10% since July 2^nd in a basically flat market; so we are willing to let bygones be bygones.  On July 8^th we compared it to a low beta gold miners fund and it has traded as such in the 2 months since.  One would expect such positive recent performance would boost the technical scores on these industrial metals miners but as we like to say, Quant moves in mysterious ways. XME’s short term technical score is its highest but only at 41.8 with intermediate and long term both down in the 20s, all three are significantly lower than early July so a warning light is flashing.  It must be flashing brightly because the bears have pushed its sentiment score up to 80.5 which is offsetting the deteriorating technicals on the Behavioral side of the model.  Positive reports have pushed its Fundamental Score higher as the price has risen, which is something we like to see.  Although its PE score is low at 38.8, it has 98s for cash flow, book value and yield scores.

XME’s bear market during the first half of the year has pushed its Risk Rating up to 5.28 compared to today’s equity ETF average of 4.46.  That high risk comes from the price risk side with Volatility and Deviation each scoring above 7 but its integrity risk measures are below average.  So consider the high risk and poor technical scores, the bears could be right.  As always, if you have any questions our dedicated staff stands ready to assist at support@etfg.com .  But also consider Quant’s track record which is second to none out there.  We will prove that again next week with our monthly performance reports.  Until then, thanks for reading and have a nice weekend.

ETFs with Apple in Their Eyes

Apple announced an event at their Cupertino headquarters on September 10 that “should brighten everyone’s day” but an event the next day in Shanghai is getting more buzz as they are expected to announce a deal to sell their iPhones to China Mobile’s 744 million customers.  If you want to see which ETFs could be most impacted by the potential news, put either company’s ticker in the upper right search box to see its ETFG^sm Equity Grey Market Report.  That’s easy to do with AAPL but those foreign tickers are not as readily available so you can pull up a China fund to see its constituents.  An example is GXC, back to 10 Green Diamonds today, whose 2^nd constituent is China Mobile; clicking on it will bring up its Grey Market Report.

In another case of ETF Global^® going beyond the competition, we not only include all those funds that actually hold the equity, but any that track an index containing it as a constituent.  This picks up all the leveraged and inverse funds that rarely hold equities but almost certainly affect their trading.  If you are most concerned about the equity, sort the bottom output by Fund AUM or the Nominal columns to see the products that could most impact it.  The Summary section above will also interest such a point of view.  If, on the other hand, you want to see which products could be a good way to play the news, then you can sort by Equity Weight to see those that are most exposed.  If you like to buy on the rumor and sell on the news, Tuesday could be a good time to buy those products with a negative number in the Leverage Factor column.  Take a look at the equity’s price chart over various time frames to help you assess your position.

We will let you decide if the Apple/China Mobile deal is already priced in or not, our job is to bring you the information you need to decide which products are exposed to any market reaction.  Our Equity Grey Market work is another example of why even managers who have yet to embrace ETFs use ETF Global^®.  Our models help in their sector and regional allocations and our deep information helps them assess how the burgeoning world of ETFs affects their books.  Thank you for letting ETF Global^® brighten your day.

Emerging Markets Produce New 10 Diamond Fund

It had a correction to begin the summer, established a higher low to end it and comes into September outperforming the S&P 500.  When the Powershares BLDRS Emerging Markets 50 ADR Index Fund (ADRE) performed similarly last year, it continued to outperform into early 2013 until breaking down to a lower early summer low.  It was a familiar pattern for emerging markets funds that had scored well last summer and fall before deteriorating early this year.  Correcting into late June got them scoring better and ADRE has been mentioned frequently over the past couple of months that our models have been selecting EM funds to outperform.  With scores similar to our August 26^th post, it gets 2^nd place in Quant and holds today’s 10 Green Diamond Reward Rating for the first time.

The main difference between our two predictive models is that Quant incorporates all measures in an overall score where the Diamond models separate risk and reward into distinct ratings.  The predictive Green Diamond Reward Rating is equally weighted between Quant’s Behavioral and Fundamental Scores where each day’s highest scoring equity ETF gets the sole 10 Green Diamond Reward Rating.  That had been GXC for most days since late July in an exceptional run of dominance that was well earned by gaining almost 10% over a couple of months when most funds were negative.  It retains an outstanding 9.91 Reward Rating today.  Regular readers will also remember PWO earning 10 Green Diamonds on so many days in the spring and dominating into early July when its smart beta quarterly portfolio reconstitution failed to excite our models and subsequently underperformed.  Only time will tell if ADRE is poised for another such run or is a typical 10 Diamond fund for a handful of days over a few weeks.  Either way, today’s rating suggests an excellent chance of outperforming over coming months.  It too is a smart beta fund whose portfolio can change significantly at each quarterly reconstitution so keep an eye on those daily scores.

ADRE’s above average 5.03 Red Diamond Risk Rating is skewed by high volatility and deviation measures but comes in lower than most EM funds.  Its 100% exposure to US dollars helps on the reflective Risk Rating where higher scores imply higher risk.  If this fall resembles last for emerging markets funds, that volatility can be your friend.  Thanks for checking into ETF Global^® Daily Perspectives.

War Drums or Kumbaya?

We said last week that Quant does not do geopolitics and we can say today nor does it do music.  We watched emerging markets gyrate like whirling dervishes to a war drum beat that now sounds more like a hippie gathering.  China and emerging markets are partying on, holding 6 of the top 10 positions with SPDR’s S&P China Fund (GXC) leading both Quant and the Green Diamond models and iShares’ FTSE/Xinhua China 25 Index Fund (FXI) in third place with 9 Green Diamonds. Both funds were more stable than most during last week’s conflicting signals.

The 4 other emerging markets funds sold off early in the week and gained most of it back later, ending up at generally higher ranks.  Like the two China funds, they get there on strong Fundamental Scores meeting rising technicals as sentiment lags.  Powershares’ ADRE in 6^th place is an exception that was in 4^th place last Monday and lagged the group for the week.  iShares’ EEM in 7^th place is an exception the other way gaining top 10 status to begin September.  That worked out splendidly when the same thing happened last year, then and now were both driven by high sentiment readings.  8^th place is held by SPDR’s S&P Emerging Asia Pacific Fund (GMF) which made the top 10 for the first time on August 14^th which may have been a bit early.  It is back today after a couple of weeks closer to 25^th place with technicals and sentiment evenly balanced as the former rises and latter falls.  WisdomTree’s 10^th place Asia Pacific ex-Japan Fund (AXJL) also gained top 10 status for the first time on August 14^th and has lagged but to a lesser extent.  It has a more lopsided 87.2 Fundamental Score leading its 66.2 technical and 46.8 sentiment scores. 

All 6 funds have had meaningful corrections in 2013 and have held their late June lows.  Their Risk Ratings are generally higher than average but not by much.  A glance at their ETFG^sm Tearsheets will show that and the Red Diamond Risk Rating page breaks it out in detail.  We do not know if war is in the air or that is Kumbaya we hear in the distance but our quantitative fundamental and market driven indicators say Asia’s emerging markets are primed to outperform in whichever environment emerges.  Thank you for emerging into ETF Global^® to begin your September.