Closing out a volatile month, the three S&P 500 funds are all in the top 10. We saw something similar when our December 4th post highlighted the three in 4th, 8th and 12th place when Quant began to turn its focus towards the US. The S&P 500 then went on its huge run and we highlighted the three again on Valentine’s Day. That February 14th post explains how three funds that track the same index can have different scores and provides a good primer on how Quant works. That day saw them in 1st, 7th and 11th place and was on the cusp of a 3% correction which was less than most other regions suffered. So now that Chairman Bernanke has put the market fears to rest, what does it mean to have SPY, VOO and IVV in 1st, 6th and 9th place today?

We often remind you that Quant does not make directional calls but simply ranks which funds will perform best in whatever environment ensues. In that December 4th post we said it was going to be difficult for our top ranked funds to outperform the index since the index and similar funds were dominating the ranks. Outperform it did though and we will see how the algorithm performed subsequently when we update the calculations over coming days with February’s month end prices. Another month with the S&P 500 dominating the ranks will likely bring the outperformance spread down somewhat but the US market continues as the place to be.

A hint to what direction the market is going to take may be found in the average Red Diamond Risk Rating of the top ranked funds. We have been highlighting the top 10 average since it fell below 4 on February 5th. It bounced up slightly early this week in time for the rebound but has fallen back below 4 today. Our models are designed for the intermediate term so we try not to get too caught up in the day to day wiggles choosing to look for consistent messages in the ranking instead. Since we advised to be careful out there on February 5th, that low risk message has been consistent. We have had a nirvana of low risk providing high reward since then and with the Fed pumping $85 billion a month into the economy maybe nirvana can continue. Only time will tell if that low risk will be paired with further handsome rewards or lesser declines. Like Fox, we report you decide but we appreciate you looking to ETFG^sm to support your investment decisions.

We tried to get the First Lady to make our announcement but the White House had her sequestered away doing it for someone else.  So your humble blogger is here to convey some exciting news.  You may have noticed the new Dynamic tab on our home page index screen containing our latest new indices.

The ETFG^sm Quant Equity 10 is a smart beta index representing the top ranked funds from our Quant model as selected on the third Friday of each month.  The selections are implemented two trading days later and remain for the month until a new crop is selected, usually seeing about half the names turn over each month.  Some of those funds may be thinly traded, so for institutional managers with liquidity mandates we also devised the ETFG^sm Golden Dozen.  That one works the same way but picks the top 12 funds with a minimum average daily trading value of $5 million.  Their year to date performance may not look very special but going back to inception in late July, both indices have handily outperformed the S&P 500, so keep your eye on them.  You can see more information on each at your Bloomberg terminal under the tickers ETFGQE10 and ETFGQE12.  Or you can click on either one from our indices screen and see their constituents.  We will also be providing historical information on them as we more fully integrate our home page with our calculation agent, Structured Solutions AG, an emerging leader in this emerging space.

But that is not all.  We have also engaged our calculation agent to publish our ETFG^sm 500 which now carries Bloomberg ticker ETFG500.  It simply tracks the largest 500 ETPs, excluding leveraged or inverse, as constituted annually and rebalanced quarterly.  That one is unique in that is crosses asset classes and regions.  So if you are among the growing numbers of managers who invest in commodity, currency or fixed income ETPs along with the traditional foreign and domestic equity funds, you no longer have to track a benchmark designed for esoteric hedge fund products or one constructed to replicate what your portfolios already look like.  Your clients will appreciate seeing how their portfolios perform compared to a simple unbiased benchmark that represents the investment universe from which you are selecting.

We are in the process of getting those three indices published on as wide a platform as possible to make them fully accessible to the investing public at no charge.  So it shouldn't be long until they are available from your favorite quote provider; if not, please ask for them.  You can contact us at support@etfg.com if you would like to benchmark against them or desire any further information on those three or the many other indices on our home page.  If you manage ETFs you need comprehensive information, idea generation with clear and concise ratings and relevant benchmarks.   ETF Global is that unique place that provides all three.  Not much movement in today’s rankings but we’ll be back to take a look at those tomorrow.

When we wrote about Silvio Berlusconi last Thursday it wasn’t meant as an endorsement.  We were simply highlighting the SPDR DJ EURO STOXX 50 Fund (FEZ) and its 7^th place rank.  Well, the Italians look to be buying back the beat of that heart grown cold which has solidified the US dominance of Quant’s upper ranks.  All of the top ten are US funds and our friend FEZ has dropped down to 40^th place.

33 places isn’t all that much considering the circumstances.  The fund’s technical score was nothing special to begin with and has only dropped a couple of points down to 56.1.  Being a couple of percent cheaper gave the Fundamental Score a little boost up to a decent 78.4 but the sentiment score fell about 24 points down to 67.2.  Shorts are stable at 85.6 and volatility picked up to 92.3 from 89.4 on Thursday; Quant likes high volatility as scored in its proprietary way.  It’s the puts getting covered that caused the drop in rank as the put/call score dropped from 98.5 to 58.1.  The action provides a good example of how Quant reacts to market movements.  As far as the rest of Europe goes, we see positive and negative reactions but the names we’ve highlighted over recent days hold similar ranks today.  Italy’s EWI gained about 80 positions from Thursday up to 346^th place out of 773 funds in today’s rankings, but that is lower than it was on Wednesday as it wallows in the lower ranks with a terrible 19.1 technical score.

So through all the echoes, Quant sees things similarly now that Silvio is back in the mix.  He’s as honest as the next jade rolling that stone, he came knocking and his people threw him a bone.  Those puts and calls can swing quickly so we’ll keep our eyes on anything that Quant sees as meaningful.  Maybe we’ll get Bernanke to put some calm to our markets when he flies his helicopter over to Congress today.  We’ll be back tomorrow to let you know.  Arrivederci.

Last week we looked at the sectors represented in Quant’s top 100 equity ETFs, today we are taking a look at the countries in that group.  Regular readers know that Quant has had a US focus since late December and that remains the case this morning.  We typically see US focused funds comprising about half of the top 100, today it’s 85.  It seems only fitting that 1^st place is occupied by the SPDR S&P 500 Fund (SPY).

The other 15 span the globe but we’ll begin in the east where the algorithm has been highlighting more names lately.  The iShares MSCI Australia Index Fund (EWA) has been ranking well recently and it’s at 7^th place on high sentiment scores.  Indonesia is nearby and the Market Vectors Indonesia Index Fund (IDX) is in 40^th place with a strong Fundamental Score of 80.5.  You won’t find many Indonesian companies in the Vanguard MSCI Pacific Fund (VPL) which sticks to the more developed countries in the region.  It has 58% of AUM in Japan and gets 8 Green Reward Diamonds and 67^th place in Quant’s rankings today.  If you like developed Asia but not Japan you might like the iShares MSCI Pacific Ex-Japan Index Fund (EPP) also getting 8 Green Diamonds at 55^th place.   Down the development chain and closing out the top 100 are two emerging markets funds tied at 99^th place. SPDR’s S&P Emerging Asia Pacific Fund (GMF) and iShares’ MSCI Emerging Index Fund (EEM) are both struggling to stay in the top 100 after scoring better in recent months.

Developed markets are certainly finding the sweet spot lately and the iShares MSCI EAFE Index Fund (EFA) invests in all of them except the US.  Scoring better on the Behavioral side than the Fundamental, it gets 8 Green Diamonds at 51^st place.  It has a heavy weighting in some European countries also seeing their dedicated funds score well.  The iShares MSCI Spain, France and Germany Index Funds (EWP, EWQ, and EWG) rank in 23^rd, 31^st, and 46^th place with high sentiment scores.  Also members of the large iShares MSCI family, Switzerland’s EWL scores better fundamentally at 58^th place while Sweden’s EWD comes in at 82^nd place on a strong technical score.  If you don’t want to choose between European countries, the SPDR DJ Euro STOXX 50 Fund (FEZ) finds itself up at 9th place today on high sentiment scores. Coming back to the Americas, the Market Vectors Brazil Small-Cap Fund (BRF) jumped into the upper ranks last week and is holding on at 29^th place today on a high 86.4 Fundamental Score.  To our north, the iShares MSCI Canada Index Fund (EWC) has fallen in the rankings along with its price but has bounced back into the top 100 at 72^nd place.

That sounds like a lot but is slimmer international pickings than usual.  While the US theme is Quant’s clearest currently we see the international names leaning towards developed countries.  We also see an average Red Diamond Risk Rating among this group of 4.49 which is higher than the top 100 average of 3.94 but lower than the international average of 5.24.  With that review out of the way, tomorrow we are going to tell you about the new ETFG^sm indices that appear on our home page and your Bloomberg screens, thanks for checking in.

Do you really think Bernanke is about to take away the punch bowl sending the economy into cold turkey withdrawal spasms?  Looking at the action in the oil pits you would think Esther George is calling the shots on the Fed board.  Maybe oil got hit on that higher than expected inventory report but those have become commonplace since the fracking boom made the US an oil producer again.  Quant is unmoved by all the noise as the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) is in 1^st place today, familiar territory as it has ranked in the top 5 since January 7^th.  Its broader sister, the SPDR Energy Select Sector Fund (XLE), confirms Quant’s pro energy message with its 4^th place rank, also familiar territory as it has been in the top 10 for most of the past month.

Notwithstanding the last two days, each fund is still outperforming the S&P500 year to date.  The lower risk XLE has held up a little better in the selloff but Quant favors XOP despite its higher 4.61 Red Diamond Risk Rating.  That’s the highest in today’s top 10 which still averages below 4, as do today’s top 25 and 100 funds.  A look at each constituent list gives a feel for that risk where XLE holds more recognizable names than XOP.   You won’t be filling your tank from Delek US Holdings which is XOP’s top holding with a 1.88% weight but they probably sell to ExxonMobil which tops XLE’s list at 17.26% of AUM.  Both funds get decent Fundamental Scores where XOP’s 80.4 beats XLE’s 75.1.  The two share similar mid 80s Global Theme Scores but XOP’s 72 constituents gives it a better diversification score than XLE with 44 which leads to a slightly higher Quality Score.  Although both are outperforming the market, their mid 60s technical scores are good but nothing special.  It’s their sentiment scores that account for their high ranks.  Both have high volatility and put/call scores and their short interest scores are each in their 99^th percentile where they have been throughout the rally.  So if the market has further to fall these two have some embedded buying pressure as those shorts will need to be covered.

If the market does have further to fall, the historically high correlation between today’s asset classes and sectors says risk off will hurt these funds.  A weakening economy is also correlated in most of our minds with lower oil prices.  However, those of us who sold cold drinks on the gas lines of the 70s know the Phillips curve has a poor empirical record.  Yes we can have a weak economy and high inflation and until Esther George becomes a household name don’t expect the Fed to turn off the firehouse.  All that liquidity needs to go somewhere and Quant thinks the oil pits will continue to absorb it.   Thank you for absorbing all that ETFG^sm has to offer, we’ll have even more for you next week.  Have a nice weekend.

He’s staking his future on a hell of a past and Sunday’s elections are coming on fast.  Europe aint complaining about what it’s got, seen better times but who has not.  We’re reminded of the Bob Dylan and Robert Hunter collaboration as former Italian Prime Minister Silvio Berlusconi makes another bid to lead Italy through its current fiscal difficulties.  He’s an old boll weevil looking for a home and if Italians don’t like him they’ll leave him alone.  Whatever happens in Italy’s elections, Quant looks ready to get back on the Europe train that performed so well last fall.  The SPDR DJ EURO STOXX 50 Fund (FEZ) is back in the top 10 at 7^th place.

Correcting about 6% since the beginning of the month, the fund’s technical scores have declined to a 59.7 average but that has boosted its Fundamental Score up to a decent 77.8.  Quant may see something only dead men know as the market is bearish exemplified by a very high 91.5 sentiment score.  Readers will remember how well this fund performed when it reached the upper ranks last fall when sentiment was also bearish.  Quant stepped aside as FEZ got as low as 97^th place in December but the fund has worked its way back up the rankings since then.  Italian companies comprise only 8% of its 50 constituents with another two thirds evenly split between France and Germany.  Those latter two countries see their dedicated ETFs, EWQ and EWG, making the top 50 but Italy’s EWI is mired at 469^th place in today’s rankings.

Everyone knows Berlusconi can charm the whistle off an evening train but the jury’s out on whether he can ease the Italians’ pain.  Market wisdom says the best time to buy equities is in the midst of a recession and Europe is clearly there now.  So as the investing world shorts the continent, Quant is going to the valley and signing its song, the echo will decide if it was right or wrong.  We appreciate you listening to the ETFG^sm song, we’ve teased you about an announcement and it won’t be long, maybe tomorrow.

From time to time we like to take a step back from Quant’s elite ranks for a broader look at the top 100 funds which on average outperform the S&P 500.  Readers know Quant has had a US focus throughout this young year and while that is still the case we have seen some foreign funds creeping up in the rankings.  But today we are going to look at the sectors represented in the top 100.

When we last performed this exercise on January 17th, the Energy sector was Quant’s 3^rd favorite, today it’s the most favorite with 10 funds from the ETFG^sm Global Energy Index scoring among the top 100 with XLE and XOP at 2^nd and 4^th place.  The average risk rating on the group is 4.56, higher than the top 100 overall.  Information Technology was the favorite sector last month and while its ranks have lessened, it still has 6 funds in the top 100 with 2 in the top 25, IGM at 17^th and IYW at 24^th place.  Those 6 funds have an average Risk Rating of 3.89, in line with the top 100 average.  5 Basic Materials funds made the cut last month and that’s the case again this month, tying that sector for Quant’s 3^rd favorite.  The highest ranker in this group is our old friend GDX dropping down to 9^th place this morning.  Its disappointing performance has driven its Risk Rating up to 6.14 higher than most equity ETFs but in the middle of the range for Basic Materials funds.  The Health Care sector is looking better in Quant’s eyes also with 5 funds in today’s top 100 where XLV gets as high as 22^nd place.  We know Quant has been favoring lower risk names and that group of 5 has a low average Risk Rating of 2.48.  The 4 Industrial funds in the top 100 have an average Risk Rating of 3.91 which comes down to 3.43 when we remove FAA which announced it will be closing.  The best ranking of the remaining 3 is XLI in 8^th place overall with a low 2.09 Risk Rating.  As Quant becomes more enamored with lower risk names, Utility funds are scoring better.  2 of them make the top 100 today with PSCU getting as high as 36^th place with a Risk Rating of 2.39.  That’s beaten by 51^st place XLU and its even lower Risk Rating of 1.84.  The ETFG^sm Global Consumer Discretionary and Staples indices each have one of their constituents in today’s top 100.  XRT represents the cyclicals at 22^nd place and XLP represents the staples at 33^rd place with the latter having a lower Risk Rating of 1.51 compared to the former’s 3.66.  Telecommunications and Financials see none of their index constituents anywhere near the top 100 today, each has a constituent getting as high as the mid 200 ranks.

Today’s list sees fewer names in most sectors making the top ranks as Quant has been favoring more broad market issues with lower Risk Ratings like the S&P 500 and Russell families of funds.  Better scores among Utility funds is another noticeable takeaway from today’s exercise.  The average Risk Ratings of the top groups has increased slightly with the top 25’s creeping above 4 but the top 10 and top 100 still average below that threshold.  That increase is largely attributable to foreign funds scoring better but we will have to hold that analysis for another day.  Thanks for reading today, we should be announcing our exciting news before the weekend so don’t forget to check back.