While Quant is gearing up for the open, your Data Miner decided to dig into the Grey Market Reports.  I found some interesting information that I wanted to share.

Of the stocks in the S&P 500 Index, Apple is the most widely held based on Long exposure at $394,497,515.89.  The second place company is Microsoft with only $169,450,430.68.  That's roughly 57% lower than Apple.

Although Apple also has the largest Short exposure at $(521,710,944.73), the stock with smallest (most negative) Net exposure is IBM at $(186,456,941.12).

With no new data for Quant to work on, your Data Miner has time to clean up the basement.  Now is a good time to prepare for the Market open tomorrow.  Check out the Tear Sheets or the Liquidation Watch List

Hope everyone on the East coast stayed safe through the storm.

You can call it stormy Monday and Tuesday’s going to be just as bad.  NYSE is closed and NYPD kicked us out of the data mine but Quant is running in the cloud, as long as it doesn't get too Sandy up there.  China is in 1^st and 2^nd place again with other familiar names filling the top ranks.  One noticeable mover is the iShares Dow Jones Transportation Average Index Fund (IYT) that we highlighted last Thursday getting up to 9^th place today.  Maybe it’s just all those trains carrying plywood and generators east or maybe Dow Theory is setting up something nice.  We sent the women and children to higher ground but Data Miner is holed up with plenty of 20 oz sodas and will try to cover developments when markets reopen, don’t tell the mayor.  Let’s hope Wednesday isn't worse and Thursday’s not so sad.  The ETFG eagles fly every day, and we wish you all safety and security through the storm.

We woke up this morning and found our dog and cat sleeping together.  Turning on the news we hear of rivers and seas boiling over.  It’s a disaster of biblical proportions!  However, there’s no need for mass hysteria, it’s only a consumer electronics company and Apple surely isn't going out of business.  In fact, savvy investors may say the stock has been telegraphing yesterday’s rare earnings and guidance miss having already lost almost 14% of its value in the last month.  If you don’t think this rare phenomenon will lead to 40 years of darkness you might want to look among the wreckage to seize the opportunity.  One fund that might get slimed today is the iShares Dow Jones U.S. Technology Index Fund (IYW) with over 24% of its assets in Apple Inc., a higher weight than the more well known QQQ and XLK, which could also take it on the chin at the open.  Indeed there are 94 funds that will be affected by Apple’s stock price today and you can see them all on our ETP Grey Market Summary, just enter the ticker AAPL in the search box on the upper right part of the site.  Other sources may tell you the funds that actually hold Apple but only ETF Global includes all those leveraged and inverse products that will also be affected.  If you think this stock has further to fall and you want a leveraged play, the ProShares UltraPro Short QQQ Fund (SQQQ) is inversely leveraged by three times to the NASDAQ 100 Index that weights Apple at 19.19% and will be a winner at today’s open if Apple opens down.  We don’t assign Reward Ratings to leveraged funds but its unleveraged cousin, QQQ, gets 9.1 Green Diamonds, a high rating which suggests the non-inversely leveraged funds may be better plays beyond today’s fire and brimstone.  You can see a list of those by clicking the top of the “Lev Factor” column to sort either in ascending or descending order.  Leveraged and inverse funds are included in our Risk Rating cross ranks and they tend to populate the higher risk scores so use caution and check with your compliance officer before purchasing.  We don't have any unlicensed nuclear accelerators on our backs but when you need some scientists to analyze your ETF choices, who you gonna call?  ETF Global.

When Data Miner was a little boy his dear old Dad told him about Dow Theory that said a move in the Dow Jones Industrial Average needs to be confirmed by increasing volume and a corresponding move in the Dow Jones Transportation Average.  The thought was that if the companies making products were doing well, so should the companies that move those products from the factories to their final markets.  Charles Dow formulated his theory at the dawn of the Industrial Revolution when the transports were the railroad companies.  A look at the tear sheet for the iShares Dow Jones Transportation Average Index Fund (IYT) shows its sub industry exposure to still be weighted towards those railroads comprising 31.6% of the fund with an additional 26.8% in Air Freight & Logistics and 19.2% in Trucking.  The tear sheet also shows a Risk rating of 4.13 (lower than most of the highest ranked funds) and a Reward Rating of 8.8.  These two strong ratings reflect the fund’s Quant rank at 16^th place today, its highest in months except for one day in early October.  The fund is basically where it’s been for a couple of years which has convinced many that the rally we have seen in the Industrials over that time may not be for real.  Those bears can also point to the Transports coming down worse than the Industrials in the developing correction of the last month.  Dow Theory isn't clear on whether that correction has run its course or has more to go so that’s where Quant can help.  Both funds are scoring well today with the SPDR Dow Jones Industrial Average Fund (DIA), also known as the Diamond, coming in at 21^st place close on the heels of IYT and its highest rank in months.  The Diamond’s tear sheet shows much more color on the charts as it is diversified across those industries that comprise the US economy.  Lower Volatility and Deviation scores, seen on the Red Diamond Risk Rating page, give it a lower Risk Rating of 3.04 and it is basically tied on the Reward Rating at 8.81.  The Fundamental measures favor the Industrials while the Behavioral favor the Transports.  These measures don’t say the correction has necessarily run its course because Quant doesn’t make directional calls.  It does say that these two equity funds look to be among the best to hold for the next few months.   We may be setting up for a sustainable rally that even Dow Theorists can accept but Quant’s intermediate time horizon means that may not happen for a couple months.  Maybe we need a big move down with heavy volume to confirm the correction.  If so, Quant still suggests hiding your equity allocation in China where FXI and GXC are back in 1^st and 2^nd place today.

On Monday we reminded you that Quant will not keep you out of a falling market, it is designed to keep you out of the worst parts of one over the intermediate term.  Yesterday’s leaders were not immune to the selloff losing 1.91% on average for the top 25 which is worse than the 1.44% drop in the S&P500.  However, if you have been reading and watching the algorithm’s output you know that China has been Quant’s favorite for quite a while.  Looking at the charts on the tear sheets, you will see the two high ranking China funds, FXI and GXC are still trading near their recent highs.  They got sucked into yesterday’s selling but have been largely immune from the 4% selloff in the S&P 500 over the past month.  The Europe funds we have been writing about, France’s EWQ and Spain’s EWP, are also still trading above their 50 day moving averages as is the pan European FEZ.  Quant is designed to outperform over the intermediate term even if it may not on a given day.

That said, Quant's leaders today include the Vanguard Information Technology Sector Fund (VGT) in second place and the SPDR S&P Metals and Mining Fund (XME) in third.  Yesterday we saw that latter fund to be more economically sensitive than the gold miners fund with which it is often grouped.  We also see emerging markets scoring well with the iShares MSCI Emerging Index Fund (EEM) moving up 14 places into the 5^th position on Quant’s relative rankings.  In what could be a telling message the Vanguard Growth Fund (VUG) moved up 34 positions into 13^th place as the iShares S&P 500 Value Index Fund (IVE) moved down 14 places to Quant’s 23^rd position.  Both moves were largely attributable to the more volatile Sentiment scores but Quant seems to be looking at the  selloff opportunistically rather than fearfully.  But again, it is not a short term trading algorithm so we will see if this message plays out over coming days.

We’re going to take a closer look at two funds mentioned yesterday.  The Market Vectors Gold Miners Fund (GDX) picked up 5 positions today to rank one spot ahead of the SPDR S&P Metals and Mining Fund (XME) which fell 4 positions into 7^th place.  Their overall scores are as close as can be at 73.8 and 73.7 where GDX gets a better Fundamental Score of 79.5 and XME gets the better Behavioral Score of 78.1.  Still very close as both have good scores in each 40% weighted category.  On the Diamond Ratings again we see little daylight between the two where GDX has a 4.95 Risk Rating and a 9.81 Reward Rating, both slightly higher than XME’s 4.91/9.58.  High Risk Ratings are negative, high Reward Ratings are positive so we’ll call this one a draw.  Looking at the ETFG Tear Sheets, the price charts show both funds rising up to meet a downtrend line so we could be at a pivotal point for each (expand the chart to 1 year for XME).  Thus far it looks like these funds could be held interchangeably.  Maybe if you are concerned about Canada you would want to stick with XME which is 98.5% US compared to GDX’s 50.2% Canadian exposure (we calculate this based on the corporate headquarters of each constituent).  It is not until you get to the exclusive ETFG Sub-Industry Exposure chart that you can see these are very different funds to be held for very different reasons.  If you think the world is going someplace bad in a hand basket and you want exposure to gold, then GDX ‘s 89.7% gold exposure and 10.3% exposure to precious metals & minerals is the fund for you.  XME does not fit that bill as its gold and precious metal exposure is only about 20% combined.  XME is a fund for those who see an accelerating world economy as its biggest sub industry exposure is 34% in steel and it has almost 20% in coal.  Don’t judge a book by its cover or a fund by its name.  Only ETF Global provides the granular detail and rigorous quantitative analysis that you need to make a sound investment decision.