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The Market’s Compass Rising Markets Nation ETF Research

Welcome to this week’s  Market’s Compass Rising Markets Nation ETF Research, Week #394, that’s being revealed in our Substack Weblog. It’s going to spotlight the technical adjustments of the 22 EM Nation ETFs that we observe on a weekly foundation and publish each third week. Paid subscribers will proceed to obtain the Weekly ETF Research despatched on to their registered electronic mail. This week, in celebration of the 4th of July vacation, we’re sending the entire Rising Markets Nation ETF Research to each paid and free subscribers. Previous publications may be accessed by subscribers through The Market’s Compass Substack Weblog. Subsequent week we can be publishing the The Markets Compass US Index and Sector ETF Research.

Final Week’s and eight Week Trailing Technical Rankings of the Particular person EM ETFs 

The Excel spreadsheet under signifies the weekly change within the Technical Rating (“TR”) of every particular person ETF. The technical rating or scoring system is a wholly quantitative strategy that makes use of a number of technical issues that embody however aren’t restricted to development, momentum, measurements of accumulation/distribution and relative power. If a person ETFs technical situation improves the Technical Rating TR rises and conversely if the technical situation continues to deteriorate the TR falls. The TR of every particular person ETF ranges from 0 to 50. The first take away from this unfold sheet must be the development of the person TRs both the continued enchancment or deterioration, in addition to a change in route. Secondarily, a really low rating can sign an oversold situation and conversely a continued very excessive quantity may be seen as an overbought situation, however with due warning, over bought situations can proceed at apace and overbought securities which have exhibited extraordinary momentum can simply change into extra overbought. A sustained development change must unfold within the TR for it to be actionable. The TR of every particular person ETF in every of the three geographic areas also can reveal comparative relative power or weak spot of the technical situation of the choose ETFs in the identical area.

The biggest drop of the three EM area Whole Rankings since we final revealed on June thirteenth was the LatAm area. The Whole Lat Am Rating has dropped -37.18% to 62.5 from 99.5 three weeks in the past versus a small drop within the Whole Asia-Pacific Rating to 102.5 from 108.5 and a slight enchancment within the Whole EMEA Rating to 90.5 from 84.5. The drop within the Whole Lat AM Rating is technically noteworthy since not one of the 5 ETFs in that area had been within the “crimson zone” in late-Could to early-June.  For the third week in a row the iShares MSCI South Korea Index Fund ETF (EWY) sported the bottom EM TRs at 1, 2, 1 respectivly. On the optimistic aspect of the ledger there was a gradual enchancment within the TR of the iShares FTSE/Xinhua China 25 Index Fund ETF (FXI) since early-Could and over the previous three weeks the FXI has registered the very best TRs. Due to the upper weighting of Chinese language equities within the EEM there was a measure of value stability within the ETF (it has averted printing a brand new low). The highest 15 holdings within the EEM is posted under (the day by day chart and feedback on the short-term technical situation of the EEM is posted later within the weblog). A chart of the FXI vs. the EEM that displays the current higher relative efficiency versus the EEM and a day by day value chart of the FXI comply with the highest 15 holdings within the ETF.

Prime 15 Holdings within the EEM

Prime 15 Holdings within the FXI

The EEM with the Whole ETF Rating “TER” Overlayed

The Whole ETF Rating (“TER”) Indicator is a complete of all 22 ETF rankings and may be checked out as a affirmation/divergence indicator in addition to an overbought oversold indicator. As a affirmation/divergence software: If the broader market as measured by the iShares MSCI Rising Markets Index ETF (EEM) continues to rally with out a commensurate transfer or greater transfer within the TER the continued rally within the EEM Index turns into more and more in jeopardy. Conversely, if the EEM  continues to print decrease lows and there’s little change or a constructing enchancment within the TER a optimistic divergence is registered. That is, in a vogue, is sort of a conventional A/D Line. As an overbought/oversold indicator: The nearer the TER will get to the 1100 degree (all 22 ETFs having a TR of fifty) “issues can’t get a lot better technically” and a rising quantity particular person ETFs have change into “stretched” the extra of an opportunity of a pullback within the EEM. On the flip aspect the nearer to an excessive low “issues can’t get a lot worse technically” and a rising variety of ETFs are “washed out technically”, a measurable low is near being in place and an oversold rally will doubtless comply with. The 13-week exponential shifting common, in crimson, smooths the risky TER readings and analytically is a greater indicator of development. 

The EEM Whole Technical Rating (“TER”) of the 22 Rising Market Nation ETFs rose solely barely over the previous two weeks from the bottom studying since April 2020 at 220. Though it did come shut the TER didn’t enter oversold territory. We remind readers that as a result of a great quantity EM ETFs are thinly traded and are topic to large swings, which in flip creates risky particular person Technical Rating adjustments, that the calculation of the TER additionally fluctuates in an identical manor. Analytically, specializing in the 13-week shifting common of the TER is a much better indicator. That shifting common has continued to trace sharply  decrease regardless of the small +16.14% achieve within the TER over the previous two weeks. Other than the short-term value stabilization, as may be seen within the detailed weekly candle chart under, repeated breaks of Fibonacci help of the put up Covid rally, together with decrease highs and decrease lows in live performance with unrelenting draw back long run value momentum, revealed by MACD within the decrease panel, the technical situation continues to be abysmal leaving little motive to start so as to add publicity to most EM equities.

Absolute Efficiency of the 22 Rising Market International locations ETFs 12 months to Date*

*Doesn’t embody dividends and the RSX which remains to be not buying and selling.

Further affirmation of the poor current technical situation of the LatAm ETFs over the past three weeks may be seen within the chart of absolutely the efficiency of the 22 EM Nation ETFs because the begin of the yr. The highest three absolute performers three weeks in the past had been all Lat Am ETFs. Since then, the iShares Chile Index Fund (ECH) has fallen from being up +19.97% on the yr to being up solely +3.94% adopted by the iShares MSCI Brazil Fund ETF up +8.76% three weeks in the past to now down -3.56% on the yr and the International X MSCI Columbia ETF (GXG) from being up +12.53% falling to down -11.99% yr so far. Whether or not this was a case of EM portfolio managers promoting winners into the tip of the quarter stays up for debate.

The Common “TR” Rating of the 22 ETFs

The Common Weekly Technical Rating (“ATR”) is the common Technical Rating (“TR”) of the 22 Rising Markets Nation ETFs we observe weekly and is plotted within the decrease panel on the Weekly Candle Chart of the iShares MSCI Rising Markets Index ETF (EEM) offered under. Just like the “TER”, it’s a affirmation/divergence or overbought/oversold indicator.

The Common Technical Rating (“ATR”) of the 22 Rising Markets Nation ETFs fell to a different new low two weeks in the past to the bottom degree (10.00) since April 2020 and solely a feeble bounce has unfolded since then. The longer-term shifting common (blue line) of the ATR left it sideways churn behind in early April and continues to trace decrease and the nonetheless declining shorter-term shifting common (crimson line) continues to drop to  decrease ranges beneath it. The EEM continues to grind in a collection of decrease highs and decrease lows remaining in its unabated downtrend. The one doubtlessly optimistic technical characteristic is that the EEM didn’t mark a brand new weekly closing low when the ATR did (inexperienced dashed strains). We’d solely declare this a bona fide non affirmation and a possible purchase sign if the EEM prints a weekly greater excessive shut above the 43 degree. We aren’t “holding our breath”.

The Week Over Week Change in Technical Rankings

Twelve of the twenty-two EM Nation ETFs we observe noticed week over week enchancment of their TRs, two had been unchanged certainly one of which, the Van Eck Vectors Russia ETF (RSX) has been at 4.5 since buying and selling was halted in late February and eight ETFs noticed their TRs free floor. The biggest drop was registered by the iShares MSCI Indonesia ETF (EDIO) which fell -6.5 “handles” to 12 from 18.5 (5 weeks in the past the EDIO had a TR of 39). Two EMEA ETFs noticed enchancment of their TRs. Each the iShares MSCI Qatar Capped ETF (QAT) and the iShares MSCI UAE Capped ETF (UAE) rose by 5.5 to 19 from 13.5. The typical achieve in TR of the ETFs was +0.28.

The Rising Markets Nation ETFs Weekly Absolute and Relative Value % Change*

*Doesn’t together with dividends, the VanEck Vectors Russia ETF (RSX) is once more, omitted.

5 of the 22 Rising Markets Nation ETFs we observe gained floor on an absolute foundation final week. The highest two had been additionally the highest two TR gainers, the iShares MSCI Qatar ETF (QAT) rose +1.71% and the iShares MSCI UAE Capped ETF (UAE) was up +0.52%. Talked about earlier within the weblog was the iShares China Giant Cap ETF (FXI) up +0.30%. Twelve EM ETFs outperformed the iShares MSCI Rising Markets ETF (EEM) on a relative foundation which was down -1.97% on the week and 9 EM ETFs underperformed. The typical absolute decline of the 22 ETFs was -2.19%. On the week, the worst performing ETF on an absolute foundation and relative foundation was the International X MSCI Columbia ETF down -7.68% and -5.82% respectively. That was the fourth weekly decline and a -28.33% decline since June sixth (see chart under).

Ideas on the Quick-Time period Technical Situation of the EEM

On the time of our final revealed technical ideas on the EEM within the June thirteenth version of the Rising Market Nation ETF Research the EEM had three days earlier than been capped by resistance on the backside of the Cloud (see chart above). That value pivot, at crimson P3, give start to the brand new shorter-term Commonplace Pitchfork (crimson P1 although P3) Final Tuesday the EEM was capped once more at not solely on the backside of the Cloud mannequin but additionally by the cluster of great resistance on the Median Line of the longer-term Schiff Pitchfork (Gold P1 by means of P3), the Kijun Plot (strong inexperienced line) and the Higher Parallel (strong crimson line) of the Commonplace Pitchfork (yellow circle). There may be one optimistic characteristic relating to the technical situation of the EEM, and that’s, in contrast to so many different fairness ETFs and Index ETFs, the EEM has not printed a decrease low beneath the pivot low in the course of Could (gold P3 and crimson P3). Saying that, the EEM has been in a sideways buying and selling sample for the previous 14 buying and selling classes in what strikes us as solely a pause within the downtrend. After briefly overtaking its sign line MACD is starting to roll over once more. The Fisher Remodel, which regularly leads turns in MACD has rolled over under its sign line. Any resumption within the downtrend in Chinese language equities will doubtless result in a check of help afforded by the Decrease Parallel of the Schiff Pitchfork at 37.50-37.75 degree.

For readers who’re unfamiliar with the technical phrases or instruments referred to above can avail themselves to a quick tutorial titled, Instruments of Technical Evaluation or the Three-Half Pitchfork Papers on The Markets Compass web site…

All charts are courtesy of Optuma. All ETF holdings and GDP knowledge is courtesy of Bloomberg. I invite our readers to contact me with any questions, feedback or solutions at…



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