The Market’s Compass Rising Markets Nation ETF Research

Welcome to this week’s Market’s Compass Rising Market’s Nation ETF Research, Week #409, that’s being printed in my Substack Weblog. It would spotlight the technical adjustments of the 22 EM Nation ETFs that I monitor on a weekly foundation and publish each third week. In celebration of Nationwide Andrews Pitchfork Week, each paid and free subscribers will obtain this week’s Rising Market’s Nation ETF Research despatched to their registered e-mail. It will enable free subscribers a onetime probability to see what they’re lacking out on by having the chance learn all the content material. Previous publications will be accessed by paid subscribers through The Market’s Compass Substack Weblog. Subsequent week we will likely be publishing the The Market’s 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 beneath signifies the weekly change within the Technical Rating (“TR”) of every particular person ETF. The technical rating or scoring system is a wholly quantitative method that makes use of a number of technical concerns that embrace however will not be restricted to pattern, momentum, measurements of accumulation/distribution and relative energy. 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 pattern 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 will be considered as an overbought situation, however with due warning, over offered circumstances can proceed at apace and overbought securities which have exhibited extraordinary momentum can simply turn out to be extra overbought. A sustained pattern 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 energy or weak point of the technical situation of the choose ETFs in the identical area.

The biggest acquire within the three EM Area Complete Rankings since we final printed on September twenty sixth for the week ending September twenty third was within the Lat/AM area which rose +37.5% to 69.5 from the 50.5 studying registered 4 weeks in the past. That’s adopted by a barely lesser acquire of +25.7% within the EMEA Area Complete Technical Rating which rose to 115 from 91.5 over the identical interval. The Asia-Pacific area Complete Technical Rating registered a lack of -31.8% over the identical interval. Affected by a knock impact of the decline within the Complete Asia-Pacific Technical Rating the Complete EM Technical Rating rose solely +6.0% to 245.5 from 231.5 because the final EM Nation ETF Weblog was printed.

The Week Over Week Change in Particular person Technical Rankings

5 EM Nation ETF registered an enchancment in its particular person Technical Rating (“TR”) one was unchanged (excludes the VanEck Vectors Russia ETF (RSX) the place buying and selling has been halted for months) and fifteen noticed their TRs fall. The common TR loss over the week was -2,61 “handles. The perfect TR acquire week over week was within the International X FTSE Greece 20 ETF (GREK) whose TR rose by 3.5 “handles” to 9.5 from 6. Though it rose by just one TR “deal with” I’ve chosen to spotlight the iShares MSCI Turkey ETF (TUR) not solely as a result of it has the best TR “rating” however due to it’s superior relative energy as witnessed by the TUR / EEM relative ratio within the chart beneath. Readers will word that this can be a recurring theme that may current itself once more additional on on this weblog publish (see YTD relative efficiency).

The Technical Situation Issue adjustments over the previous week and former 8 weeks

There are eight Technical Situation Components (“TCFs”) that decide particular person TR scores (0-50). Every of those 8, ask goal technical questions (see the spreadsheet posted above). If a technical query is constructive a further level is added to the person TR. Conversely if the technical query is destructive, it receives a “0”. Just a few TCFs carry extra weight than the others such because the Weekly Development Issue and the Weekly Momentum Think about compiling every particular person TR of every of the 22 ETFs. Due to that, the excel sheet above calculates every issue’s weekly studying as a p.c of the potential whole. For instance, there are 7 concerns (or questions) within the Every day Momentum Technical Situation Issue (“DMTCF”) of the 22 ETFs (or 7 X 22) for a potential vary of 0-154 if all 22 ETFs had fulfilled the DMTCF standards the studying can be 154 or 100%. This previous week a 37.01% studying within the DMTCF was registered for the week ending September twenty third, or 57 of a potential whole of 154 constructive factors. This was a drop from the week ending October seventh when the DMTCF marked a 57.14% studying. One technical take away can be if the DMTCF rises to an excessive between 85% and 100% it could counsel a short-term overbought situation was creating. Conversely a studying within the vary of 0% to fifteen% would counsel an oversold situation was creating. The week ending September twenty third the DMTCF was 5.84% suggesting a short-term oversold situation had developed. As a affirmation software, if all eight TCFs enhance on every week over week foundation, extra of the 22 ETFs are enhancing internally on a technical foundation, confirming a broader market transfer greater (consider an advance/decline calculation). Final week six TCFs fell, one gained barely (On Stability Quantity TCF) and one was unchanged.

The EEM with the Complete ETF Rating “TER” Overlayed

The Complete ETF Rating (“TER”) Indicator is a complete of all 22 ETF rankings and will 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 and not using 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 constructive divergence is registered. That is, in a trend, 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 turn out to be “stretched” the extra of an opportunity of a pullback within the EEM. On the flip facet 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 pink, smooths the risky TER readings and analytically is a greater indicator of pattern.

The iShares MSCI Rising Market ETF (EEM) has fallen -4.92% over the previous two weeks and the TER has risen +6.0% to 245.5 from 231.5. Earlier than the TER bounce two weeks in the past the TER reached 206.5, matching the TER low registered on July fifteenth. To this point this has produced a brief time period divergence vs. the brand new bear market weekly closing low of 34.21 within the EEM on the finish of final week (inexperienced dashed traces).

It will be untimely to counsel that the constructive divergence is a sign that the unrelenting promoting strain that has gripped the EEM has reached its terminus. That mentioned, it could not be a stretch to counsel that the EEM on the very least is due for at counter pattern worth transfer. A take a look at the short-term technical situation follows later on this weblog publish.

The Common “TR” Rating of the 22 ETFs

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

A second divergence in one other of my proprietary indicators versus worth has developed, this time it’s the EEM vs the ATR. The week ending September thirtieth the ATR registered a 9.39 studying matching the July fifteenth studying as costs continued to drop sharply to new lows (inexperienced dashed traces) however the shorter time period shifting common pink line continues to trace decrease beneath the longer-term exponential shifting common (blue line). One constructive technical characteristic is that on Friday the EEM bounced off assist provided by the Decrease Parallel (stable pink line) of the Schiff Modified Pitchfork (pink P1 by means of P3). Setting apart that brief time period constructive technical characteristic, the principally unrelenting downtrend within the EEM since February of 2021 continues to be intact.  

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

Final Thursday the EEM opened sharply decrease in the beginning of the buying and selling session however a worth reversal developed and the EEM closed up +0.29% on the day. That worth pivot gave start to the newly drawn Schiff Modified Pitchfork (inexperienced P1 by means of P3). On Friday an try and comply with by means of to Thursday’s worth reversal failed and the EEM closed at a brand new bear market low.

A brief-term divergence has developed in my newly minted EM Nation ETF Every day Momentum Oscillator as worth registered a decrease low and the oscillator has briefly held at the next low (inexperienced dashed traces). For that divergence to turn out to be certifiable I would wish to see costs to carry final Thursday’s low at 33.65 and finally the next excessive within the oscillator. That is doubtless an excessive amount of to perform within the short-term with out the EEM over taking Median Line resistance (inexperienced dotted line) and the Kijun Plot (stable inexperienced line).

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

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

Solely 4 EM Nation ETFs had been up on an absolute foundation final week. The highest two that improved had been the International X MSCI Greece ETF (GREK) up +1.42% adopted by the iShares MSCI Turkey ETF (TUR) up +0.97%. These wouldn’t usually be value highlighting if the typical absolute lack of the 21 tracked ETFs wasn’t -2.38%. That mentioned, sixteen ETFs outpaced the EEM on a relative foundation and 5 underperformed. Of these 5, three had been Asia Pacific Nation ETFs, the biggest underperformer on a relative foundation over the previous 5 buying and selling periods (-4.52%) was the iShares China Massive Cap ETF (FXI).

The Relative Return of the 22 EM ETFs Vs. the EEM Index 12 months to Date*

*Doesn’t embrace dividends or the RSX

Charts are courtesy of Optuma, knowledge feed is courtesy of Bloomberg Finance L.P.

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