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The Market’s Compass US Index and Sector ETF Research


That is the primary publication of the Market’s Compass US Index and Sector ETF Research to be printed in our Substack Weblog that may spotlight the technical modifications of the 30 US ETFs that we monitor on a weekly foundation. Previous publications could be accessed through The Market’s Compass web site or by contacting us instantly.

This Week’s and eight Week Trailing Technical Rankings of Particular person 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 completely quantitative method that makes use of a number of technical concerns that embrace however are usually not restricted to pattern, momentum, measurements of accumulation/distribution and relative energy. If a person ETFs technical situation improves the Technical “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 needs to 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 could be considered 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 pattern change must unfold within the “TR” for it to be actionable. The colour of a quantity signifies the place the “TR” is the place every particular person ETF is on a scale of 0-50 with 0-15 in Purple, 16-34 in Blue and 35-50 in Inexperienced and could be considered as a warmth map.

As could be seen above, because the center of December, the XLP (SPDR Shopper Staples Choose Sector Fund ETF) has sported a “TR” that has constantly been within the higher quartile of the 0-50 vary. Additionally noteworthy, has been the continued constructive technical situation of power ETFs over the previous 5 weeks. Because the begin of the yr, the XLE (SPDR Vitality Choose Sector Fund ETF) in addition to the OIH (VanEck Vectors Oil Providers ETF) have proven  enchancment of their “TRs”.

The SPX Index with This Week’s Whole ETF Rating “TER” Overlayed in Blue

The “TER” Indicator is a complete of all 30 ETF rankings and could be checked out as a affirmation/divergence indicator in addition to an overbought oversold indicator (chart beneath). As a affirmation/divergence instrument: If the broader market as measured by the SPX Index (SP) continues to rally and not using a commensurate transfer or greater transfer within the “TER” the continued rally within the SPX Index turns into more and more in jeopardy. Conversely, if the SPX Index 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 vogue, is sort of a conventional A/D Line. As an overbought/oversold indicator: The nearer the “TER” will get to the 1500 stage (all 30 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 SPX Index, 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” an oversold rally or measurable low is near be in place. The 13-week exponential shifting common in Purple smooths the unstable “TR” and analytically is a greater indicator of pattern.

Though the “TER” registered a 34.62% bounce to 630 from the earlier week’s 468 studying, the pattern stays decrease. Except the “TER” prints a better excessive above the December thirty first studying (917.5) the take away is that we will anticipate that the Friday, October 1st low of 4,388 within the SPX Index to be examined.

The Common “TR” Rating of the 30 ETFs

The Common Weekly Technical Rating (“ATR”) is the common technical rating of the 30 US Index and Sector ETFs we monitor weekly and is plotted within the decrease panel on the Weekly Candle Chart of the SPX Index introduced beneath. Just like the “TER”, it’s a affirmation/divergence or overbought/oversold indicator.

The “ATR” printed a divergence (decrease excessive as proven by the violet dashed line) in late December whereas the big cap index went on to a brand new excessive. Additionally telling was when the brief time period shifting common of the “ATR” (purple line) “kissed” the long term shifting common and resumed its decline. Though the “ATR” is monitoring decrease it has not but reached an oversold excessive.

The Week Over Week Change in Technical Rankings

After two weekly readings beneath 15 the XME (SPDR S&P Metals and Mining ETF) “TR” bounced sharply, rising 17 to twenty-eight.5 from11.5. The second greatest week over week “TR” gainer was the XOP (SPDR Oil & Gasoline Exploration and Manufacturing ETF) which jumped 15 to 43.5 from 28.5, rising again up into the higher quartile in live performance with a brand new two yr weekly closing excessive (chart beneath). Word that MACD of the “TR” (decrease panel) has flip up by means of it’‘s sign line and the momentum oscillator of the “TR” is starting to trace again into constructive territory.

The Weekly Absolute and Relative Value % Change*

*Doesn’t together with dividends

The afformentioned XME and XOP ETFs had been two of the highest three greatest performing ETFs on an absolute foundation up +6 .99% and +5.56% final week. Sandwiched between the 2 was the SLX (VanEck Vectors Metal ETF) up +5.60%. The highest 15 holdings of these three ETFs are proven beneath. Information is courtesy of Bloomberg.

XME Holdings

XOP Holdings

SLX Holdings

The Relative Return Vs. the SPX Index 12 months to Date*

*Doesn’t together with dividends

I invite our readers to contact me with any questions or feedback at…tbrackett@themarkets compass.com

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