The Market’s Compass Developed Markets Country ETF Study

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This is the third publication of the Market’s Compass Developed Markets Country (DMC) ETF Study that is being published on my Substack Blog. This is the last DMC ETF Study that will be available to free subscribers. This week’s blog highlights the technical changes of the 22 DM ETFs that we track on a weekly basis and write about every three weeks. There are three ETF Studies that include the Market’s Compass US Index and Sector ETF Study, the DMC ETF Study and the Emerging Markets Country (EMC) ETF Study. The three Studies will individually be published every three weeks. The EMC ETF Study will be published a week from today. We recommend that readers view the ETF Studies on a desk top computer, a laptop computer or ipad.

This Week’s and 8 Week Trailing Technical Rankings of the DMC ETFs

The Excel spreadsheet below indicates the weekly change in the Technical Ranking (“TR”) of each individual ETF. The technical ranking or scoring system is an entirely quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength. If an individual ETFs technical condition improves the Technical Ranking (“TR”) rises and conversely if the technical condition continues to deteriorate the “TR” falls. The “TR” of each individual ETF ranges from 0 to 50. The primary take away from this spread sheet should be the trend of the individual “TRs” either the continued improvement or deterioration, as well as a change in direction. Secondarily a very low ranking can signal an oversold condition and conversely a continued very high number can be viewed as an overbought condition but with due warning over sold conditions can continue at apace and overbought securities that have exhibited extraordinary momentum can easily become more overbought. A sustained trend change needs to unfold in the “TR” for it to be actionable.

This week we have chosen to highlight the Global X FTSE Norway 30 ETF (NORW). As can be seen above, for the past three weeks the NORW has registered the second best improving Technical Ranking (“TR”) after the GlobalX FTSE Portugal 20 ETF (PGAL) TR. The NORW has rising from 12 three weeks ago to its current reading of 39 and also marks the 3rd highest TR of the 22 Developed Markets Country ETFs we track. In addition, as can be seen in the chart presented below, the NORW is only 0.72 points or 2.2% from registering a new 8-year high. The lower panel of the chart is the relative comparison of the NORW to the iShares MSCI World ETF (URTH). As can be seen, there has been a marked relative improvement vs. the URTH since the start of the year (green arrow). In the center indicator panel, MACD of the TR has enter positive territory after kissing its signal line twice reflecting the positive momentum in the “TR”. In the panels that follow there is additional evidence of the NORW outperformance.

Top 15 Holdings in the NORW*

*Data is courtesy of Bloomberg

The URTH with This Week’s Total ETF Ranking “TER” Overlayed

The Total ETF Ranking (“TER”) Indicator is a total of all 22 ETF rankings and can be looked at as a confirmation/divergence indicator as well as an overbought oversold indicator. As a confirmation/divergence tool: If the broader market as measured by the iShares MSCI World ETF (URTH) continues to rally without a commensurate move or higher move in the TER the continued rally in the URTH Index becomes increasingly in jeopardy. Conversely, if the URTH continues to print lower lows and there is little change or a building improvement in the TER a positive divergence is registered. This is, in a fashion, is like a traditional A/D Line. As an overbought/oversold indicator: The closer the TER gets to the 1100 level (all 22 ETFs having an individual Technical Ranking “TR” of 50) “things can’t get much better technically” and a growing number individual ETFs have become “stretched” the more of a chance of a pullback in the URTH. On the flip side the closer to an extreme low “things can’t get much worse technically” and a growing number of ETFs are “washed out technically” an oversold rally or measurable low is close to be in place. The 13-week exponential moving average in red, smooths the volatile TER readings and analytically is a better indicator of trend.

When we last published three weeks ago the Total Technical Ranking (“TER”) of the iShares MSCI World Index ETF, (URTH) fell to it lowest level in almost two years. last week and has fallen from the week before reading of 368.5 to 233.50 and from the February 11th reading of 435.5. What we wrote previously was that the TER was near a level that suggested a deep over sold condition but at that time there was nary a signal that it has reached its terminus. Although the TER has not yet printed a higher high it nonetheless has rebounded to near neutral territory and despite the fact that the 13-week moving average has not turned in a significant fashion we believe the reversal is technically noteworthy.

The Average “TR” Ranking of the DMC 22 ETFs

The ATR of the 22 Developed Markets Country ETFs reached its oversold nadir (10.61) three weeks ago. It began to rise the following week but two weeks ago a sharp reversal unfolded when ATR rose +97.09% to 23.11 which was the best reading since the week ending January 14th (25.50) As can be seen above, the shorter-term moving average (red line) is starting to hook higher but the longer-term moving average (blue line) of the ATR is still retreating (although at a more subdued pace). The ATR had not reached an oversold extreme that we witnessed in December 2018, but it nonetheless did turn from what can be considered an oversold level. We would need to see a sustained follow through in the ATR and in price now that the URTH has retaken the ground above the Cloud. Only then would it suggest a sustained recovery and not just a counter trend rally was unfolding.

The Week Over Week Change in Technical Rankings

Nine out of 22 Developed Markets Country (DMC) ETFs we track registered improved TRs over the week, 2 were unchanged and 11 declined with the average TR gain of +0.34. This was a marked improvement from the week ending 3/4/22 when only 4 registered TR improvement and 18 fell with an average TR loss of -6.14. The two ETFs leading in TR improvement were the iShares MSCI Singapore Index Fund ETF (EWS) rising +8 to 22.5 from 14.5 (three weeks ago it reached a low of 5.5). The iShares MSCI United Kingdom Index Fund ETF (EWU) rose +7.5 to 39.5 from 32 marking the second highest TR of the 22 ETFs just behind the iShares MSCI Canada Index Fund ETF (EWC) at 43.5 at the end of last week. Both of these ETFs positive technical features have been featured in previous DMC ETF Studies.

The Developed Markets Country ETFs Weekly Absolute and Relative Price % Change*

*Does not including dividends

Eleven of the 22 Developed Markets Country (DMC) ETFs we track improved on an absolute basis last week led by the Global X FTSE Norway 30 ETF (NORW) up +3.77% This was after a +7.49% gain the previous week and the NORW takes the pole position as the best performing ETF on a relative basis vs. the URTH since the start of the year (+13%). The NORW was followed by the iShares Australia Index Fund ETF (EWA) up +3.15%. Seven DMC ETFs outperformed the iShares MSCI World ETF (URTH) on a relative basis and 15 underperformed.

The Relative Return of the 22 DMC ETFs Vs. the URTH Index Year to Date*