Welcome to this week’s publication of the Market’s Compass Developed Markets Country (DMC) ETF Study #608. It highlights the technical changes of the 21 DM Country ETFs that I track on a weekly basis and publish every third week. There are three ETF Studies that include the Market’s Compass US Index and Sector (USIS) ETF Study, the Developed Markets Country (DMC) ETF Study and the Emerging Markets Country (EMC) ETF Study. The three Studies are normally published every three weeks and are sent to my paid Substack subscriber’s email. A total of 71 ETFs are covered in the three Studies. There is also a Weekly publication that is sent to paid subscribers every Sunday titled The Market’s Compass Crypto Sweet Sixteen Study that tracks the technical condition of sixteen of the larger cap Cryptocurrencies.
To understand the methodology used in constructing the objective DM Country ETF Individual Technical Rankings visit the mc’s technical indicators page at www.themarketscompass.com and select “dm country etfs”. What follows is a Cliff Notes version* of the full explanation…
*The technical ranking system is a quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength of each individual DM Country ETF that can range between 0 and 50. The DM ETF Total Technical Ranking ranges between 0 and 1100 and can be viewed as a overbought / oversold indicator.
The Total DM Technical Ranking fell -0.31% to 792 from the week before reading of 794.5 which was a -1.55% drop from 807 three weeks ago.
Nine DM ETF TRs gained ground last week and twelve fell. Sixteen ended the week in the “green zone” (TRs between 35 and 50) and five ending the week in the “blue zone” (from 15.5 to 34.5) which was a technical improvement from two weeks ago when thirteen DM ETF TRs were in the “green zone” and eight ended that week in the “blue zone”. The average TR loss last week was -0.12 vs. the previous week’s average TR loss of -0.60 when ten TRs moved higher, three were unchanged, and eight fell.
*The 13-Week Simple Moving Average (SMA) lines smooths what can be “choppy” Objective Technical Rankings and better defines the trend in the TRs. Changes in the SMA trends with follow-through are signals worthy of consideration.
The iShares MSCI Ireland Index Fund ETF’s (EIRL) 13-Week TR SMA continued in its rise from the May lows. It also “sports” the best 13-Week TR SMA level (45.73) of the other twenty 13-Week TR SMA’s. The closest is the iShares MSCI Singapore Index Fund ETF’s 13-Week TR SMA at 41.73 which has been in a rising trend since the end of March. The iShares MSCI Hong Kong Index Fund ETF’s 13-Week SMA has turned up for the first time since it rolled over in March with the help of the largest rise in TR of the twenty-one ETF TRs last week (up 18 to 38 from 20). It is also featured on the RRG Chart in the chart that follows.
The Relative Rotation Graph, commonly referred to as RRGs were developed in 2004-2005 by Julius de Kempenaer. These charts are a unique visualization tool for relative strength analysis. Chartists can use RRGs to analyze the relative strength trends of several securities against a common benchmark, (in this case the URTH) and against each other over any given time period (in the case below, daily) over the past three weeks. The power of RRG is its ability to plot relative performance on one graph and show true rotation. All RRGs charts use four quadrants to define the four phases of a relative trend. The Optuma RRG charts uses, from Leading (in green) to Weakening (in yellow) to Lagging (in pink) to Improving (in blue) and back to Leading (in green). True rotations can be seen as securities move from one quadrant to the other over time. This is only a brief explanation of how to interpret RRG charts. To learn more, see the post scripts and links at the end of this Blog.
Not all 21 ETFs are plotted in this RRG Chart. I have done this for clarity purposes. Those which I believe are of higher technical interest remain.
The iShares MSCI Hong Kong Index Fund hooked higher in the Lagging Quadrant early last week after falling out of the Leading Quadrant and through the Weakening Quadrant weeks befor exhibiting increasingly negative Relative Strength Momentum (note the distance between the daily nodes as it did so). A week ago, last Friday the iShares MSCI Denmark ETF (EDEN) did a U-turn in the Lagging Quadrant and accelerated into the Improving Quadrant in concert with positive Relative Strength Momentum. The Global X FTSE Norway ETF (NORW) also did a U-turn, but it did so in the Weakening Quadrant and at the end of last week it returned to the Leading Quadrant marking the best Relative Strength ratio vs. the benchmark CCi30 Index at weeks’ end (see the Tabulation Table below).
The Relative Strength and Relative Strength “Tabulation Table” begins with the readings at the end of last week followed by the trailing three weeks that includes the Readings from the last Study. If there has been an improvement in either the Relative Strength Ratio or the Relative Strength Momentum reading on a week-over-week basis I have highlighted it in green. If there has been a contraction in either, it is highlighted in red and an unchanged reading in either will remain in black. The color-coding system serves as a heat map over the past four Friday’s readings highlighting either the continued improvement, deterioration, or stasis vs. the benchmark, the URTH. The ETFs that are displayed on the RRG chart above have the Symbol and ETF Short Name (Country or Index) highlighted in blue below.
*To understand the construction the of The Technical Condition Factors or TCFs visit the mc’s technical indicators page at www.themarketscompass.com and select “dm country etfs”. For those who unfamililar a shortened version* is explained below…
*The Technical Condition Factors are utilized in the calculation of the Individual DM Country ETF Technical Rankings. What is shown in the excel panel below is the total TCFs of all twenty-one TRs. A few TCFs carry more weight than the others, such as the Weekly Trend Factor and the Weekly Momentum Factor in compiling each individual TR of each of the twenty-one ETFs. Also, the TCFs number of inputs vary. Because of that, the excel sheet below calculates each factor’s weekly reading as a percentage of the possible total which normalizes the inputs. The basic explanation is that the eight TCFs can range between 0% and 100%.
The Daily Momentum Technical Condition Factor (“DMTCF”) fell for the second week in a row to 55.19% or 85 out of a possible 210 handles last week from 64.94% or 100 the previous week which was drop from the near overbought reading of 85.06% three weeks ago..
As a confirmation tool, if all eight TCFs improve on a week over week basis, more of the 21 ETFs are improving internally on a technical basis, confirming a broader market move higher (think of an advance/decline calculation). Conversely, if more of the 21 TCFs fall on a week over week basis, more of the ETFs are deteriorating on a technical basis confirming the broader market move lower. On a week-over-week basis four TCFs rose, two TCFs fell, and two were unchanged.
The Weekly Average DM Technical Ranking (“ATR”) in the bottom panel, is the average of the individual Technical Rankings of the 21 Developed Markets Country ETFs I track. It is a confirmation/divergence or overbought/oversold indicator.
Three weeks ago, the iShares MSCI World ETF or URTH retook the ground above the Upper Parallel (solid gold line) of the long-term Standard Pitchfork (gold P1 through P3) and closed the week above it. The following week the URTH challenged the June12th intra-week highs at 212.08 and pulled back last week. I have left the Pitchfork on the chart as it continues to mirror the vector of the Cloud. The Stochastic Momentum Index turned up at a higher low and is tracking higher above its signal line and longer-term MACD has pulled back above its signal line and ATR (bottom panel) has advanced above both its moving averages. More comments in Thoughts on the Short-term Technical Condition of the URTH but first…
* From Friday August 14th to Friday August 21st
Fourteen of the Developed Markets Country ETFs I track in these pages were up on an absolute basis and seven were down over the week. Sixteen of the DM ETFs outpaced the -1.01% loss in the URTH, last week and five underperformed on a relative basis. The five-day average absolute price change was +0.43%, adding to the previous week’s average price gain of +0.43% and the average absolute price gain of +2.34% three weeks ago.
The Average YTD price change of the twenty-one DM ETFs was +13.67% last week vs. a YTD +12.54% gain in the URTH. The previous week, the Average YTD price change was +13.21% of the twenty-one DM ETFs. All twenty-one of the DM Country ETFs are now up for the year.
Three weeks ago, last Monday, the URTH lifted off impulsively through the Upper Parallel (solid violet line) of the falling Schiff Pitchfork (violet P1 through P3) which had contained prices since May. That was in concert with a move above potential resistance at the top of the Cloud model. The rally followed through until it marked a new all-time intra-day high that capped the rally and a process of backing and filling unfolded that led me to draw the shorter-term new Schiff Pitchfork (P1 through P3 in light blue). On Thursday of last week, the Median Line of that Pitchfork (blue dotted line) acted as support. All three momentum oscillators, not surprisingly, have rolled over. Secondary support should be discovered at the Kijun Plot at 205.60 (which is the midpoint or 50% between the lowest low and highest high over the past 26 days).
Charts and price data are courtesy of Optuma. Any time series data including my ETF Technical Rankings can be imported, charted, and back tested in Optuma. A three part tutorial on Andrews Pitchfork can be found on The Market’s Compass website.
The following links are an introduction and an in-depth tutorial on RRG Charts…
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