Market’s Compass Emerging Markets Countries ETF Study

July 29, 2022

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This is the third publication of the Market Compass Emerging Markets Country ETF Study published on our Substack blog, which will cover the technical changes of the 22 EM ETFs we track weekly, as well as include notes on the technical changes compared to our last published Market’s Compass ETF Study EM Countries ETF Study three weeks ago on March 14. This is the latest Market’s Compass ETF Studies available to free subscribers. Paid subscribers will continue to receive weekly ETF research sent directly to their registered email. Past publications are available via The Market’s Compass Substack blog, The Market’s Compass website or by contacting us directly. Please note that due to the author’s travel commitments, this week’s ETF research is being published late and prices are as of last Friday.

Technical ratings of selected ETFs for the past week and the last 8 weeks

The Excel table below shows the weekly changes in the Technical Rating (“TR”) of each individual ETF. A technical ranking or scoring system is a completely quantitative approach that uses a variety of technical considerations that include, but are not limited to, trend, momentum, accumulation/distribution measurements, and relative strength. When the technical condition of an individual ETF improves, the TR technical rating rises, and conversely, when the technical condition continues to deteriorate, the TR falls. The TR of each individual ETF ranges from 0 to 50. The main information from this table should be the trend of individual TRs, either a constant improvement or deterioration, and a change in direction. Second, a very low rating may signal an oversold condition, and conversely, a very high number may be considered an overbought condition, but with proper warning, oversold conditions may continue at a rapid pace, and securities that have shown unusual momentum may easily rise. . overbought. A sustained trend change must unfold in TR to be eligible. The TR of each individual ETF in each of the three geographic regions can also reveal the relative relative strength or weakness of the technical condition of selected ETFs in the same region.

As seen above, of the three emerging market regions we track, only five Latin American ETFs have technical ratings (“TR”) that are in the “green zone” (above 35) over the past three weeks. . The Total Lat AM EM rating hit a high of 235.5 two weeks ago (we highlighted the continued relative outperformance of the 5 Lat Am Country ETFs in our last two EM blogs. There has been a notable improvement in the Asia-Pacific EM rating, which includes 9 individual country TR ETFs that helped lift the EM total to 688 from a weekly low of 517.5 on March 11. The Asia Pacific total rose to 231 from 159.5 for 71.5 handles or 44.8% after the March 11 reading SPDR S&P Emerging Asia Pacific ETF (GMF) recovered from the March 15 lows (chart below) and while the rally from these lows has slowed in a recent consolidating price pattern, it is still up 11.79% from the lows. bottom panel of the chart that the MACD is tracking above the signal line, reflecting a recent reversal of price momentum to the downside, although it remains in negative territory. GMF is not a very liquid ETF (with a 90-day moving average Ag egate (volume 0 shares), but the ETF chart serves to reflect the initial reversal of the underlying stock in the Asia-Pacific region. The page after the GMF chart shows the top 15 ETF holdings, and they are heavily weighted to Taiwanese, Chinese and Indian stocks, thanks to investments in depositary receipts.

EEM’s overall ETF rating for this week is “TER.”

The ETF Total Rating Indicator (“TER”) is an aggregate of all 22 ETF ratings and can be viewed as a confirmation/divergence indicator as well as an overbought and oversold indicator. As a confirmation/divergence tool: If the broader market, as measured by the iShares MSCI Emerging Markets Index ETF (EEM), continues to rally without a corresponding or larger move in TE’, a further rally in the EEM becomes increasingly threatened. Conversely, if EEM continues to print lower lows and TER shows little change or building improvement, a positive divergence is registered. It is, in fashion, like a traditional A/D line. As an overbought/oversold indicator, the closer the TER gets to the 1100 level (all 22 ETFs have a TR of 50), “technically things can’t get any better” and more individual ETFs become “stretched,” the more likely a pullback to EEM is. On the other hand, the closer to an extreme low, “technically things can’t get any worse” and more and more ETFs are “technically washed out,” an oversold rally or measurable low is close to happening. The 13-week exponential moving average in red smooths out the volatile TER reading and is analytically the best trend indicator.

The EEM (TER) Total Technical Rating of 22 Emerging Markets ETFs rose to 688.0 from 669.5 the previous week, resulting in a gain of 2.76% for the week. In the 3-week period since our last publication, EM’s overall rating has risen to 688 from 517.5. We remind readers that since a significant number of EM ETFs are thinly traded and subject to wide fluctuations, which in turn creates volatile changes in individual technical ratings, the TER calculation also fluctuates in a similar manner. Analytically, targeting the 13-week moving average TER is a much better indicator. This moving average has not made a new higher high, but it is starting to rise. TER divergences take time to develop and only when we start to see the price break out of the downtrend or the TER decisively break out of the contracting triangle to higher highs will we be ready to assume that the EEM may be out of the woods.

Year-to-date absolute performance of 22 emerging market ETFs*

* Excludes dividends and RSX, which is still not trading.

Further confirmation of year-to-date Lat AM country ETF outperformance is seen in the chart above with the iShares MSCI Brazil Index Fund ETF (EWZ +39.44%), the iShares Chile Index Fund ETF (ECH +27.98%) and the iShares MSCI Peru ETF (EPU +26.94%).

Average rating of “TR” 22 ETFs

The average technical rating (ATR) of 22 emerging market ETFs has risen over the past three weeks from a low of 23.52 in the week ended March 11 to 29.39, 30.43, 31.27 respectively, but the trend appears to be however, the longer-term moving average (blue line) remains flat in the lateral outflow, although the shorter-term moving average (red line) is starting to hint at a turn higher. The EEM, which has been declining since February, has partially reversed itself over the past three weeks. During this period, EEM increased by +7.82. However, the ATR avoided printing a lower low in part thanks to an improvement in Asia-Pacific ETFs also as TRs in Latin America were raised, with this week’s ATR reading for the remaining 17 ETFs at 27.06.

Week by week change in technical ranking*

* RSX, which has a long trading halt, has been removed from the weekly TR changes.

The three biggest technical gainers over the past week were the Global X FTSE Greece 20 ETF (GREK), which climbed +9 to 25 from 16, followed by the iShares MSCI Thailand Index Fund ETF (THD), which rose +8, 5 to 37.5 from 29, and the iShares MSCI India Index ETF (INDA), which rose +7 to 25 from 18. Data provided by Optuma.

Weekly absolute and relative price of emerging market ETFs, % change*

*Excluding dividends, VanEck Vectors Russia ETF (RSX) is again omitted.

Fifteen of the 22 emerging market ETFs we track improved in absolute terms last week, led by the Global X MSCI Greece 20 ETF ( GREK ) with a gain of +5.20%. The eight EM ETFs outperformed the iShares MSCI Emerging Markets ETF ( EEM ) on a relative basis, which rose 1.89% for the week. In relative terms, 13 EM ETFs underperformed. The worst-performing ETF for the week in absolute and relative terms was the iShares MSCI Qatar ETF, down -1.07% and -2.90%, respectively. As seen in the chart below, this was just a pause in what could be classified as a powerful constructive rally from the March 2020 low (the top 15 holdings in the ETF follow the weekly chart below). Data provided by Bloomberg.