April 2014 SQN Report
by Van K. Tharp. Ph.D.
There are numerous ETFs that now track everything from countries, commodities, currencies and stock market indices to individual market sectors.  ETFs provide a wonderfully easy way to discover what’s happening in the world markets.  Consequently, I now apply a version of my System Quality Number® (SQN®) score to measure the relative performance of numerous markets in a world model. 
The Market SQN score uses the daily percent change for input over a 100-day period. Typically, a Market SQN score over 1.45 is strongly bullish and a score below -0.7 is very weak. The following color codes help communicate the strengths and weaknesses of the ETFs in this report:

• Green: ETFs with very strong Market SQN scores (0.75 to 1.5).
  
• Yellow: ETFs with slightly positive Market SQN scores (0 to 0.75).
  
• Brown:  ETFs with slightly negative Market SQN scores (0 to -0.7).
  
• Red: Very weak ETFs that earn negative Market SQN scores (< -0.7).
  

The world market model spreadsheet report below contains most currently available ETFs; including inverse funds, but excluding leveraged funds.  In short, it covers the geographic world, the major asset classes, the equity market segments, the industrial sectors and the major currencies. 
World Market Summary
Each month, we look at the equities markets by segment, region and sector. Most of the world’s countries are now light green or yellow.   All of the US sectors are now either light green or yellow, and the same goes for the rest of the Americas except Mexico which is brown.  Europe is still mostly green, but now there are some yellows and Russia and Emerging Europe are still brown or red.  In Asia, Japan and China are weak, while Australia and India are light green.    
Currencies show the British Pound, the Indian Rupee, and the Brazilian Real are strong.  The Canadian Dollar, the US Dollar and the Yuan are weak. 
From an industrial sector standpoint, we find mostly yellow and light green.  REITs and Utilities are very strong but Aerospace, Building Materials, Energy, Oil and Gas, Healthcare, Pharmaceuticals, Networking and Technology are light green.  Retail and Media are the only brown areas. 
Commodities, Real Estate, Debt, Top and Bottom Lists
The next chart shows real estate, debt instruments, commodities and the top and bottom ETFs for the past 100 days. 
Agriculture and livestock are the only dark green commodities.  Natural gas, and global water are both light green.  Coal, steel, base metals, and silver are all still weak and everything else is yellow or neutral. 
US real estate is now strong, but Chinese real estate is negative, just like last month.  All the interest rate categories, however, are positive with Junk Bonds actually being dark green and above 2.0 and Corporate Bonds being strong.   Interestingly, Long Term Bonds are again stronger than Short Term Bonds for the second month in a row.   Either some people don’t seem to understand what’s going on in the world or they are making short term plays.   
The top scoring ETFs had three  SQN scores above 3.0 which is very very, stong.  These include two preferred stock groups and California municipal bonds.   The remaining 12 ETFs in the top 15 all have scores above 2.0.   I think this is the first time I’ve seen all 15 above 2.0.   There is lots of representation by various munibond ETFs.
Only two of the weakest ETFs are below -1.0.  These include Russia and the Chinese Yuan.  The weakest list  continues to include currencies and short funds.
Summary
Now let’s look at our newest table which measures the percentage of ETFs in each of the strength categories.  Based upon this, the downward trend we’ve been observing has halted but not convincingly.  45%  of the ETFs are bullish and 13.2% are Bearish.     

Date	Very Bullish	Bullish	Neutral	Bearish	Very Bearish
	> 1.5	0.75 - 1.5	0 - 0.75	0 - -0.7	< - 0.7
January 31st, 2013	27.1%	39.6%	20.7%	6.4%	4.7%
February 28th	10.3%	45.2%	24.4%	11.9%	7.5%
March 31st	39.2%	25.5%	19.1%	9.0%	6.4%
April 30th	49.1%	21.1%	14.8%	8.0%	6.2%
May 31st	29,2%	23.6%	19.9%	12.3%	14.2%
June 30th	2.1%	31.0%	23.2%	22.0%	20.9%
July 31st	8.2%	33.5%	29.0%	13.3%	15.2%
August 30th	1%	15%	46.4%	19.3%	17.5%
Sept.  30th	1%	13.8%	42.3%	23.0%	19.1%
Nov. 1st	13.3%	48.3%	21.8%	12.5%	3.3%
Dec 1st	14.6%	42.7%	24.2%	13.3%	4.3%
Dec 31st	19.3.%	45.5%	22.0%	11.3%	2.9%
January 31st, 2014	8.0%	49.3%	20.7%	12.7%	7.6%
February 28th	18.9%	48.4%	18.1%	6.2%	6.8%
March 31st	4.9%	40.2%	38.8%	13.3%	3.1%
April 30th	11.1%	33.9%	40.2%	11.3%	1.8%

What's Going On?
Fundamentals are still terrible but the stock market seems to be one of the key places to be even though a bear market could be right around the corner.  Be careful.
Until early May, this is Van Tharp.
The markets always offer opportunities, but to capture those opportunities, you MUST know what you are doing.  If you want to trade these markets, you need to approach them as a trader, not a long-term investor.  We’d like to help you learn how to trade professionally because trying to navigate the markets without an education is hazardous to your wealth.
All the beliefs given in this update are my own. Though I find them useful, you may not.  You can only trade your own beliefs about the markets.
 

About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at [You must be registered and logged in to see this link.] His newest book, Trading Beyond The Matrix, is available now at matrix.vantharp.com.