June 2015 SQN® Report by Van K. Tharp, Ph.D.

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June 2015 SQN^® Report

by Van K. Tharp, Ph.D.

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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 1.47 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:

	•	Dark Green: ETFs with very strong SQN^® 100 scores > 1.47
	•	Light Green: ETFs with strong SQN 100 scores (0.70 to 1.47).
	•	Yellow: ETFs with slightly positive Market SQN scores (0 to 0.70). These are Neutral/Sideways
	•	Brown: ETFs with slightly negative Market SQN scores (0 to -0.7).
	•	Red: Very weak ETFs that earn negative Market SQN scores (< -0.7).

This is basically the same ratings that we use for the Market SQN^® Score. 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 — Equities & Currencies

Each month, we look at the equities markets across the globe by segment, region and sector. This month what we see are very neutral markets across the board. There is nothing exciting. There are only five red sectors and there are no dark green sectors. It’s mostly brown, yellow, and light green. Again, the dollar is no longer the dominant sector and that probably explains what is going on since everything on the chart is relative to the US dollar.

This month all US sectors are yellow except for small cap growth which is light green. The Americas continue to be weak with Canada, Mexico, Brazil, Latin America and Chile all showing negative.

Last month’s dark green sectors in Asia: China, Hong Kong, and Japan have all weakened — Hong Kong actually became yellow. This month, five Asia markets have turned brown: India, Malaysia, Singapore, South Korea, and Thailand.

Despite the Greek crisis in Europe, most of Europe is yellow with the Netherlands being light green. There are no negative markets in Europe.

The US sector view shows some weakening with three red sectors (Metals and Mining, REIT, and Dow Transports). Volatility is also red (meaning there is none). The strongest sectors seem to be biotech, the only dark green sector. These sectors are light green: Consumer Discretionary, Health Care, Pharmaceuticals, Biotech and Genome, Broker Dealers, Food and Beverage, Insurance, Media, Regional Banks and Software.

In the foreign exchange market, the Yuan is now the strongest currency. You might remember that we’ve been talking about how oil might come to be denominated in the Yuan instead of the US dollar. When we first mentioned this, the US dollar was the dominant currency and the Yuan was relatively weak. But since that time we certainly seem to have seen a movement to support that rumor. At this point, the Japanese Yen is the only red currency.

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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.

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This month there are no green commodities, but there are two red ones 1) Coal and 2) Gold. Five areas are yellow while 7 are negative … so commodities have not been a profitable place to be long.

US real estate now looks week, and Chinese real estate is getting much stronger.

Debt continued to move down this month, with 20+ year bonds and corporate bonds being red. And only short term bonds are green. The market seems to be expecting higher interest rates.

The top ranking ETFs in the database are weakening again. We have only seven dark green areas and no ETFs are above 2.0. Last month all of the top 15 were dark green and six were above 2.0. Health Care, Japan Small Cap stocks, and the Yuan are the strongest ETFs in the database right now.

The bottom list includes one sector with SQN scores below -2.0 (Coal) and all of them are below negative 1.0.

Summary

Now let’s look at the summary table which measures the percentage of ETFs in each of the strength categories.

Date	Very Bullish	Bullish	Neutral	Bearish	Very Bearish
2013	> 1.5	0.75 - 1.5	0 - 0.75	0 - -0.7	< - 0.7
Jan 31st,	27.1%	39.6%	20.7%	6.4%	4.7%
Feb 28th	10.3%	45.2%	24.4%	11.9%	7.5%
Mar 31st	39.2%	25.5%	19.1%	9.0%	6.4%
Apr 30th	49.1%	21.1%	14.8%	8.0%	6.2%
May 31st	29,2%	23.6%	19.9%	12.3%	14.2%
Jun 30th	2.1%	31.0%	23.2%	22.0%	20.9%
Jul 31st	8.2%	33.5%	29.0%	13.3%	15.2%
Aug 30th	1%	15%	46.4%	19.3%	17.5%
Sep 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%
2014
Jan 31st	8.0%	49.3%	20.7%	12.7%	7.6%
Feb 28th	18.9%	48.4%	18.1%	6.2%	6.8%
Mar 31st	4.9%	40.2%	38.8%	13.3%	3.1%
Apr 30th	11.1%	33.9%	40.2%	11.3%	1.8%
May 31st	12.5%	46.5%	27.7%	7.6%	6.0%
Jun 30th	53.4%	33.7%	14.2%	2.5%	0.8%
Aug 29th	20.3%	45.2%	22.8%	10.5%	5.3%
Sep 30th	6.6%	26.9%	30.2%	24.0%	18.5%
Oct 31st	2.9%	17.9%	38.8%	17.7%	26.3%
Nov 30th	3.1%	25.7%	25.1%	22.8%	27.9%
Dec 31st	3.7%	29.2%	24.8%	15.6%	31.2%
2015
Jan 31st	7.2%	9.4%	35.1%	25.5%	27.3%
Feb 28th	6.4%	41.1%	34.5%	11.5%	10.9%
Mar 31st	2.3%	24.0%	46.4%	19.7%	12.9%
April 30th	1.6%	13.6%	69.4%	15.0%	5.7%
May 29th	5.5%	37.4%	41.5%	14.8%	4.7 %
June 30th	1.4%	15.8%	48.5%	29.0%	10.7%

As I have pointed out recently, there has been a strong move toward neutrality and that continued in June.

Be careful to base your actions upon what is happening, not what you think might happen.

Until the July SQN Report 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.

June 2015 SQN® Report by Van K. Tharp, Ph.D.

June 2015 SQN® Report by Van K. Tharp, Ph.D.

June 2015 SQN® Report by Van K. Tharp, Ph.D. :: Comments