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

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July 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, we see a neutral to negative market across the entire model — nothing exciting really. There are 11 red sectors and not one is dark green. It’s mostly brown, yellow, with a few light green areas.

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The US market segments this month ranges from brown to light green with yellow being the predominate color. The other markets in the Americas continue to be weak with Canada, Brazil, Latin America and Chile all showing negative. Mexico has the only positive market in the Americas outside of the US.

In Asia now, there are three yellow markets — two China indexes and Hong Kong. Japan is green this month. Everything else is negative with Thailand being the only red market.

And despite the Greek debt crisis, most of Europe is yellow. Belgium and Switzerland, however, are green.

The US sector view shows some weakening with three red sectors (Building Materials, Metals and Mining, Oil and Gas Exploration). Volatility is also red, meaning there has been none. The strongest sectors seem to be Food and Beverage, Insurance, Software, and Regional Banks — all light green. There are no dark green sectors this month.

The Yuan is now the strongest currency. You might remember that we’ve been talking about how oil might become dominated 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.

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 five red ones 1) Coal 2) Gold 3) Commodities; 4) Base Metals; and 5) Steel. Three commodities are yellow – Global Water, Natural Gas and Global Agribusiness.

US real estate now looks weak but so does real estate across the globe.

Debt is mostly yellow with long term bonds, corporate bonds, and junk bonds all being brown. While mid-term Treasuries are green, the market seems to be expecting higher interest rates.

Looking at the top ranking ETFs shows the database as a whole weakened again. Zero ETFs are above 2.0 and none are even dark green. Two months ago, six scored above 2.0 and all of the top 15 were dark green. The Yuan is the strongest area this month.

The bottom list includes one sector with a Market SQN score below -2.0 (coal, again) and all of them are equal to or less than 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%
July 30th	0.0%	15.8%	52.0%	30.6%	7.8%

As I’ve pointed out in the last few months, there is a strong move toward neutrality and that continues. Furthermore, this is the first month where no ETFs were in strong bull territory since we have been keeping records.

Let me remind you —

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

Until the August 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.

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

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

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