Welcome to Week 409 of this week’s Compass Emerging Markets Country ETF Study, published on my Substack blog. I publish every other week, focusing on technical changes in the 22 EM Country ETFs I track weekly. In honor of National Andrews Pitchfork Week, both paying and unpaid subscribers will receive this week’s Emerging Markets Country ETF Survey sent to their registered email. This allows free subscribers to see what they may have missed once by having the opportunity to read the entire content. Paid subscribers can access past publications from The Market’s Compass Substack blog. can. Next week, we will publish The Market’s Compass US Index and Sector ETF Study.
Last Week and 8 Week Trailing Technical Rankings of Individual EM ETFs
The Excel spreadsheet below shows the weekly changes in the Technical Rankings (“TR”) of individual ETFs. A technical ranking or scoring system is a fully quantitative approach that utilizes multiple technical considerations including, but not limited to trend, momentum, accumulation/distribution measures, and relative strength. As the technical conditions of individual ETFs improve, the technical ranking TR will increase, and conversely, if the technical conditions continue to deteriorate, the TR will decrease. The TR range for individual ETFs is 0 to 50. The main takeaways from this spreadsheet are trends of continued improvement or deterioration of individual TRs, and changes in direction. Secondly, a very low ranking may indicate an oversold condition, while a sustained very high number can be considered an overbought condition. With warning, oversold conditions could escalate rapidly, and overbought securities that show extraordinary momentum could easily move higher. overbought. For a TR to be viable, a persistent trend change must be evident in the TR. The TR of individual ETFs in each of the three geographic regions can also reveal the relative strength or weakness of technical conditions for some ETFs in the same region.
Largest lift in combined rankings for the three EM regions since last publishing on Sept. 26 for the week ending Sept. 23, +37.5% up from a reading of 50.5 registered four weeks ago was the Lat/AM region, which was 69.5. This was followed by a 25.7% increase in the EMEA region’s total technical ranking, rising from 91.5 to 115 over the same period. Asia-Pacific’s total technical rankings recorded a loss of -31.8% over the same period. Since his last EM Country ETF blog was published, the Total EM Technical Ranking has only increased +6.0% from 231.5 to 245.5.
Weekly changes in individual technical rankings
Five EM Country ETFs recorded improvements in their individual technical rankings (“TR”), one remained unchanged (with the exception of the VanEck Vector Russia ETF (RSX), which had been suspended for several months), and 15 TR decreased. The average TR loss over the week was -2.61 handles. The highest TR gain by week was Global X FTSE Greece 20 ETF (GREK), whose TR increased 3.5 “handles” from 6 to 9.5. The Turkey ETF (TUR) not only has the highest TR “score”, but also because of its superior relative strength, as demonstrated by the TUR/EEM relative ratio in the chart below. Readers will notice that this is a recurring theme and will be brought up again later in this blog post (see YTD relative performance).
T.Changes in the Technical Condition Factor over the past 1 week and the past 8 weeks
There are eight Technical Condition Factors (“TCF”) that determine an individual TR Score (0-50). For each of these eight, ask objective technical questions (see spreadsheet above). Additional points are added to the individual TR if the technical question is positive. Conversely, if the technical question is negative, you will receive a ‘0’. Some TCFs are more important than others, such as the Weekly Trend Factor and the Weekly Momentum Factor, when compiling individual TRs for each of the 22 ETFs. Therefore, in the Excel sheet above, we calculated the weekly readings for each factor as a percentage of the possible total. For example, the Daily Momentum Technical Condition Factor (“DMTCF”) (or 7 X 22) for 22 ETFs has 7 considerations ranging from 0 to 154 if all 22 ETFs meet the DMTCF criteria. (or question) I have. The reading will be 154 or 100%. Last week, the DMTCF read 37.01% for the week ending 23 September, 57 out of a total of 154 positive points. This was down from the week ending Oct. 7 when the DMTCF marked a reading of 57.14%. One technical point is that when DMTCF rises too far between 85% and 100%, it indicates a short-term overbought condition. Conversely, readings in the 0% to 15% range indicate an oversold condition. DMTCF was 5.84% for the week ended September 23, suggesting that a short-term oversold condition has occurred. As a confirmation tool, if all eight TCFs improve week to week, many of the 22 ETFs are improving internally on a technical basis, confirming that the broader market is rising (up/ Think of the decline calculation). Six TCFs fell last week, one rose slightly (on-balance volume TCF), and one remained unchanged.
EEM stacked with total ETF ranking “TER”
The Total ETF Ranking (“TER”) indicator is the sum of all 22 ETF Rankings and can be viewed as a Confirmation/Divergence indicator and an Overbought/Oversold indicator. As a Confirmation/Divergence Tool: If the broader market as measured by the iShares MSCI Emerging Markets Index ETF (EEM) continues to rise without a commensurate or higher move in TER, the continued rise in the EEM index will increasingly at risk. Conversely, a positive divergence is recorded when the EEM continues to mark low lows and the TER shows little change or building improvement. In some ways this is like a traditional A/D line. As an overbought/oversold indicator: “Technically it doesn’t get any better” as the TER approaches the 1100 level (all 22 ETFs with a TR of 50). Possibility of EEM pullback. Conversely, if the number of ETFs that have been “technically washed out” is increasing as the extreme low of “technically can’t get any worse” is approaching, a measurable low is approaching and oversold. rally may continue. The 13-week exponential moving average shown in red smooths out the erratic TER measurements and is a better indicator of trend analytically.
The iShares MSCI Emerging Market ETF (EEM) has fallen -4.92% over the past two weeks, with the TER rising +6.0% from 231.5 to 245.5. Before TER bounced back two weeks ago, TER reached 206.5, matching the TER low recorded on July 15th. So far, this has produced a short-term divergence against last weekend’s EEM new bear market close of 34.21 (green dashed line).
It is too early to suggest that the positive divergence indicates that the constant selling pressure that has gripped EEM has reached its limit. That said, it’s not hard to at least suggest that EEM is pointing towards counter-trending price movements. The short-term technical situation will be discussed later in this blog post.
Average “TR” Ranking of 22 ETFs
The Average Weekly Technical Ranking (“ATR”) is the average Technical Ranking (“TR”) of the 22 Emerging Markets ETFs tracked by the Company weekly and is shown in the panel below the EEM Weekly Candlestick Chart shown below. plotted. Similar to TER, this is a confirmation/divergence or overbought/oversold indicator.
Another second divergence of my own indicator versus price has occurred. This time it’s EEM vs ATR. In the week ending Sept. 30, the ATR posted a reading of 9.39, matching his July 15 reading. The price continues to plunge to new lows (the dashed green line), but the short-term moving average red line remains below the long-term exponential moving average. (blue line). One positive technical feature is that on Friday the EEM bounced off the support provided by the lower parallel lines (red solid lines) of the Schiff modified pitchforks (red P1 to P3). Aside from its short-term positive technical characteristics, his EEM’s almost relentless downtrend since February 2021 is still intact.
Considerations on short-term technical conditions of EEM
Last Thursday, the EEM plunged at the start of the trading session, but a price reversal occurred and the EEM closed +0.29% higher on the day. That price pivot resulted in the newly drawn Schiff Modified Pitchfork (green P1 to P3). On Friday, an attempt to catch up with Thursday’s price reversal failed, with the EEM closing at new bear market lows.
A short-term divergence occurred in the newly created EM Country ETF Daily Momentum Oscillator as price hit a new low and the oscillator held a brief high (dashed green line). For that divergence to be provable, the price would need to hold onto last Thursday’s low of 33.65 and eventually the oscillator high. This may be too much to achieve in the short term without the EEM exceeding the midline resistance (dotted green line) and the Kijun plot (solid green line).
Emerging Market Country ETF Weekly Absolute and Relative Price Change*
*Dividends are not included, and VanEck Vector’s Russia ETF (RSX) is omitted.
Last week, only four emerging market ETFs rose in absolute terms. The top two to improve were the Global X MSCI Greece ETF (GREK), up +1.42%, followed by the iShares MSCI Turkey ETF (TUR), up +0.97%. Unless the average absolute loss of the 21 tracked ETFs is -2.38%, these are usually not worth highlighting. That said, 16 ETFs outperformed EEM on a relative basis and 5 ETFs underperformed. Three of these five are Asia-Pacific ETFs, and the biggest relative underperformer (-4.52%) over the last five trading sessions was the iShares China Large Cap ETF (FXI).
Relative Returns of 22 EM ETFs vs. EEM Index YTD*
*Dividend and RSX not included
Charts provided by Optuma, data feed provided by Bloomberg Finance LP
Readers unfamiliar with the technical terms and tools above can take advantage of the technical analysis tools on The Markets Compass website or a short tutorial entitled The Pitchfork Paper in three parts.
https://themarketscompass.com