ETFs: Chart Trend Comparisons

We present three tables comparing the charts of investment funds based on several criteria that some investors may find useful when interpreting whether the fund is in an uptrend or downtrend.

The charts used are multi-year, weekly charts. The criteria range from aggressive to conservative tests for trend.

Note that we do not present these as dispositive of opportunity. They are simply additional data to consider as part of your determination of entry or exit points on funds that you have otherwise determined are what you want to own for conceptual and fundamental reasons, and that you have determined by other means to be reasonably valued and not subject to risks beyond those you are willing and able to take.

Note also that the criteria we used to test for trend are not the only ones we use or that others use. They are just ones that are uncomplicated in nature and that could be interesting and helpful to some of our readers in their larger research effort.

One table compares funds for twelve key asset categories from which a reasonable total portfolio could be constructed. Another compares selected country funds. The other compares funds for key bond types.

Each fund is interpreted by these criteria:

1. Is the slope of the 40-week simple moving average up, down or flat?
2. Is the 20-week simple moving average above or below the 40-week simple moving average (above labeled UP, below labeled DN)?
3. Is the price above or below the 40-week simple moving average (above labeled UP, below labeled DN)?
4. Is the price above or below the 20-week simple moving average (above labeled UP, below labeled DN)?
5. Is the slope of the 20-week simple moving average up, down or flat?

The designation “flat” is based on the slope of the last week or two to look for a flattening or topping out pattern.

To make it a bit easier to see how the funds compare, cells with UP have a green background, cells with DN have a pink background, and cells with FLAT have a yellow background.

For each table, SPY and AGG, representing important stock and bond benchmarks, are shown at the top for easy visual benchmark comparison.

The key asset category funds are:

• VTI: total US stocks
• VGK: developed Europe stocks
• EPP: developed Asia stocks
• EWJ: Japan
• EEM: emerging markets stocks
• IEF: intermediate US Treasuries (7-10 years)
• LQD: investment grade corporate bonds
• JNK: below investment grade corporate bonds
• MUB: national municipal bonds
• DBC: global commodities basket
• IYR: US equity REITs
• TIP: inflation protected US Treasuries

The selected countries funds are:

• FXI: China
• EWZ: Brazil
• IFN: India
• RSX: Russia
• EWT: Taiwan
• EWH: Hong Kong
• EWY: Korea
• EZA: South Africa
• ECH: Chile
• EWW: Mexico
• EWM: Malasia
• EWC: Canada
• EWA: Australia
• EWS: Singapore
• EWP: Spain
• EWU: United Kingdom
• EWG: Germany

The key bond category funds are:

• SHV: US Treasuries < 12 mo
• SHY: US Treasuries 1-3 yr
• IEI: US Treasuries 3-7 yr
• IEF: US Treasuries 7-10 yr
• TLH: US Treasuries 10-20 yr
• TLT: US Treasuries 20+ yr
• TIP: inflation protected US Treasuries
• VWSTX: short-term national municipal bonds
• VWITX: intermediate-term national municipal bonds
• VWLTX: long-term national municipal bonds
• BSV: short-term component of US aggregate bonds
• BIV: intermediate component of US aggregate bonds
• BLV: long-term component of US aggregate bonds
• LQD: investment grade corporate bonds
• HYG: below investment grade corporate bonds

click images to enlarge

Comments

[No Free Cake:]

No one else has said so but I sure like the charts. Thanks

Apr 30 12:23 AM

[Richard Shaw:]

No Free Cake -- thank you -- it isn't cake, but it's free

Apr 30 01:08 AM

[Living4Divi...:]

Richard - I am a fan of yours and an avid follower of your posts. I have to disagree with you on Technical Analysis. The Trend is NOT Your Friend. There have been a large number of academic studies that have proven that Technical Analysis is pure bunk.

Apr 30 10:19 AM

[Richard Shaw:]

Living4Dividends:

The fault I find in your argument is that you posit that "technical analysis is bunk" and then use that argument to disprove an entirely different idea that "the trend is your friend".

That translates to: since visual analysis of price patterns is invalid in all respects at all times, even the most basic observation of prices rising or falling (because that's all I am doing here), it is therefore not in your best interests to buy and own stocks that are rising, and instead you should buy and own stocks that are falling.

First, what I am doing here IS NOT "technical" in any way. I am identifying whether the prices are rising or falling in terms of simple instantly visually observable patterns that require no math or convoluted logic -- just a quick glance to see the trend. There are no obscure concepts here, no reversal indicators, now ideas that require any interpretation beyond simply seeing the prices and their averages rising or falling.

Second, whether some or most "technical" analysis works or does not work, the "trend IS your friend" -- which says no more than what Newton said when he developed the science of physics. An object in motion in a particular direction will continue in motion in that direction unless some opposing force changes the speed or direction (that's called momentum). The trend once established has momentum and the probabilities from period-to-period favor continuation. Investing is about betting with the probabilities, not against the probabilties.

So, if you think this article is technical, I disagree. If you think technical analysis of all forms is bunk, that's your privilege. I think much of it is bunk too. But, if you think the trend is not your friend then I could not possibly disagree with you more.

Apr 30 12:16 PM

[Living4Divi...:]

I will give you this: some new academic studies have shown that momentum in the past causes stocks to rise higher for the next few months or so. So, momentum works. By how much, I do not know and whether it is exploitable profitably after friction costs, I do not know. Momentum is a tricky beast to exploit.

Since I am no expert on TA, I do not know if you were applying any of the tools of that trade.

Whatever encompasses classical "Technical Analysis" The evidence is clear, the experts have spoken: Technical Analysis candlesticks, head and shoulders formations it is has been disproven as valid and profitable investment strategy.

Apr 30 02:29 PM

[Richard Shaw:]

Living4Dividends:
OK Fine.

Here's how I normally go about looking for ideas:

(1) quantitative - I use fundamental financial screening as my first act, then

(2) qualitative - inspection of those that come through the fundamental screens for "stories" that appeal to me (business activities I can both understand and that make sense to me thematically), then

(3) part quantitative and part qualitative - review valuation for reasonablenss, then

(4) qualitative and highly subjective - attempt to peer into the surround and the future to apprehend special risks that might hurt me if I invest in a particular security, then

(5) pick those that are going up and wait for the rest to start going up before investing ("up" is a subjective term that for me is most often a 200-day moving average that is sloped up, or if the 200-day is not yet sloped up, an impressive movement of the price and a shorter than 200-day average crossing over the 200-day and staying there with the price above both averages).

I always use persistent trailing stop loss orders in case I am wrong or things just get bad.

Sometimes I change the order, but I always do all five steps.

I don't think that step five is "technical analysis", its just using simple visual clues that the stuff I know I want to own and that I know why I want to own it, is also going up not down. If it's going down, I'll buy it later when it's going up. If step five is "technical analysis" then I'd like someone to tell me what so "technical" about it. I learned the difference between up and down before I could walk.

Apr 30 09:40 PM