Wide Fund Survey: Prices vs. Primary Trend

Assuming for this discussion that the 200-day moving average of a security could be called its primary trend, let’s see how the prices of a round-the-world selection of 60 diverse fund types (and 6 transport indexes) stack up to their primary trend, and whether their primary trend is up or down.

The first observation is that nearly all are in a primary down trend, based on the 200-day (40-week or roughly 10 month) average. In this batch of fund categories, only aggregate US bonds, intermediate US Treasuries, the Dollar index and the Japanese Yen are in primary up trends, but the price of the Treasuries fund and the Dollar index fund have fallen below their primary trend line. That leaves only two where the primary trend is up and the price is above the primary trend line — US aggregate bonds and the Japanese Yen.

Of the 60+ in a primary down trend, about 60% have prices that have moved above he primary trend line (a possible sign of an impending trend reversal, but with significant false positive whipsaw risk unless the relationship is maintained for an extended period, and until the primary trend line actually slopes up).

The other approximate 40% of those in a primary down trend have prices below the primary trend line. They are predominantly US related (S&P 500, S&P sectors, US REITs, US transportation indexes, plus European real estate, several commodities, and Middle East countries).

Note that in some cases, whether the price is above or below the primary trend line, it could be very close to that line, perhaps to cross over shortly — to the upside or downside.

click images to enlarge

• SPY: S&P 500
• AGG: US Aggregate Bonds
• EFA: Non-US Developed Markets (ex Canada)
• VWO: Emerging Markets
• VNQ: US Equity REITs
• DBC: Global Commodities
  

• VBMFX: US Aggregate Bonds
• VFITX: Intermediate Municipal Bonds
• VWITX: Intermediate Treasury Bonds
• VFICX: Investment Grade Corporate Bonds
• VWAHX: Below Investment Grade Corporate Bonds
• VIPSX: Infation Protected US Treasuries

• UUP: Dollar Index
• FXY: Japanese Yen
• FXE: Euro
• FXB: British Pound Sterling
• FXA: Australian Dollar
• CNY: Chinese Yuan

• VNQ: US Equity REITs
• RTL: US Retail REITs
• FIO: US Industrial REITs
• REZ: US Residential REITs
• IFAS: Asian Real Estate
• IFEU: European Real Estate

• $TRAN: DJ US Transportation Index
• $DJUSTK: DJ US Trucking Index
• $DJUSRR: DJ US Railroad Index
• $DJUSMT: DJ US Pipeline Marine Transport Index
• $DJUSPL: DJ US Pipelne Index
• $DJUSAR: DJ Airlines Index

• DBC: Global Commodites Index
• USO: Near Crude Oil Futures
• UNG: Near Natural Gas Futures
• GLD: Gold Bullion
• DBA: Agricultural Near Futures Index
• DBB: Base Metals Near Futures Index

• EFA: Non-US Developed Markets (ex Canada)
• EWG: German
• EWU: United Kingdom
• EWQ: France
• EWP: Spain
• EWD: Sweden

• EFA: Non-US Developed Markets (ex Canada)
• EWJ: Japan
• EWA: Australia
• EWS: Singapore
• EWH: Hong Kong
• EWC: Canada

• VWO: Emerging Markets
• FXI: China
• IFN: India
• EWT: Taiwan
• EWM: Maylasia
• THD: Thailand

• VWO: Emerging Markets
• EWZ: Brazil
• ECH: Chile
• EWW: Mexico
• EZA: South Africa
• RSX: Russia

• TRAMX: Middle East & Africa (mostly GCC countries)
• ISL: Israel
• TUR: Turkey
• EZA: South Africa

• SPY: S&P 500 Sectors
• XLB: S&P Basic Materials
• XLE: S&P Energy
• XLF: S&P Financials
• XLI: S&P Industrials
• XLP: S&P Consumer Staples

• SPY: S&P 500 Sectors
• VOX]]: S&P Telecommunications
• VGT: S&P Information Technology
• XLU: S&P Utilities
• XLV: S&P Healthcare
• XLY: S&P Consumer Cyclicals

Disclosure: We a few of these funds in some of our managed accounts.

Comments

[Alex Trias:]

The primary trend can give some false positives - meaning, it is not unusual for a bear market rally to go as high, or indeed higher, than a 200 day simple or exponential moving average. A more useful tool, I believe, is seeing whether a 50 day moving average can cross above a 200 day moving average on heavy volume. We're seeing a convergence on some index ETFs - notably FXI and EEM.
More interestingly, we've seen the 50 day cross below the 200 day on a number of short ETFs - I just ran these averages on Yahoo finance and found this formation on SH, DOG, RWM, EFZ. If the short etfs are heading into bear markets, it strengthens the case that primary uptrends may form up on the corresponding long indexes (although you wouldn't expect that 100% of the time given the performance lag you typically see with short ETFs).

May 26 03:34 PM

[Richard Shaw:]

Alex Trias: I agree. In fact, we use the price (1-day av), the 25-day av, the 50-day av and the 100-day av all versus the 200-day av in determining how far and how fast to leg into the market. We haven't published our full method, but have alluded to it strongly in a recent blog post ( www.qvmgroup.com/inves...) which we also put on our instablog. Thank for the comment.

May 26 05:09 PM