Other People’s ETFs: What 'Their' Indicators May Be Saying

Some money managers stick to simple moving averages. Other financial advisers examine fundamental value. Still others glean ideas from history, seasonal patterns, contrarian sentiment, economics and/or behavioral psychology.

Each has his/her way of evaluating investments; each often brings something unique to the table. And yet, nobody, and I mean, nobody, “bats 1000.”

(Why isn’t it 100%?)

In any event, long-time radio show listeners, clients, readers — those who have followed me over the years — recognize that I focus most of my energy on risk management; specifically, I acknowledge the criticality of the sell decision.

For this reason, I particularly like to review the work of those who also have a plan to minimize risk; that is, the more competent voices are those that go beyond “asset allocation” and “diversification.”

Example? Jeff Miller appears on Seeking Alpha each week with ETF rankings. He outlines whether or not an ETF is in the “penalty box” for violating a proprietary technical rule. In effect, through a “penalty” indicator, Jeff Miller tells his readers about ETFs that he would not buy right now. (In fact, the description of the “penalty box” is that of a sophisticated stop-loss or, investments that Jeff Miller might sell right now.)

As of 10/12/09, Jeff Miller had 95% of his ETFs in the “penalty area.” That led me to wonder… what similarities might the remaining 5% share? How about the top 10, highest ranking, penalty-free ETF? (Jeff Miller’s rankings are listed by investment “strength.”)

Jeff Miller’s Top 10, Penalty-Free ETFs (10/12/09)
					YTD %
PowerShares Nasdaq Internet Portfolio (PNQI)					74.0%
Dow Emerging Markets Composite (EEG)					N/A
First Trust Chindia (FNI)					72.7%
Powershares Global Transports (PTRP)					49.2%
Dow Emerging Markets Energy Titans (EEO)					N/A
Claymore Frontier Markets (FRN)					53.7%
SPDR Emerging Asia Pacific (GMF)					63.4%
Rydex S&P Equal Weight (RYT)					55.4%
iShares MSCI Hong Kong (EWH)					53.9%
iShares S&P Asia 50 (AIA)					54.4%

It may not come as any surprise, yet emerging market investments still merited consideration. Beyond that, 4 of the 10 were Asia-related, including SPDR Emerging Asia Pacific (GMF) and Hong Kong (EWH). In previous posts, I have written about GMF and EWH considerably.

Jeff Miller didn’t initiate a new buy on any ETFs here, though he did elaborate on Hong Kong (EWH) as a possibility. In fact, he discussed the possibility of Asia, and its limitations, with specific reference to my earlier article, “Will Revised Asian Growth Forecasts Translate Into Investment Gains.”

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.