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Lowell Herr
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Retired physics instructor and now editor of the ITA Wealth Management investment blog.
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ITA Wealth Management
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ITA Wealth Management
  • VNQ: Examining The Technical Indicators 1 comment
    May 29, 2012 3:54 PM | about stocks: VNQ

    Vanguard's REIT ETF, VNQ, is part of every portfolio I track and due to its importance merits close attention. I track a number of technical indicators for each ETF in the portfolios and here are a few of them. One of the first metrics I examine is my own "Delta Factor" which is a reversion-to-the-mean projection of how well an ETF is expected to perform with respect to the broad market. The current projection for VNQ is positive, but not sufficiently strong to recommend a 'Buy.' As a 'Hold' candidate, it is not projected to do much better than the total U.S. Equities market.

    A second indicator is the price of VNQ as measured with respect to its 195-Day Exponential Moving Average (NYSEMKT:EMA). The price of VNQ remains well above its 195-Day EMA, confirming the "Delta Factor" indicator. A third factor is the Relative Strength Indicator (RSI) as shown in this reference. It is the second graph from the top. Alert points occur when the graph charges above 70 or dips below 30. VNQ is close to 50 or a 'Hold' position. This indicator is frequently early, one reason why I would not rely on it in isolation. The same is true for the "Delta Factor" projection. We now have three technical indicators reinforcing each other.

    A fourth indicator is the Moving Average Convergence-Divergence (MACD) graph or the third from the top. This indicator is currently showing a weak signal. The MACD was developed by Gerald Appel in the 1970s and interested readers should investigate how the three EMAs work with each other to create this graph. Right now I classify this metric as negative, but the actual signal was generated earlier in the month.

    A fifth indicator, and one I pay least attention to, is the Chaikin Money Flow (NYSEARCA:CMF) as show in the same link provided above. The CMF recently moved into negative territory, another weak signal confirming what we see with the MACD.

    A sixth indicator is the relationship between the 13-Day EMA and the 34-Day EMA. That signal recently turned negative with the 13-Day EMA line passed from above to below the 34-Day EMA.

    Overarching these six indicators is something called the Bullish Percent Indicator. In this Point and Figure (NYSE:PNF) graph we are looking at the condition of the broad market to see if it is overbought or oversold. Which is in control - supply or demand. The current condition is neutral as approximately 50% of the stocks in the NYSE are a buy while 50% are a sell. This confirms the earlier 'Hold' signals discussed above.

    Based on these technical indicators, VNQ is currently an ETF that qualifies as a 'Hold' candidate in portfolios made up of ETFs.

    Disclosure: I am long VNQ.

    Stocks: VNQ
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  • jweissman
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    Comments (522) | Send Message
     
    As always very useful info! Thanks!
    29 May 2012, 06:04 PM Reply Like
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