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...exchange traded funds in a global context |
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ETF TrendTracker... Visitor GuideThis document contains all you need to know to make optimal use of the ETF TrendTracker website. You may find it worthwhile to print this document and use it as a handy reference until you're comfortable with the analysis and format being used in the weekly updates. NOTE: ETF TrendTracker is not affiliated in any way with the Toronto Stock Exchange or any other source directly involved in the management and trading of exchange traded funds (ETFs). (See also the Detailed Disclaimer at the bottom of this page.)
IntroductionWe assume that you're visiting this web site because you're an investor interested in the growing selection of exchange traded funds (ETFs). ETFs provide diversity like mutual funds, yet have lower management fees and trade like stocks. In ETF TrendTracker we track recent trends on a level playing field that let's us compare...
That's why we call it relative trend analysis™ (RTA). While we do not offer investment advice with respect to any of the ETFs discussed here (see detailed Disclaimer below), you can easily observe how individual ETFs are performing relative to one another and blend that information into your own particular style of investing. That way you’re constantly aware of your own level of risk tolerance and investment objectives. We believe it would be unfair to impose anything else that would upset that balance.
Relative Trend Analysis™ (RTA)To fully appreciate the methodology used here, we strongly encourage you to read this section carefully, because it’s the most important section of this guide. It explains the mathematics used in our relative trend analysis™, and explains how our approach differs from what you'll find elsewhere on the web. Without having at least a rudimentary understanding of RTA, you may find much of what you find here difficult to interpret, if not downright confusing. So, what is relative trend analysis™? Well, we had to call it something, didn't we? Here is the general idea that we apply across all classes of investments (stocks, indexes, ETFs, income trusts, you name it)... For simplicities sake we refer to stocks for the most part here, but you can easily substitute any other investment vehicle, including indexes and ETFs, which are the focus here. To put all potential investments on a level-playing field, all weekly price changes are converted to %-changes. That way a $1 move on a $4 stock (or whatever) is every bit as significant as a $5 move on a $20 stock. That's the relative component. Comparisons among stocks, or between stocks and indexes mean something when they're on the same scale! A 10-week, exponential moving average is computed on these changes for all stocks and indexes. That's the trend part of the term. We want to know how fast prices are moving relative to one another, but over a consistent period of time. The net result is that each stock or index has a weekly trend value that says, on average, stock (or index) ABC is moving up or down X% per week. Once computed and illustrated in the charts and data tables here, the current winners and losers are then easy to pick out. There is also another component to the methodology... and that is consistency. A ratio is computed where the trend (already described) is divided by the volatility of the prices. Consistency is what distinguishes a stock that thrashes around on the path from $10 per share to $15 per share... e.g., $10, $8, $6, $12, $10, $15 (causing nail-biting and ulcers among shareholders)... from one that moves up in an orderly fashion... $10, $11, $12, $13, $14, $15. The more that the weekly price movements are in one direction, the higher the consistency rating. The bottom line is that each stock, average, or index is represented by two numbers: trend ... expressed as % price move per week, and consistency ... expressed as a percentage between 0% (random up and down price movement) and 100% (all price movement in one direction, as determined by the plus or minus sign of trend). A couple of examples might clarify things. Suppose ETF A has a trend/consistency reading of +3%/75%. That means that, on average, at this point in time, the stock is rising at +3% per week, and that, on average, 75% of the weekly price movement has been to the upside... quite a promising scenario (especially if it persists). Now consider ETF B, with a +3%/10% reading. The +3% trend factor is every bit as positive as that for ETF A, but the 10% consistency factor suggests that the trend value may be due to a sudden and recent spike up in price (perhaps due to an unforeseen event), or a series of broad up and down price moves over time en route to the final price. That's not to say that ETF B doesn’t deserve a look; it’s just that we would be less likely to expect the trend to continue for ETF B, unless the consistency factor improved over ensuing weeks. We've all heard expressions like "Don't fight the tape" or "The trend is your friend". These are common expressions among the investment community that refer to the fact that stocks that are trending (up or down) tend to persist in doing so until some contrary news or events suggest that the current trend is ending. To these expressions, we'll add our own saying, "A consistent trend is less likely to bend" . With no promises of a sure thing, we've observed that stocks trending upward (or downward) with high consistency values, tend to continue to do so longer than those with poor consistency. There are lots of other investment-oriented web sites that offer some sort of momentum or trend data, but we believe that this is the only one that both puts all trend values on a common scales and provides a metric for the consistency of trends (which is also standardized). We hope you find our data useful.
How to Use the RTA DataThere are many ways to take advantage of the weekly data in our Data & Charts workbook. One that we generally recommend is to look at the sectors that are leading the pack (trendwise) and by how much. Then, have a look at the ETF data within those groups to find the strongest candidates. We don't expect you to base your stock picks solely on trends, but the information you'll find here may well become a useful part to your overall investment strategy. How much you weight trends versus other fundamental and technical factors is entirely up to you. It's probably worth mentioning that trend-following is quite different from picking tops and bottoms in market (or stock) cycles. The latter approach is best expressed by the well-known "Buy low, sell high" slogan. With trend-following, the appropriate phrase is "Buy high, sell higher". While our own preferred tactic is to follow trends (sometimes also called "momentum investing"), a market timer could still find our data useful. We think that market timing is a tricky proposition, but if you're good at it, you should be able to map patterns in our weekly data onto some sort of trading scheme. After all, tops (or bottoms) should be flagged first by weakening consistency, then by softening or reversing trend values. However, since this is not our preferred approach to investing, we'll leave working out the details to you.
NavigationThe navigation controls at this web site are pretty straightforward. All buttons in the left margin pull up pages that appear in the main window frame which you're looking at now. There’s also a search box that lets you enter a stock or ETF symbol, and obtain detailed information about the company in question from the comprehensive GlobeInvestor.com web site hosted by the Globe & Mail newspaper. Since our updates are weekly, we offer this as a means for you to get up-to-the-minute quotes, charts, news and fundamentals from all Canadian and US companies that are publicly-traded. If a ticker symbol represents a different company in the US from the one it represents in Canada, both are shown and you can choose. The VISITOR GUIDE is the document you're reading now. The DISCLAIMER tells you what you can and cannot expect in terms of what we're trying to offer here. There’s also a shorter version at the bottom of this document. ETF REPORT is the entry page for this site. There’s no point in revisting the Welcome page once you know what to expect here.. WEEKLY REPORT includes commentary on the overall market, charts that may be of interest (but not in the standard set in DATA & CHARTS), and some discussion of current ETFs to watch. We’re currently using a web log (blog) approach for ETF REPORT, so you’ll be able to look back at earlier reports if you wish. The DATA & CHARTS page actually leads you to a workbook of graphs and data tables. Each table and chart is accessed by the tabs on the bottom of the workbook. We highlight those ETFs which have a trend value exceeding +1% and a consistency value of at least 70%, as "ones to watch". There isn’t anything magical about these thresholds, but it’s one simple means of identifying outperformers. And, finally, if you're visiting the site between weekly updates, you might click on CANADIAN NEWS to get a list of headlines of the very latest stories about Canadian companies and current events. You can click on the headlines to see the full story from the source.
Canadian ETF Review UpdatesWe generally run our trend analyses on weekends using price data as of the market close on Friday (or a day earlier if Friday's a holiday). We aim to publish on the weekend as well, since we know that many investors and traders like to do their homework while the markets are closed. If you’re on our MAILING LIST, you’ll receive an email just after each weekly update is published on our web site. We’ll also use that mailing list for any special announcements about changes to the site or technical difficulties; but rest assured that no one will gain access to the list for spamming purposes, and you should never receive more than one email per week. Naturally, you can opt-out at any time. Instructions will appear at the bottom of each email.
Questions & FeedbackUser feedback is a cornerstone to the success with any product (even if it's a free access web site!). All suggestions and comments are welcome. As questions come in that aren’t addressed in this tutorial, we’ll add them to our QUESTIONS? page and provide the answers you need. When that page gets excessively long, we’ll simply re-write this guide. Our objective, as mentioned earlier, is to keep the site simple and uncluttered, but that doesn't mean that it can’t be improved. At any time you are encouraged to take a few minutes and send an email if you think something’s missing or inadequately covered.
Detailed DisclaimerCommentary and opinions expressed by Charles P. Whaley in any of the weekly updates to this site reflect only his views and may be in conflict with the views or official releases of any company mentioned. While every attempt is always made to use reliable sources and ensure proper and consistent data gathering and analysis methods, we cannot guarantee completeness, adequacy, accuracy or reliability in any section of this online publication. Furthermore, the performance of the companies discussed here are based on historical data. As such, there is no assurance that identified trends discussed here will persist. Canadian ETF Review is not an investment advisory service. The information contained in this publication is not intended to be, nor should be construed to be a recommendation for purchase or sale of shares in any of the companies listed or discussed. At any point in time, Charles P. Whaley may or may not hold shares or options on shares of any company discussed herein. The opinions expressed are based on interpretation of available information, and are subject to change. No material contained in this publication may be reproduced in whole or in part without the written permission of the publisher. © Charles P. Whaley & ProfiTrend Enterprises, 2007. ALL RIGHTS RESERVED. Latest revision: 2007.01.25
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