All donations go towards web site maintenance for all of Technical Watch,
keep it free of charge, and may be tax deductable as an investment expense.


PayPal Verified
Join our market chat sessions every Tuesday and Thursday at 4:00 pm Pacific time!
More information on subscriber services can be found at
http://www.technicalwatch.com/subs.htm




Support Technical Watch!
Buy from our Book Store!
Register Calendar Latest Topics
 
 
 


Reply
  Author   Comment  
mortiz

TW Patron++
Registered:
Posts: 1,054
Reply with quote  #1 
There are unweighted or equal weighted (EW) ETF products that can be traded (Rydex EW-SPX, symbol RSP) that usually have superior performance over their weighted index cousins.  Here are a few examples of EW-indices that have exhibited impressive performances over the past several months.

First a long term look at the unweighted composite NYSE consisting of all issues traded on the NYSE over the past 40 years.  The data is based upon the daily NYSE QCHA numbers published each week in Barrons.

The EW-NYSE index reached an all-time new high a couple weeks ago before backing off last week.  This is a log chart of the EW-NYSE index versus NYA with trend lines drawn from their respective late-1974 and respective 1980s lows.  Note how the NYA (blue curve) nominally violated its long term trend line in March 2009 while the EW-NYSE (red curve) decisively violated its long term trend line. 

The EW-NYSE was recently able to claw its way back above the long term trend line.



Next, we zoom in on the EW-NYSE index versus the NYA with price action since 1997.



The next image is the daily EW-NYA (common stocks) versus its weighted NYA cousin. Note the EW-NYA reached its June 2008 highs recently and found some resistance.  Since its March 2009 lows, the EW-NYA rallied 141% before backing off last week. 



The weekly EW-NYA index is derived by comparing its components' Friday over Friday price changes, then averaging their collective percentage price changes.  As with the daily EW-NYA, the weekly EW-NYA has out-performed its weighted NYA index cousin significantly.



Neither the daily nor weekly EW-NYA indices have been able to break to new all-time new highs as the "all-issue" EW-NYSE index, and the next couple of charts show us why.

First is the NYSE EW-Preferred stock index (currently 780 issues), which has blown away its previous all-time high posted in June of 2007, with the EW-preferred stock index gaining nearly 170% from its March 2009 lows.



The NYSE EW-Bond CEF index (currently about 280 issues) has also been extremely strong since the March 2009 lows, easily taking out its May 2007 all-time high.



Let's take a look at some other unweighted indices, starting with the Russell 1000 (RUI). I forgot to include the percentage price gains for EW-RUI versus RUI, but since the March 2009 lows, EW-RUI gained 110% at its recent high versus "only" a 60% gain for RUI itself.



Now the small caps (Russell 2000, aka RUT), the EW-RUT index rallied 129% from its March 2009 low to its recent high, while RUT managed to gain a "mere" 81% in that same time frame.



Even the very smallest cap common stocks have achieved impressive gains from their March low.  The next index is comprised of the Russell MicroCap members that are not also members of RUT. This group is the very smallest cap US common stocks qualifying for the Russell indices. 

This is an index I have created by separating the Russell MicroCap members that are not part of the Russell 2000 (RUT) index.  I call this index the "NanoCap" index.  In this chart, we compare the EW-NanoCap index versus the Russell MicroCap index.  EW-Nano index gained 163% from its March 2009 high to its recent high while the weighted MicroCap index gained 88% in the same time frame.



Now if we can only lobby those companies that construct ETFs tracking various groups of stocks to construct some EW-index products similar to what has been discussed in this thread!

FWIW

Randy
0
Previous Topic | Next Topic
Print
Reply

Quick Navigation:






Copyright 2000-2017 Technical Watch