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Thursday, July 12, 2012

An important update for the Trade-Radar software is available now -- Download it right away!

You may know that Trade-Radar Stock Inspector uses financial data from Yahoo! Recently Yahoo! started adding nearly up-to-the-minute price and volume data to its historical data download. Later in the evening, after the trading day is over, Yahoo! seems to add a second entry for the same day (maybe it's after-hours trading data, they don't say). In any case, all this can cause some inaccurate results in Trade-Radar.

Download the fix right away!

We've built in a way to get around this problem and the new version of Trade-Radar Stock Inspector is now working as it should. Plus we've fixed a couple of minor bugs while we were at it including the dreaded Error 9 (Subscript out of range) error related to occasional problems in the trend analysis functionality when viewing the charts.

Just go to this special download page and get the newest version now.

Some readers who are signed up for the Trade-Radar Software Users Group will be receiving an email with this same information. This update is so important I wanted to cover all possible channels to get the word out.

As always, this update is free for all users.

Sunday, April 1, 2012

Earnings Acceleration as economic indicator?

We are about to begin another earnings season so I thought it might be a good idea to review how the most recent earnings season turned out.

I have focused first of all on earnings growth; ie, the change in quarterly earnings on a year-over-year basis. The change was converted into a percentage growth calculation in order to compare growth rates across multiple quarters. For 4Q-2011 (results for 4th quarter 2011 as reported during 1st quarter 2012) the numbers are as follows:

Out of our universe of roughly 5600 stocks that we follow (ETFs are excluded for the purposes of this analysis), 1445 companies showed earnings growth in the most recent quarter that exceeded the earnings growth registered in the previous quarter. This means that 25% of companies actually showed earnings growth acceleration. That seems to be to be pretty solid results.

To widen our net a bit, I then looked at stocks who did not have accelerating growth but whose earnings growth year-over-year was at least still positive. There were 671 companies that were able to clear this hurdle or almost 12% of those stocks we follow.

I am ignoring whether these companies missed the whisper number or fell short of analyst expectations. The fact is that 37% of stocks managed to register positive earnings and most of them even registered accelerating earnings.

If the following table I show how the numbers have looked over the past three quarters in order to gain some perspective on this most recent quarter:

Quarter(results reported over following 3 months)
Number Showing Earnings Acceleration Percent Showing Earnings Acceleration Number Showing Positive Earnings but no acceleration Percent Showing Positive Earnings but no acceleration

What jumps out here is that the numbers are fairly consistent and actually pretty good.

Here are a couple of charts that show the results graphically. Companies that are showing Earnings Acceleration are denoted by the purple bars.

Here is the same data represented as percentages:

Keep in mind that I did not include in this analysis those companies who had positive earnings in a particular quarter but where those earnings were less than what was registered in the prior year’s quarter. There are very roughly around 2000 companies in Q2 and Q3 and almost 1800 companies in Q4 that fell into this category.

Conclusion --

First of all, it can be seen that Q4’s results were not as strong as the previous two quarters. If one were trying to establish a trend based on these three quarters data points I guess it could be said that the trend suggests a slight weakening. On the other hand, it cannot be said that Q4 was particularly bad, only slightly less good than those earlier quarters. Keep in mind that all results over these three quarters have been with just a few percentage points.

The results also seem to support the bulls who firmly believe the economy is on the mend. There are significant numbers of companies whose earnings are accelerating and that suggests economic growth, not a return to recession.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Tuesday, February 21, 2012

Commission-Free ETFs now available from E*TRADE

E*TRADE recently rolled out commission-free trading of a select group of ETFs from Wisdom Tree, Global-X and Deutsche Bank (db-X funds).

No doubt, this is in reaction to a similar move that Charles Schwab made last year and that proved popular with investors and investment advisors alike.

In any case, this is good news for investors who happen to have an E*TRADE account. Not only does this reduce trading costs, it provides a wide-ranging set of ETFs that can be used to construct highly diversified portfolios. ETFs include target date funds, currency funds, numerous single-country and global ETFs and an interesting set of style-based ETFs. Examples of the styles available include dividend focused, earnings focused, small cap, mid cap and large cap and combinations of the above. The one drawback is that U.S. sector funds are largely absent. For example, there are no tech ETFs available.

The main question, though, is whether these ETFs are good investments. I can say that many of them, though not all, have performed well based on our proprietary trending indicator. I have set up a set of specialized pages at our sister site that focuses solely on the commission-free ETFs. Here you can see what specific ETFs are included in the commission-free program and how they rank in terms of their current trending characteristics on a scale of 0 to 6 where 6 is most bullish. The data is compiled based on daily data and also on weekly data. You can find these pages under the "ETFs" main menu item at but if you want to go directly to the pages you can use the links below.

To see how they rank in terms of their trend (bullish, bearish or in between):
Commission-Free ETF Scorecard based on Daily data
Commission-Free ETF Scorecard based on Weekly data

To see how the trend is changing for these ETFs use the following links:
Trend Score Changes based on Daily data
Trend Score Changes based on Weekly Data

I myself just bought the Global X FTSE Columbia 20 ETF (GXG). Using daily data, the ETF is rallying nicely and currently has a bullish trend score of 5.67 and it registered a nice improvement in trend in the last few trading sessions. Though it looks over-bought on the daily charts (and is probably due for some backing and filling), the weekly chart shows the ETF has just recently broken out above a downward sloping trend line and consequently looks to have further room to run. This is my first experience with one of these commission-free ETFs so we shall see how it plays out.

As appealing as commission-free trading may be, there are some caveats. To quote the E*TRADE web site: "Please note that sell short, buy to cover, and buy-write orders are not commission free. Options on ETFs and options-exercise-related transactions are also not eligible. For margin customers, the ETFs purchased through the commission-free ETF program are not margin eligible for 30 days from purchase date. To discourage short-term trading, E*TRADE Securities will charge a short-term trading fee on sales of participating ETFs held less than 30 days." The major takeaway here is that these ETFs are for position traders, not day traders.

So for all of you with E*TRADE accounts, I hope you find the pages listed above useful.

Disclosure: small position in GXG, no positions in any other ETFs mentioned in this post

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Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.