There are changes to two iShares models this week. The iShares Sector Rotation Model (ISHRSECT) bought the iShares North American Natural Resources ETF (IGE) and the iShares US Energy ETF (IYE). ISHRSECT utilizes a relative strength versus benchmark methodology which compares each fund in the model universe against the iShares Dow Jones US ETF (IYY). Those funds showing near-term relative strength against the benchmark (i.e., are in a column of Xs) are included in the portfolio and are removed only when they show weakness relative to the benchmark. When an addition or deletion is made, the portfolio is rebalanced so each position is equally weighted.

IGE and IYE were added because both funds reversed up on their respective relative strength charts versus IYY, demonstrating short-term relative strength against the benchmark. IGE currently has a strong 5.75 fund score, which is 1.37 points better than the average for all energy and natural resources funds, and a positive 4.33 score direction. Year-to-date (through 2/18), the fund has gained 20.38% on a price return basis and also carries a 2.1% yield. IYE currently has a favorable 4.55 fund score, which is 0.17 points better than the average for all energy and natural resources funds, and a positive 3.06 score direction. Year-to-date, IYE has gained 21.82% on a price return basis and carries a 2.5% yield.

In addition to IGE and IYE, ISHRSECT also has exposure to biotechnology, technology, semiconductors, basic materials, financials, and telecom. Year-to-date, ISHRSECT has gained 2.47% while the S&P 500 (SPX) is up 0.52%.

The iShares Tactical Model (ISHRTACTICAL) sold the iShares US Consumer Discretionary ETF (IYC) and bought the iShares US Oil Equipment & Services ETF (IEZ). IYC was sold because its rank in the model’s relative strength matrix fell below the threshold to remain a holding in the model. In its place, the model added IEZ as it was the highest-ranking fund in the matrix that was not already a model holding.

IEZ currently has a near-perfect 5.80 fund score, which is 1.42 points better than the average for all energy and natural resources funds, and a positive 3.21 score direction. Year-to-date IEZ has gained 35.03% on a price return basis and carries a 1.5% yield. In addition to IEZ, ISHRTACTICAL also has exposure to gold, the S&P 500, semiconductors, silver, aerospace & defense, US broker dealers & securities exchanges, and industrials. Year-to-date, the model has gained 7.06%.

This section of the report categorizes select iShares Fixed Income and Currency ETPs by their respective fund groups. Along with each group, you can view the Average Group Score, which is an average of the scores of all funds represented in that particular group. Those iShares ETFs that meet or exceed the Average Group Score will be highlighted in green in order to easily view those ETFs that have superior strength within their respective group. You want to focus on those ETFs that exhibit superior strength when looking to add new exposure to a particular group.

The distribution curve places each ETF on a bell curve according to their respective degrees of overbought or oversold status using a 10-week distribution. ETFs that are statistically oversold will appear on the left-hand side of the bell curve, while those that have become statistically overbought will appear on the right-hand side of the bell curve. Perhaps the most useful attribute of this feature is that it displays the entire universe on the curve at one time with an "average level" to give us a general picture of whether the iShare ETF universe is generally overbought on a near-term basis, or generally oversold. Our best opportunities are to buy strong market ETFs that have regressed back toward mean conditions based on market weakness, or have become oversold based upon extreme market weakness. 

Weekly Distribution is a short-term gauge that is most helpful in timing entry and exit points, while the longer-term information of trend and relative strength is a more controlling factor in the decision of whether to buy or sell. The Distribution Curve below displays those ETFs with positive RS in uppercase letters and those ETFs with poor RS versus the market in lowercase letters. As well, those ETFs that are on a Point & Figure Buy signal appear in Green letters, while those on Sell signals can appear in Red letters. Box Color indicates the Sector Status Rating. Green = Favored, Yellow = Average, and Red = Unfavored.

This section of the report categorizes select iShares ETFs by their respective broad group. Along with each group, you can view the Average Group Score, which is an average of the scores of all funds represented in that particular group. Those iShares ETFs that meet or exceed the Average Group Score will be highlighted in green in order to easily view those ETFs that have superior strength within their respective group. You want to focus on those ETFs that exhibit superior strength when looking to add new exposure to a particular group.

Weekly Updates: The iShares Sector Rotation Model (ISHRSECT) bought the iShares North American Natural Resources ETF (IGE) and the iShares US Energy ETF (IYE). The iShares Tactical Model (ISHRTACTICAL) sold the iShares US Consumer Discretionary ETF (IYC) and bought the iShares US Oil Equipment & Services ETF (IEZ).