What are Chaikin Power Gauge ETF Ratings?
Chaikin Power Gauge ETF Ratings are a proprietary, predictive rating system that indicate an ETF’s potential to outperform the ETF's universe (US Equity, Fixed Income, or Global Equity) over an intermediate-term horizon (3-6 months), based on extensive back testing. They combine Chaikin’s proprietary multi-factor stock rating model and technical analysis techniques into a unique indication of an ETF’s “alpha potential”, helping investors decide which ETFs to buy and which to avoid.
Though there are differences between the mechanics of stocks and ETFs, the end result is similar between stock and ETF Ratings.
Rating values are the same as stocks: Very Bullish, Bullish, Neutral(+/-), Bearish, Very Bearish.
What are the goals of the ETF rating system?
- Allow investors to see at a glance which ETFs to avoid or consider buying.
- Deliver a consistent, predictive rating for all types of ETFs.
- Build upon success of existing Power Gauge stock ratings.
- Introduce a new, proprietary Technical ranking for ETFs.
ETF Power Gauge Rating Icons
We have designed Power Gauge Rating icons, with an “ETF” stamp for ETFs. The icon shows a “gauge” marker, which allows the icon to make sense independent of color or text.
How often do ETF Ratings update?
Power Gauge ETF Ratings are evaluated on a weekly basis. Before the first market open of the trading week, the prior week’s data is evaluated and new Ratings are generated.
On a daily basis “technical overlays” are calculated to adjust ratings in the case of large price drops or upward movements. These updates are performed before the open each trading day.
How are ETF Ratings calculated?
For US Equity ETFs, the Power Gauge ETF Rating model looks at three factors:
- ETF Technical Rank
- Constituent Bull/Bear Ratio
- Weighted Average Constituent Power Gauge Rating
These three factors are weighted and combined into a consolidated ETF Rating, from Very Bullish (most likely to outperform), to Very Bearish (most likely to underperform).
Consolidated Ratings are evaluated for all rated ETFs before the start of each trading week.
On a daily basis, a “technical overlay” is applied so that Bullish or Very Bullish ETFs which have had a significant price drop are modified to a “Neutral+” Rating, and Bearish or Very Bearish ETFs which have had a significant price gain are modified to a “Neutral-” Rating.
Finally, a continuity check is performed to prevent gaps in an ETF’s Rating from week to week.
A new ETF will get a Rating after 120 days of trading. Chaikin provides 5 years of weekly Rating history on ETF charts.
For Fixed Income and Global Equity ETFs only the Technical Ranking is used to calculate the rating. Other ETF types do not have ratings.
How often do ETF Ratings update?
Power Gauge ETF Ratings are evaluated on a weekly basis. Before the first market open of the trading week, the prior week’s data is evaluated and new Ratings are generated.
On a daily basis “technical overlays” are calculated to adjust ratings in the case of large price drops or upward movements. These updates are performed before the open each trading day.
What do the Ratings mean and how should I use them?
Similar to our stock Ratings, Chaikin Power Gauge ETF Ratings are an indication of likely intermediate-term relative performance of an ETF, and can be used to help decide which ETFs to overweight, underweight, or avoid in a portfolio.
- Very Bullish ETFs are the most likely to outperform the overall ETF universe.
- Very Bearish ETFs are the most likely to underperform the overall ETF universe.
Since ETFs reflect a number of investment strategies, Chaikin ETF Ratings can help anyone managing a portfolio achieve an allocation across Sectors, Market Cap, Growth/Value – and ultimately across asset classes – in line with Chaikin’s backtested methodology.
How shouldn’t I use them?
Like stock Ratings, Chaikin Power Gauge ETF Ratings are not trading signals. A Bullish Rating should be considered a “call to attention”, allowing the careful investor to look at all relevant factors to decide whether the ETF is a suitable investment candidate for them at that time.
What should I keep in mind about Power Gauge ETF Ratings?
Technical Rank
Why is this ETF’s Technical Rank “Bullish” even though it just dropped?
- The Technical Model is over half of the input into the final ETF Rating. It combines long-term and intermediate-term indicators to rank all U.S. ETFs by technical strength.
- It skews toward longer-term performance, to reduce whipsaws from short-term activity.
- Charts which are going down across the screen tend to have Bearish technical ranks, NOT necessarily the ones with a big drop over the last few weeks.
- The Technical Model ranks all types of ETFs, and tests well on its own. For U.S. equity ETFs, Power Gauge stock ratings enhance the performance of the Technical Model.
How does the Chaikin Power Gauge ETF Rating compare to other ETF ratings?
Other ETF rating methods typically look at prior price performance, and things like fees and liquidity to determine “strongest” or “weakest” ETFs. While these are valid metrics, only Chaikin ETF PGRs look at the underlying fundamental and technical characteristics of an ETF’s constituent holdings to determine an ETF’s potential to out- or underperform the market.
We are determining a consistent, meaningful, predictive rating for all classes of ETFs, even though they are very different types of tradable instruments – something which is very differentiated, if not unique, in the marketplace.