Break Out ETF

USA

Bruce Bond breaks out into chartism

Bruce Bond-backed Innovator ETFs is listing a new first of a kind ETF that brings chartism – “technical analysis”, if you prefer – into an ETF. The Innovator IBD Breakout Stocks ETF (BOUT) will track an index of stocks that are about to “break out,” or experience a period of sustained price growth beyond the stock’s “resistance level.” A resistance level is, in chartist jargon, the point at which most traders believe a stock price to have peaked. Resistance levels are difficult for stock prices to get past, chartists believe, because most traders are inclined to sell a stock when it reaches that level. Stocks looking likely to get past their resistance level are said to “break out”.

In order to pick breakouts stocks, BOUT will use a Nasdaq index full of “base prices” for a large universe of stocks. Base prices are determined by looking at stock price movements. When a stock hits “a recent high in price and at least four weeks elapse without that high being surpassed, this price is identified as the base,” the prospectus says. In determining if a stock is about to break out past its base price the index looks at:

  1. How long since a stock hit its base price.
  2. How far the stock has falled from its base price.
  3. The percentage difference between the current price and the base price.
  4. The percentage difference in price from the stock’s lowest price subsequent to the establishment of the base and its current price.
  5. The percentage change in the stock’s price in each of the last three weeks.

Based upon this, the BOUT eliminates all stocks not identified as nearing a breakout or currently breaking out. The stocks that are chosen for inclusion in the index and are equally weighted. It is expected that the index will generally contain between 25-50 stocks, the prospectus says.

BOUT, however, doesn’t end there. It’s index also looks at the “overall health of the equities market,” the prospectus says. When signals suggest a pending downturn, BOUT can take a 50% cash position T-bill position. The downturn signals are:

  1. Year-over-year margin debt of 55%;
  2. S&P 500 more than tripling in value over a 5-year time period;
  3. The average closing prices of the last 5 weeks of the S&P 500 having a lower value than the average closing prices of the last 50 weeks of the S&P 500; or
  4. Falling relative price performance of the S&P 500 in relation to itself over an 89-week time period (i.e. when the S&P 500 average short-term prices fall below its average long-term prices).

The fund will stay 50% in cash until any of the following good signals rear their heads:

  1. The value of the S&P 500 declining by 50%;
  2. The index price of the S&P 500 being greater than its average monthly closing price over the last 6 months; or
  3. The S&P 500 average price for the previous 10 weeks falls below its average price for the previous 50 weeks (more recent weeks weighted more heavily).

Analysis – great product; won’t work

If nothing else, Bruce Bond has a genius taste for product innovation. As every finance professional knows full well: chartism doesn’t work. But as every finance professional also knows: there are plenty of people who think it does. In the ETF industry, gathering assets into your products matters more than building ones that perform. While BOUT will be thoroughly defeated by the index it aims to beat, it serves to show how ETF providers really can offer something for everyone. We suspect, and hope, this fund will gather assets. They just won’t be ours.

Europe

Effective from 1st September 2018, we are sharing the success of our Xtrackers MSCI EMU UCITS ETF by reducing the management fee of all share classes starting with an all-in fee at 0.12% per annum

 

The Xtrackers MSCI EMU ETF is one of our Core funds and offers direct investment in large and mid-cap companies from developed EMU markets and covers approximately 85% of free-float market capitalization.

 

 

EUR share class | Distributing

Xtrackers MSCI EMU UCITS ETF 1D

Fee reduction: from 0.15% to 0.12%

 

USD hedged share class | Capitalizing

Xtrackers MSCI EMU UCITS ETF 1C – USD Hedged

Fee reduction: from 0.25% to 0.17%

 

GBP hedged share class | Capitalizing

Xtrackers MSCI EMU UCITS ETF 2C – GBP Hedged

Fee reduction: from 0.25% to 0.17%

 

CHF hedged share class | Capitalizing

Xtrackers MSCI EMU UCITS ETF 3C – CHF Hedged

Fee reduction: from 0.25% to 0.17%