S&P World ex-U.S versus S&P 500 - By: S.C.R. Analysts

Finance Research & Analysis for July 20, 2008

The following financial analysis excerpts are from research revisions recently completed on investment portfolios:

**Analysis 5: From D7 (Global) Financial Portfolio Research Revision**
iShares D.J. U.S. Energy (IYE) vs. SPDR S&P 500 (SPY):
*Observation – Relative Strength: Results in the relative strength analysis of D.J. U.S. Energy (IYE) versus SPDR S&P 500 (SPY) indicate that the IYE is currently neutral to SPY on a relative basis.
*Observation – Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: The linear regression is below the time-series. Since the linear regression provides the “best fit” to the price path, this has negative implications for IYE.
*Observation – Price Performance: D.J. U.S. Energy (IYE) shows a continuation of a neutral to negative price path (flat to downward slope); however, this continuation is on weak indicators.
[Reference Charts - SCR: D7-28 (relative strength); A7-28A (regression); A7-28B (price)]

**Analysis 6: From D7 (Global) Financial Portfolio Research Revision**
SPDR S&P World ex-U.S. (GWL) vs. SPDR S&P 500 (SPY):
*Observation – Relative Strength: Results in the relative strength analysis of SPDR S&P World ex-U.S. (GWL) versus SPDR S&P 500 (SPY) indicate that GWL is fairly neutral to SPY on a relative basis.
*Observation – Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: The linear regression is below the time-series from a recent crossing. Since the linear regression provides the “best fit” to the price path, this has negative implications for GWL.
*Observation – Price Performance: S&P World ex-U.S. (GWL) shows continuation of a negative price path (downward slope) but on weak indicators. The GWL price path closely matches the SPY path.
[Reference Charts - SCR: D7-46 (relative strength); A7-46A (regression); A7-46B (price)]

For most investors, a diversified portfolio approach combining stocks, bonds, money market securities, etc., is optimal. While diversification cannot protect against a loss from a declining market, it can reduce the overall portfolio’s volatility.

Finally, to the above analysis, the usual disclaimers apply. Since all Strategic Capital Research publications provide research that is conducted using historical data, a reminder needs to be made that the analysis of past market reactions cannot predict future market actions. In particular, no amount of historical data can predict the sudden changes that occasionally occur in financial markets.

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The SCR Analysts represent the collective voice of the researchers at Strategic Capital Research (SCR). We provide global financial analyses, and subsequent strategies, from countries to companies. [SCR] Research & Analysis with Excerpts: http://www.strategiccapitalresearch.com/research.html [SCR] Matching R&A Strategies: http://www.strategiccapitalresearch.com/strategies.html [SCR] Finance Videos (1): http://www.strategiccapitalresearch.com/sitesvideos1.html

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