Understanding Power Gauge ETF Ratings
The Chaikin Power Gauge ETF Rating is a proprietary, predictive system designed to help investors quickly identify ETFs likely to outperform or underperform over the next 3 to 6 months. While based on the same principles as the stock Power Gauge Ratings, this model is tailored to how ETFs behave.
What Is the Power Gauge ETF Rating?
Chaikin’s ETF Rating blends:
- Our multi-factor stock rating model
- A technical ranking system
- And the underlying holdings of the ETF itself
The result is a clear, forward-looking rating that reflects an ETF’s alpha potential—its likelihood to beat other ETFs in its category (U.S. Equity, Fixed Income, or Global Equity).
Ratings follow the same five-point scale used for stocks:
- Very Bullish
- Bullish
- Neutral+ / Neutral / Neutral–
- Bearish
- Very Bearish
🧠 While ETFs function differently from individual stocks, the Power Gauge adapts to both, allowing for consistent interpretation across your portfolio.
What Do These Ratings Help You Do?
- Identify ETFs to consider or avoid at a glance
- Support portfolio decisions across sectors, asset classes, and strategies
- Expand on the success of the stock Power Gauge model, with logic tailored to ETFs
- Introduce a proprietary Technical Rank designed specifically for ETF behavior
📌 ETF Ratings are indicators of relative strength—not buy or sell signals. They’re best used as a starting point for research and portfolio positioning.
How Are Power Gauge ETF Ratings Calculated?
🟦 For U.S. Equity ETFs:
The rating combines three core inputs:
- ETF Technical Rank – Measures technical strength using intermediate- and long-term signals
- Constituent Bull/Bear Ratio – Counts how many stocks in the ETF are Bullish vs. Bearish
- Weighted Average Stock Rating – Measures the average Power Gauge rating of the ETF’s top holdings, adjusted for their weight
These are combined into a single score, which is then assigned a rating from Very Bullish to Very Bearish.
🟨 For Global Equity and Fixed Income ETFs:
Only the Technical Rank is used, due to differences in data availability and holdings structure.
⏱ New ETFs receive a rating after 120 trading days, and 5 years of weekly rating history is available on Chaikin charts.
How Often Are ETF Ratings Updated?
- Weekly: Ratings are recalculated before the market opens on Monday, using data from the previous week.
- Daily: A technical overlay adjusts the displayed rating to Neutral+ or Neutral– if there's a large price move that doesn't align with the underlying rating.
- Continuity checks help prevent major shifts between weeks that aren't supported by actual changes in the data.
What Is the Technical Overlay?
Similar to how it works with stocks, the technical overlay acts as a circuit breaker:
- A Bullish ETF with a sudden drop may be shown as Neutral+
- A Bearish ETF with a sudden rally may be shown as Neutral–
These adjustments ensure the rating reflects short-term price movement without overreacting to noise.
Learn more in: What Do Neutral+ and Neutral– Mean?
Interpreting the Technical Rank
❓ Why is an ETF’s Technical Rank Bullish if its chart just dropped?
The Technical Rank leans heavily on longer-term performance to reduce false signals:
- It focuses on trend quality over weeks and months—not short-term volatility
- Sharp short-term drops may not immediately affect the rank if the longer trend remains intact
- Charts showing steady downward movement are more likely to carry Bearish Technical Ranks
For U.S. Equity ETFs, this rank is then enhanced by the Power Gauge ratings of the ETF’s holdings—something most other systems do not offer.
How Are Chaikin ETF Ratings Different?
Most ETF rating systems focus on:
- Past price performance
- Expense ratios
- Liquidity or size
Chaikin Power Gauge ETF Ratings go deeper by analyzing the fundamentals and technicals of the ETF’s underlying holdings.
This creates a more predictive, forward-looking system that works across very different types of ETFs, including sector, factor, and asset-class-based funds.
Summary: How to Use the ETF Ratings
Use Power Gauge ETF Ratings to:
- Identify ETFs to overweight (Very Bullish) or underweight/avoid (Very Bearish)
- Support asset allocation decisions based on sector, market cap, or style (value vs. growth)
- Gain insights not only from the ETF itself—but also from the stocks it holds
⚠️ Avoid using ratings in isolation. A Bullish rating is a call to investigate—not a command to buy.