ETF Portfolio Update: Best Months Over, Shifting Towards Defense By: Christopher Mistal | June 18, 2015 | Email | Print

Bulls clearly had the upper hand in today’s market. NASDAQ exceeded its dot-com era high and closed at a new all-time high. Russell 2000 also broke out to close at a new all-time high. S&P 500 and DJIA also enjoyed 1% plus moves to the upside, but no new highs were made by either of these two indices. Today’s gains turned the faster moving MACD “buy” indicator positive for DJIA, S&P 500 and NASDAQ. Russell 2000 MACD was already positive.

 

 

Technically, the picture is rather mixed across the four indices. Stochastic and relative strength indicators applied to Russell 2000 suggest small-cap shares are overbought. The same indicators applied to DJIA, S&P 500 and NASDAQ are essentially in neutral territory suggesting that some more upside is possible. It is encouraging to see tech and small-cap finally leading the way higher, but with the frequently treacherous end of Q2 quickly approaching, it would not be surprising to see today’s break out quickly become just another fake out.

 

 

In accordance with our June 4, official MACD Seasonal NASDAQ Sell signal Alert, First Trust DJ Internet (FDN), iShares DJ US Medical Devices (IHI), iShares DJ US Tech (IYW), SPDR Technology (XLK), iShares Russell 2000 (IWM) and PowerShares QQQ (QQQ) were closed out of the portfolio using their respective closing prices on that day. The average gain for all six of these positions was a respectable 11.4%. IHI was the best, advancing 17.8%. 

 

Also in that Alert, we officially added to our three defensive positions, iShares 20+ Year Treasury Bond (TLT), iShares Core US Aggregate Bond (AGG) and AdvisorShares Ranger Equity Bear (HDGE). As a result of doubling our positions in these ETFs, the “Presented Price” for TLT, AGG and HDGE has been adjusted to reflect an average purchase price. Due to recent market strength, TLT, AGG and HDGE were all modestly lower at yesterday’s close. Additional TLT, AGG and HDGE purchases can be considered at current levels as all three are below their respective buy limits.

 

Direxion Daily Jr Gold Miners Bear 3X (JDST) was also closed out on the close on June 4. Physical gold has been range bound since March keeping many mining stocks in tight ranges as well. JDST’s 3x leverage helped turn an otherwise flat trade into a decent 6.2% profit relatively quickly. 

 

Both of this month’s Seasonal Sector Trades ideas have been added to the portfolio. iPath Bloomberg Livestock Sub-TR ETN (COW) and PowerShares DB Agriculture (DBA) are modestly lower and on Hold.

 

With the exception of our three Worst Months trades, TLT, AGG and HDGE, all other positions in the portfolio are on hold. SPDR HealthCare (XLV) did trade above its auto-sell today. If you have sold your position that is fine, but officially we are going to continue to Hold XLV as the sector has a solid track record of outperforming the broader market during the Worst Months.