ETF Portfolio Updates: Stick to Playbook, Worst Two Months August & September Nearly Here
By: Christopher Mistal
July 21, 2015
Beyond the heat wave impacting the East Coast the past few days, NASDAQ has also been red-hot the past two weeks. At yesterday’s close, NASDAQ was at another new all-time high and up 4.7% so far in the month of July. Looking back in our database, NASDAQ has only been up 4% or more for the full-month of July twelve times in its 44 year history. 
The best July was a 10.5% gain in 1997 while recent hot NASDAQ Julys were frequently followed by a cool August. Four of six Augusts following NASDAQ July gains of 4% or more since 1997 have been negative. After a 6.9% advance in July 2010, NASDAQ dropped 6.2% in August. The two years when NASDAQ was up in July and August were 2003 (bear market ended in October 2002) and 2009 (bear ended in March).
[4% NASDAQ Julys]
ETF Portfolio Updates
In the two weeks since last update, the market has found support and bounced notably higher. iShares 20+ Year Treasury Bond (TLT) and iShares Core US Aggregate Bond (AGG) are essentially unchanged. TLT is a few cents higher while AGG is a few cents lower. Excluding dividends, TLT is down 3.4% while AGG is off 1.2%. AdvisorShares Ranger Equity Bear (HDGE) has also slipped, but is still holding onto a 2.1% gain. HDGE, TLT and AGG could be considered on dips below their respective buy limits.
Crude oil’s rout persisted longer than expected and United States Oil (USO) was stopped out on July 17 when it closed below its stop loss of 17.00. Traders and investors remain heavily focused on supply and U.S dollar strength. There is sufficient supply today and there is the prospect of even more from Iran should sanctions be eased, but lower prices are causing a pickup in demand. According to the EIA’s Weekly Petroleum report from last week, total product supplied to market over the past four-week period was up 3.6% compared to the same period a year ago while inventories declined. Enjoy lower pump prices while they last.
New ETF Trade ideas presented early this month have not been added to the portfolio yet. IBB and IYW both came within a few percentage points of their buy limits, but neither traded below. With the market looking toppy and possibly rolling over once again, buy limits for IBB and IYW remain unchanged for now.
Of the three new Seasonal Sector Trade ideas presented this month, ProShares UltraShort S&P 500 (SDS) and First Trust ISE-Revere Natural Gas (FCG) have been added to the portfolio.  SDS was added on July 14 at $20.08 when SPDR S&P 500 (SPY) traded above $210.56 for the first time. SDS is on Hold with a 5% trailing stop loss (based upon daily closing prices). FCG is on a wild ride. It traded just below its buy limit on July 16 and then crashed to just three cents above its stop loss two days later. An East Coast heat wave is giving natural gas a boost which is in turn helping FCG today. FCG is on Hold while United States Natural Gas (UNG) can be considered on dips.
Short positions in XLF, IYT and XLB are mostly performing. XLF is refusing to decline as numerous analysts remain bullish on banks. They expect big profits from a steepening yield curve however; at least one bank has already adjusted its strategy because it does not expect the Fed to raise rates anytime this year. Without higher rates soon, the banks are still excellent short candidates. Associated stop losses have been updated in the table below.
The balance of the portfolio is on Hold. See table below for updated stop losses.
[Almanac Investor ETF Portfolio – July 20, 2015 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held a position in USO.