Stock Portfolio Updates: Well Positioned for Rest of Worst Months By: Christopher Mistal | July 23, 2015 | Email | Print

Post “Great Recession” we have had to place much less importance on some of our long-time favorite indicators such as weekly CBOE equity Put/Call ratio and Investor’s Intelligence Advisors' Sentiment survey. Both of these indicators were once quite useful when trying to confirm market tops and bottoms, but in recent years both have been essentially stuck in narrow ranges and/or apparently just responding to the markets every move. Both remain useful, just not as much as they once were. Today, I am going to add another to the “not so relevant” list, weekly Initial Jobless Claims.

 

 

 

This weekly report tells us the approximate number of people filing for jobless benefits each week or more simply, how many people lost a job for whatever reason. It’s seasonally adjusted and subject to some rather large moves and revisions from week to week, but it once correlated quite well with the market’s moves. If weekly claims were trending higher, the labor market was generally weak and in turn the market was weak as well. A declining trend signaled the opposite and the market was generally moving higher.

 

The trend of weekly Initial Jobless Claims has been down for all of 2015 and the market has only gone sideways. Today, articles with headlines like “Lowest Claims in Four Decades” are followed by analysis that seems to suggest that all is well in the labor market. Fewer people losing their jobs must mean a tight labor market which should lead to rising wages and more spending and in turn more jobs which can only lead to even more growth and continued spending. 

 

 

Yeah, maybe, except most articles today failed to mention that claims are so low because the labor force participation rate in the U.S. is also at a near four decade low. The smaller the labor force, the fewer the number of weekly claims there will be. As long as the labor force continues to shrink, Jobless Claims will also continue to decline rendering any new “lowest-in-decades” report essentially meaningless.

 

Stock Portfolio Updates 

 

Over the past six and a half weeks since last update, through the market’s close on July 22, S&P 500 climbed 1.7%. Russell 2000 was up 0.4% over the same time period. Collectively the three Almanac Investor Stock Portfolios advanced 0.7%. Our Mid-Cap stocks performed best, gaining 3.4%. Our Large-Cap portfolio was second best, up 0.9% while Small-Caps slipped 0.2%. All the damage in the Small-Cap portfolio can be attributed to ChipMOS Technologies (IMOS) as it fell from nearly $23 last update to $17.70 yesterday. Along the skid lower, IMOS first closed below its stop loss on July 20, resulting in the closure of this position for an 11.7% gain.

 

Our long holdings in both the Mid- and Large-Cap portions of the Stock Portfolio continue to perform well with the exception of Southern Copper (SCCO) which looks like it will get stopped out today. (If stopped out, SCCO will be addressed in the next update) Amerco Inc (UHAL), Jetblue Airways (JBLU), Lithia Motors (LAD), Gildan Activewear (GIL), Fidelity National Finance (FNF) and UnitedHealth Group (UNH) have all traded at new 52-week highs at one time or another over the past few weeks. All long positions in the Mid- and Large-Cap portfolio are on HOLD.

 

Earlier this month we presented a basket of 14 stocks that we believe are excellent candidates to short. There were three small-caps, three mid-caps and eight large-cap stocks to choose from. All 14 appear in the Stock Portfolio and can be quickly identified by having “(S)” following their names. Thus far, eight have reached one of their two respective price targets to establish a short trade. Tronox Ltd (TROX) and Cree Inc (CREE) were shorted when they broke down through support however; both bounced and closed above their stop losses resulting in a small 5% loss being realized on both positions.

 

BKEP, CQP, CL, MCD, PM and PX were also shorted at various times over the past few weeks. These positions are on Hold. SKYW, LECO, VMI, BLUE, and IRM have not been shorted yet and can be shorted either near resistance (the higher price in “Current Advice”) or on a breakdown below support (lower price in “Current Advice”). Norfolk Southern (NSC) has broken down below support at $84.80 today and will be updated in the Portfolio later.

 

Active traders can consider our short stock ideas while others may prefer the comfort of cash. No matter the situation, our stock portfolio currently offers both which we feel is the best approach to weathering the worst two months of the year, August and September that are just around the corner. All other positions, not specifically mentioned above, are on Hold. See table below for updated Stop Losses.