ETF Portfolio Updates: Stick with Defense
By: Christopher Mistal
September 06, 2016
Following six straight months of gains from February through July, DJIA declined 0.2% in August. S&P 500 had been up for five months straight before slipping 0.1% in August. NASDAQ and Russell 2000 performed better in August, up 1.0% and 1.6% respectively. Overall August performance was weaker than past election years although not far off as tech and small-caps did outperform. As of last Friday’s close DJIA was up 6.12% year-to-date, S&P 6.66% and NASDAQ 4.84%. DJIA and S&P 500 are above average compared to past election years, but NASDAQ is still slightly below.
The market is now navigating the weakest part of the calendar year, September. Even in election years the month has been challenging. This weakness is apparent on the following updated “Eighth Year” charts. In past election years, DJIA and S&P 500 have peaked early in September and then decline through mid-October. NASDAQ tends to rally until mid-September before surrendering its gains.
DJIA Election Year Seasonal Charts
S&P 500 Election Year Seasonal Charts
NASDAQ Election Year Seasonal Charts
ETF Portfolio Updates
Over the past two weeks since last update, the market has been relatively quiet and so has the Almanac Investor ETF Portfolio. SPDR Utilities (XLU) is the oldest and best performing holding up 9.1% as of the close on September 2. Recent talk and increase speculation of a September Fed rate increase had pressured XLU throughout the month of August, but recent weak data, August jobs report, ISM-manufacturing and non-manufacturing, has reduced the odds of the Fed acting in September. Once again, lower rates for longer is creating a demand for higher-yielding assets such as XLU. With today’s gains, XLU’s technical outlook has improved. MACD and stochastic indicators are now positive and relative strength is improving. XLU is on Hold.
iShares 20+Year Treasury Bond (TLT) and iShares Core US Aggregate Bond (AGG) have been moving sideways since early August. Similar to XLU, TLT and AGG are off their respective July highs, but not as much. If data weakness persists and the Fed sits tight, further gains are possible. TLT and AGG are on Hold.
Recent Seasonal Sector Trade ideas, SPDR Gold (GLD) and ProShares UltraShort Bloomberg Oil (SCO) were both under water at last Friday’s close. Today’s tepid data and softer U.S. dollar gave GLD a boost today and this position is now positive. SCO was added last Friday using its average daily price as it gapped below its buy limit. SCO was down even more today as the weaker dollar lifted crude oil. GLD and SCO are also on Hold.
iShares NASDAQ Biotech (IBB) and iShares DJ US Tech (IYW) have still not traded below their respective buy limits. IBB did weaken in August while IYW continued its march higher. We will not give chase. IBB and IYW can still be considered on dips below their respective buy limits.
Our position in Ranger Equity Bear (HDGE) still has not performed. A key reason for this is the fact that stocks have held up well through the summer months. Continue to Hold HDGE, its loss could shrink if there is a modest market pullback in September and/or October or turn into a gain should a deeper correction transpire if seasonal weakness and election uncertainty materialize.
[Almanac Investor ETF Portfolio – September 2, 2016 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in AGG, HDGE and TLT.