Portfolio Updates: Ramping Up Long Exposure
By: Christopher Mistal
October 25, 2016
Today’s Alert is a continuation of yesterday’s Seasonal MACD Buy Signal. It is being delivered a little later than usual as all updates were done using today’s closing prices. November’s Vital Statistics, Almanac and Strategy Calendar Alert will be sent out tomorrow. 
Unlike last year, the late-summer/early-fall selloff was relatively mild this year. S&P 500 is still on course to close out October in the red which would complete a three consecutive month losing streak. Past streaks of three or more losing months in a row were followed by solid gains and the majority of the losing streaks did end at just three months. 
Should this be the case, November could be a good month to be long again. November marks the beginning of the “Best Six Months” for DJIA and S&P 500 and the “Best Eight Months” for NASDAQ. November is also the first month of the best three consecutive month span that runs until the end of January. And of course, we should finally know who the next president will be after Election Day. The uncertainty of what the political alignment will be next year in D.C. is undoubtedly weighting on the market and this should end two weeks from now.
The other major headwind the market faces is the Fed. Will they raise rates or not is still an unknown. As of today, CME Group’s FedWatch Tool is showing only a 9.3% probably of a rate increase at the Fed’s November meeting and the probability of an increase in December is 79.5%. This would suggest virtually no chance for November, but a fairly decent chance of a hike in December. If the Fed did act, it could ultimately prove to be another positive for the market. Fed action would remove another major uncertainty from the equation and within the longer-term perspective, even at a Fed funds rate range of 0.50-0.75%, rates would still be quite low which is favorable for business and consumers alike and in turn should be a positive for the market.
Stock Portfolio Updates
Per yesterday’s Alert, all remaining short trades where covered today. The most successful of these trades was Newfield Exploration (NFX) with a gain of 8.8%. The three Mid-Cap portfolio shorts, MTDR, TNH and DRQ were also closed out for modest gains. Other short positions, LNN, KKR and PX were closed at for modest losses. KKR and PX were covered today while LNN was stopped out on October 13 when it closed above its stop loss.
In addition to these positions, recent October weakness and today’s retail sector weakness resulted in four other positions being closed out since last update. CNC, DHI, HBI and SBUX have all been closed out of the Large-Cap portfolio after closing below their respective stop losses.
With the closure of several long positions and all short positions there is a sizable cash balance in the Stock Portfolio once again. We will look to put this cash to work in a basket of undervalued, relatively unknown stocks exhibiting the greatest potential for growth and gains regardless of Election Day outcome in upcoming Alerts. 
[Almanac Investor Stock Portfolio – October 25, 2016 Closes]
ETF Portfolio Updates
Per yesterday’s Alert, remaining defensive positions were closed out of the portfolio today. AGG was closed out for a 0.6% gain excluding dividends while HDGE was sold at a 9.0% loss. The loss on HDGE is unsatisfactory however; no major pullback or correction took place during the summer/early-fall months. HDGE was the more aggressive “Worst Months” trade. Absent meaningful weakness, a loss is not unexpected. 
SPDR DJIA (DIA), SPDR S&P 500 (SPY), PowerShares QQQ (QQQ), and iShares Russell 2000 (IWM) appear in the table below and can be purchased at current levels or below their respective buy limits, whichever is lower. Most other positions can also be considered at current levels or below their respective buy limits. See table below for updated buy limits, stop losses and auto-sell prices.
[Almanac Investor ETF Portfolio – October 25, 2016 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in BUSE, FXB, GLD,IBB, IWM, IYT, MHO, QQQ, SCMP, SPY, VNQ, XLB, XLF, XLP, XLV and XLY.