ETF Portfolio Updates: Warm Weather Tanks Natural Gas
By: Christopher Mistal
February 21, 2017
As of today’s close, DJIA is up 4.96% year-to-date, S&P 500 is up 5.65% and NASDAQ is up a strong 8.97%. The market shrugged off typical weakness before and after Presidents’ Day and appears to be skipping typical weakness seen during a new administration’s first 100 days in office. This strength and resilience is noteworthy as it does appear in one pattern, the pattern of past years that also had a positive January Indicator Trifecta.
In the following charts 2017 is compared to all past Post-Election Years, all past January Trifecta years and past Post-Election Years that also had a positive January Trifecta. 2017 DJIA and S&P 500 performance has (or very nearly) caught up with the bullish positive January Trifecta pattern while NASDAQ is actually exceeding past averages. Taking the most bullish of these patterns, past Post-Election Years with a positive January Trifecta, and applying them to current market levels results in some rather large numbers by yearend; DJIA 23940, S&P 500 2776 and NASDAQ 6804.
[DJIA Trifecta Seasonal Pattern Chart]
[S&P 500 Trifecta Seasonal Pattern Chart]
[NASDAQ Trifecta Seasonal Pattern Chart]
Back in December we released our Annual Forecast for 2017 and laid out three scenarios; worst case, base case and best case with probabilities attached to them. Worst case was a mild bear market with a 5% chance. Base case was for continued tepid economic growth and single-digit to low double-digit gains, 65% chance. Our best case of 20% plus gains, based upon an acceleration of growth, tax reform, healthcare reform and infrastructure buildout, had a 30% chance. The longer the market keeps making new all-time highs, the better the odds are for the best case scenario to play out, but we still await signs of and confirmation of acceleration in growth, tax and healthcare reform and infrastructure buildout.
Portfolio Updates
Since issuing our Seasonal MACD Buy Signal for the “Best Six/Eight Months” after the close on October 24, corresponding positions in SPDR DJIA (DIA), iShares Russell 2000 (IWM), PowerShares QQQ (QQQ) and SPDR S&P 500 (SPY) are up an average 11.6% as of Friday’s close. IWM is the best performer, up 14.6%. These gains exclude any trading fees and any dividends issued. This is a respectable return given it has been less than four months and there are still two-plus months remaining in the “Best 6.” Due to recent gains, stop losses for DIA, IWM, QQQ and SPY have all been raised and these positions are on Hold.
Recent trade ideas from Seasonal Sector Trades Alerts earlier this month have been entered into the ETF Portfolio table below. United States Oil (USO) was added on the open on February 8 at $11.11 and was up 2.5% as of Friday’s close. USO could still be considered on dips below the original buy limit of $11.10.
Precious metal short trade idea, ProShares UltraShort Silver (ZSL) traded below its buy limit on February 10. As of today, ZSL is slightly in the green as silver has weakened. ZSL is also on Hold. DB Gold Double Short (DZZ) still has not traded below its buy limit and can still be considered on dips. Silver’s record of declines from mid-February to mid-April is more consistent than gold’s. Factor in the leverage of ZSL and DZZ and both of these trades should be closely monitored if executed.
Above average winter temperatures have spread across a large area of the U.S. which is reducing demand for natural gas for heating. As a result, natural gas prices have fallen taking United States Natural Gas (UNG) along with them. UNG was stopped out on February 16 when it closed below its stop of $7.29. UNG was closed out of the portfolio using its average price on the following day. Weather forecasts are currently well above average which is likely to put additional pressure on natural gas prices and could eventually lead to price declines in stocks of producers and explorers. Sell First Trust Natural Gas (FCG). For tracking purposes it will be closed out of the portfolio using its average price on February 22.
This month’s ETF Trades new idea, SPDR Utilities (XLU) has not yet traded below its buy limit and can still be considered on dips. XLU is modestly higher now than at the beginning of the month, but could still manage to dip below its buy limit especially if longer-term interest rates were to tick higher.
Updated stop losses and current advice for any position not mentioned above can be found in the portfolio table below.
[Almanac Investor ETF Portfolio – February 17, 2017 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in FCG, IWM, IYT, QQQ, SPY, VNQ, XLB, XLP, XLV and XLY.