ETF Trades: Ride the Rally & Tend Stop Losses By: Christopher Mistal | March 02, 2017 | Email | Print

Although the market took a breather today giving back a portion of yesterday’s surge, it is not all that likely to manifest into anything more than a brief bout. In addition to our positive January Trifecta signaling further gains are quite likely, the history of S&P 500 gains in January and February offers further support for continued strength.

 

In 87 years going back to 1930, S&P 500 has been positive in January and February 33 times. Strength continued into March in 22 of those years and the full year was up 29 times. The record further improves when examining the data since 1950. This is the earliest year we consider to represent the beginning of the modern era. Since 1950, S&P 500 has advanced 19 out of 26 times in March following gains in January and February and was positive for the full year 25 out of 26. Average March gains in all 26 years were 1.4% while the full-year averaged 19.5%.

 

 

 

Usually at this time we would be considering new long ideas from the Computer Technology sector as seasonal strength typically begins in April and runs until July. Historically, the Computer Technology sector has averaged 6.2%, 5.9%, and 7.2% over the last 15-, 10- and 5-year time periods respectively. Back in January we elected to hold Computer Tech related positions in the portfolio instead of selling as the table on page 94 of the Stock Trader’s Almanac 2017 suggests. That decision proved correct as iShares US Technology (IYW) and SPDR Technology (XLK) continued to rally along with the broader market. Because sufficient exposure to the Computer Tech sector already exists in the portfolio, with respectable gains, we will not officially expand any Computer Tech related positions.

 

 

Core ETF Portfolio positions utilized to trade the “Best Six/Eight Months,” SPDR DJIA (DIA), iShares Russell 2000 (IWM), PowerShares QQQ (QQQ) and SPDR S&P 500 (SPY) are up an average 13.4% as of yesterday’s close. DIA is now the top performing ETF of this group, up 16.2%. Due to recent gains, stop losses for these positions have all been raised. DIA, IWM, QQQ and SPY are on Hold. 

 

SPDR Utilities (XLU) still has not traded below its buy limit. XLU currently has a dividend yield exceeding 3% and seasonal strength typically lasts until the beginning of October. XLU can be considered on dips below $50.20. 

 

Per last update, First Trust Natural Gas (FCG) was closed out of the portfolio using its average price on February 22 of $25.56 resulting in a 4.5% loss. FCG is about $1 lower at this writing, so the decision to cut and run appears to have been the correct one.

 

Precious metal short trades from early February have both been executed. DB Gold Double Short (DZZ) was added to the portfolio on February 23 at $5.80. DZZ and ProShares UltraShort Silver (ZSL) were both negative at yesterday’s close, but will likely be in the green at today’s close as gold is down over 1% and silver is currently down over 3%. The seasonalities associated with these two holdings are relatively brief in duration so we will look to take profits at their respective Auto-Sell prices.

 

All other positions not previously mentioned are on Hold. Please see table below for updated stop losses.