In just over a week it will be Memorial Day weekend. In recent years, this weekend has become the unofficial start of summer. Not long afterwards trading activity will likely begin to slowly decline (barring any external event triggers). We refer to this summertime slowdown in trading as the doldrums due to the anemic volume and uninspired trading on Wall Street. The individual trader, if they are looking to sell a stock, is generally met with disinterest from The Street. It becomes difficult to sell a stock at a good price. That is also why many summer rallies tend to be short lived and are quickly followed by a pullback or correction.
Below we have plotted the one-year seasonal volume patterns since 1965 for the NYSE and 1978 for NASDAQ against the annual average daily volume moving average for 2017 so far. The typical summer lull is highlighted in yellow. A surge in volume this summer, especially accompanied by gains, would be an encouraging sign that the bull market will continue. However, should traders lose their conviction and participate in the annual summer exodus from The Street, a market pullback or correction could quickly unfold.
Stock Portfolio Updates
Typically once we issue our Seasonal MACD Sell signal for DJIA and S&P 500, we would weed out the Almanac Investor Stock Portfolio by cutting weak or underperforming positions. This year existing stop losses have already been trimmed weaker positions. There is also an abundant supply of cash to deploy when new opportunities (long or short) come up.
In the four and a half weeks since last update, S&P 500 was 0.01% lower while Russell 2000 was down 0.8% as of yesterday’s close. The Almanac Investor Stock Portfolio’s blend of cash and long positions was weaker, down 1.4% over the same time period. Like the broader market, the bulk of the decline in the portfolio was the result of yesterday. Our Large-Cap portfolio performed best, up 0.4% while Small-Caps shed 1.2% and Mid-Caps tumbled 3.1%.
Once again, Almanac Investor Large-Caps were supported by a 6.8% gain by Arista Networks (ANET). Shares were trading at new all-time highs, above $148, as recently as Tuesday, May 16. Even after yesterday’s $5-plus decline, ANET’s chart is still bullish and its uptrend is still intact. ANET is on Hold.
UnitedHealth (UNH) also contributed to Large-cap gains. The healthcare industry is facing numerous uncertainties, but one thing that seems to not change is the rapidly escalating costs. The higher costs keep getting passed along to the consumer in the form of higher premiums and higher deductibles. Until this cycle slows or gets broken, UNH is likely headed higher. UNH is on Hold.
Although up just 0.7% since being added to the portfolio, Hershey Company (HSY) was a bright spot yesterday. As the broader market was struggling, HSY moved higher and reclaimed its 50-day moving average on above average volume. Today, HSY is continuing to advance. A close above $110 would further reinforce near-term bullishness. HSY is on Hold.
Our Mid-cap stocks were struggling somewhat even before yesterday’s declines. Scotts Miracle-Gro (SMG) reported Q2 earnings that failed to meet expectations on May 2. Both revenue and earnings missed. Management cited weather as a contributing factor. That’s the past and SMG appears to be an interesting way to gain exposure to the world of cannabis investment. One positive in an otherwise tepid earnings report was the 22% year-over-year growth in SMG’s hydroponics product line. SMG’s recent selloff looks overdone given the magnitude of its Q2 miss and solid growth in hydroponics. SMG is on Hold.
On May 16, Sabra Healthcare REIT (SBRA) closed below its stop loss of $23.46 and was closed out of the portfolio. A downgrade and a proposed merger, paid for with shares of SBRA, appear to be the key negatives that knocked shares down so abruptly. We will let this one go at least until after the ink dries on the merger.
After being the star of the Small-cap portfolio for the last few updates, Pressure Biosciences (PBIO) momentum faded and it closed below its stop loss of $0.25 on May 16. Having already sold half of the original position in late March, PBIO was closed out for a 78.1% gain.
IES Holdings (IESC) was also stopped out when it closed below $16.29 yesterday. For tracking purposes it was closed out using today’s opening price of $15.75. A disappointing second quarter earnings report on May 5 appears to have been the catalyst for the selloff.
All other positions, not mentioned above, are currently on Hold. Please refer to the updated portfolio table below for Current Advice about each specific position. Please note that some stop losses have been updated as a result of yesterday’s Sell signal.
ETF Portfolio Correction
In yesterday’s
Seasonal MACD Sell signal Alert, two new long trades in
SPDR Gold (GLD) and
iShares Silver (SLV) were presented. We intended to cancel and close out the positions in gold and silver that were
presented on May 4.
ProShares UltraShort Silver (ZSL) was added to the ETF Portfolio on May when it traded below $35.40.
Sell ZSL. GLD was shorted on May 5 using its average price of $116.94.
Cover GLD short trade. For tracking purposes, ZSL and short GLD will be closed out using their respective average prices on May 19.
A corrected version of yesterday’s ETF Portfolio table follows. A complete update is scheduled for next Tuesday, May 23.
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in AGG, ANET, BUSE, CCS, FXB, GLD, HSY, IESC, IWM, MHO, PBIO, QQQ, RMCF, SBRA, SLV, TLT, XLE, XLP and XLY.