Seasonal MACD and Stock Portfolio Updates: Too Early & Still Holding
By: Christopher Mistal
September 20, 2018
DJIA’s record-less streak finally ended today at 237 calendar days and a new all-time closing high of 26657.18. S&P 500, NASDAQ and Russell 2000 all enjoyed solid gains of just under 1%. S&P 500 also closed at a new all-time high. NASDAQ and Russell 2000 did not. Recent market strength has turned MACD positive for DJIA and S&P 500, but not NASDAQ (blue arrows in charts below point to current MACD status).
[DJIA Daily Bar Chart with MACD]
[S&P 500 Daily Bar Chart with MACD]
[NASDAQ Daily Bar Chart with MACD]
Although today’s broad based strength is an encouraging sign, it is just a single day and only DJIA and S&P 500 closed at new all-time highs. NASDAQ and Russell 2000, which lead for the bulk of the summer, need to catch up. All four indexes closing at new all-time highs would be decisively bullish especially if it lasted for multiple trading sessions.
As a reminder for all subscribers, new and veteran alike, the earliest date that we can issue our Seasonal MACD Buy signal is October 1, 2018. The criteria to issue our Seasonal MACD Buy Signal is a new buy signal using our 8-17-9 MACD indicator on or after the first trading day of October and DJIA, S&P 500 and NASDAQ must be in agreement. When the criteria are satisfied, we will send an email Alert to all active subscribers detailing what trades could be made.
Stock Portfolio Updates
Over the past six weeks since last update, S&P 500 climbed 1.8% through yesterday’s close. Russell 2000 advanced 1.0% over the same time period. Overall, the entire Stock Portfolio slipped 0.7% excluding any dividends or trading fees. Mid-caps performed the best climbing 0.1%. Large-caps were lower by 0.4% while our four Small-caps declined 1.0%. Compared to the S&P 500, the overall portfolio’s performance lagged due to a still sizable cash position and sizable declines from semiconductor related positions held throughout the portfolio.
June’s basket of Defensive Stocks is performing reasonable well even after the carnage the semiconductor sector suffered recently. Of the original 21 stocks selected eighteen are still held. Fifteen are positive with an average gain of 10.5%, three are negative and three were stopped out. Including the stopped positions, the basket’s average performance is 4.9% compared to a gain of 4.5% by S&P 500 over the same time period excluding any dividends. 
Lam Research (LRCX) was stopped out of the portfolio on September 6 for a loss of 10.8%. In the last update it was trading just above $190 and had a 6% gain. This nearly 20% decline was not limited to just LRCX, but numerous other semiconductor related stocks. Yet another cryptocurrency rout in early September was at least one catalyst for the selloff. Cohu (COHU), Rudolph Tech (RTEC), Kla-Tencor Corp (KLAC) and Te Connectivity (TEL) all suffered similar declines to LRCX. The selloff does appear to be rather excessive and some names are beginning to show signs of recovery. KLAC was up 1.4% today, RTEC gained nearly 1.9% and COHU advanced a little more than 2%.
Of the remaining defensive positions, seven are up double digits. The best performing position is still McCormick & Company (MKC), now up 22.6% as of yesterday’s close. Second best is Church & Dwight (CHD) up 18.6%. Utilities NJR, OGS, AEE and CMS are also enjoying double-digit gains. Southern Company (SO) has not been as successful.   
Officially the “Worst Months” for the market do not end until November begins. Thus far the “Worst Months” this year have not been bad at all, but midterm elections are quickly approaching, trade tensions are rising with new tariffs being added, bullish sentiment is at lofty levels and the Fed is in a tightening cycle. Any one of these headwinds alone could trigger a pullback or correction of magnitude and duration matching the January/February correction earlier this year. All positions in the portfolio are on Hold. 
Cash and defensive positions held in the portfolio could provide some level of protection should a pullback or correction transpire in the later stages of the “Worst Months.” Please see portfolio table below for updated stop loss suggestions.
[Almanac Investor Stock Portfolio – September 19, 2018 Closes]