ETF Trades & Seasonal MACD Update: Tech Leads & Seasonal Window Opens
By: Christopher Mistal
April 04, 2019
Seasonal MACD Update
April, the last month of DJIA and S&P 500 “Best Six Months,” has gotten off to a respectable start this year with major U.S. indexes on track for gains during the first week. DJIA’s slower moving MACD indicator (lower pane of next chart) turned positive on the first trading day of April after spending a ll of March negative and trending lower. S&P 500’s MACD indicator turned positive on the second trading day of April and is trending higher, but at a modestly slower pace (lower pane of second chart below). Blue arrows in each chart point to the positive and expanding difference between the signal line and the difference between the exponential moving averages. An expanding gap typically accompanies a strengthening trend. Currently, the trend is higher, but resistance at previous all-time highs could prove formidable.
[DJIA Daily Bar Chart]
[S&P 500 Daily Bar Chart]
Continue to hold long positions associated with DJIA’s and S&P 500’s “Best Six Months.” We will issue our Seasonal MACD Sell signal when corresponding MACD Sell indicators applied to DJIA and S&P 500 both crossover and issue a new sell signal. Based upon today’s close it would take a single day decline of nearly 1.8% by S&P 500 and over a 3.1% decline by DJIA to turn MACD negative.
Sector Rotation Update
March’s biggest winner was technology. NASDAQ lead the charge higher and finished March with a 2.6% gain. S&P 500 and its sizable tech exposure advanced 1.8%. DJIA and Russell 2000 were off that pace. DJIA advanced just 0.05% while small-caps slipped 2.3% lower. The distribution of gains and losses in March is reflected in the Sector Rotation portfolio. Technology related ETFs preformed the best.
Due to the mixed results in March, three open trade ideas did trade below their respective but limits and were added to the Sector Rotation portfolio. iShares DJ Transports (IYT) was the first to be added early in March. IYT was up 5.5% at yesterday’s close. SPDR Industrials (XLI) was next, added just ahead of mid-month. XLI also has a solid gain of 4.4%. Lastly, SPDR Financial (XLF) was added two days after the Fed announced a surprising dovish statement that sent bond yields and banks lower. However, the purchase of XLF at that time has resulted in a 3.5% gain. IYT, XLI and XLF are on Hold.
Two other trade ideas, SPDR Consumer Discretionary (XLY) and Vanguard REIT (VNQ) did not trade below their buy limits. With the end of the “Best Six Months” for DJIA and S&P 500 coming soon, XLY and VNQ trade ideas are cancelled.
This leaves three open trades; SPDR Consumer Staples (XLP), SPDR Healthcare (XLV) and SPDR Utilities (XLU). Historically the sectors represented by these ETFs have performed reasonably well during the “Worst Six Months,” May through October. XLU’s seasonality does align well with the “Worst Months” while XLP and XLV have other seasonally favorable periods. Nonetheless, we still want to add all three positions to the portfolio due to their generally defensive nature. Buy limits for XLP, XLV and XLU have been adjusted and all can still be considered on dips.
Seasonal Sector Trades in copper and gold had a mixed March. Copper related trades in United States Copper (CPER) and Global X Copper Miners (COPX) had a fair month. COPX is up 19.1% and CPER is up 8.3% on modest gains by copper due to Chinese stimulus efforts and trade deal expectations. DB Gold Double Short (DZZ) is also modestly higher, but gold appears to be settling into a trading range. CPER, COPX and DZZ are on Hold.
All other positions in the Sector Rotation ETF Portfolio are currently on Hold.
[Almanac Investor Sector Rotation ETF Portfolio – April 3, 2019 Closes]
Tactical Switching Strategy Update
In our February 7, 2019 ETF Portfolio Update Alert, positions in DIA, IWM, QQQ and SPY were adjusted to account for additional purchases that occurred in early January. This adjustment created unwanted confusion. In the table below this adjustment has been removed. Instead there are now two entries for each position. Positions dated 11/1/18 are the original positions added when our Seasonal MACD Buy Signal was issued. Positions dated 1/10/19 were additional buys from our January 10, 2019 Alert.
All positions in the Tactical Seasonal Switching Strategy Portfolio are on Hold. Our seasonal MACD Sell signal for DJIA and S&P 500 can come any day now. In preparation for that day and the corresponding transition to a more cautious position in the portfolio, iShares Core U.S. Aggregate Bond (AGG) and Vanguard Total Bond Market (BND) appear at the bottom of the Tactical Switching Strategy portfolio. AGG and BND could be considered on dips or when our Seasonal MACD Sell Signal Alert is issued.
[Almanac Investor Tactical Seasonal Switching ETF Portfolio – April 3, 2019 Closes]