NASDAQ Seasonal MACD Update and ETF Trades: Tech Still Rising & Transports Slipping
By: Christopher Mistal
July 11, 2019
As of the market’s close today, both the faster and slower moving MACD indicators applied to NASDAQ were positive. With NASDAQ’s modest decline today, a one-day decline of at least 2.33% (190.88 points) would be needed to turn NASDAQ’s MACD Sell indicator negative.
[NASDAQ Daily Bar Chart and MACD Sell Indicator]
When NASDAQ’s MACD Sell indicator becomes negative, we will issue our NASDAQ Seasonal MACD Sell signal and begin clearing out remaining technology and small-cap positions held in the Almanac Investor ETF Portfolios. We will also review current holdings in the Stock Portfolio and act accordingly. Until that time, all technology and small-cap related positions in the portfolios are on Hold.
July Sector Seasonalities
Two new sector seasonalities begin in the month of July. First up is a bearish seasonality in Transports which typically begins in the middle of July and lasts until the middle of October. This seasonality is based upon the Dow Jones Transportation index (DJT). Over the last 5-, 10- and 15-year time periods DJT has declined 2.0%, 3.4% and 2.7% on average during this weak timeframe.
iShares Transportation (IYT) is a good choice to establish a short position in. IYT has just over $500 million in assets, has traded an average of over 150,000 shares per day over the past 20 trading days and has a reasonable 0.43% expense ratio. IYT’s top five holdings include: Norfolk Southern, Union Pacific, FedEx, Kansas City Southern and Landstar System.
[iShares Transportation (IYT) Daily Bar Chart]
Unlike DJIA or S&P 500, IYT has been struggling since peaking in late April. More recently, IYT is battling to remain above its declining 50- and 200-day moving averages. Stochastic, relative strength and MACD indicators are all neutral, but trending poorly. IYT could be shorted near resistance around $192.86 or a breakdown below $183.95. If shorted, set an initial stop loss at $200.50, this year’s high. If tit-for-tat tariffs spiral out of control and global trade activity continues to slow, transports are likely slip even further.
July’s second seasonality is from gold & silver mining stocks. This seasonality is based upon strength in the Philadelphia Gold & Silver index that typically begins in late July and lasts until late December. Over the last five years this trade has not been that successful however, over the last fifteen years the trade has averaged 7.8%. A three-pronged approach to this trade will be taken. In addition to a long position in VanEck Vectors Gold Miners (GDX) positions in SPDR Gold (GLD) and iShares Silver (SLV) are also suggested.
[VanEck Vectors Gold Miners (GDX) Daily Bar Chart]
GDX is currently trading near multi-year highs due to strength in physical gold as the Fed has been signaling an end to it rate tightening cycle and the possible beginning of a new easing cycle. Lower rates are generally a negative for the U.S. dollar and have the potential to boost inflation. Both are generally viewed as a positive for gold and the stocks that mine it. GDX could be considered on dips below $25.50. If purchased an initial stop loss at $23.50 is suggested. Take profits if GDX trades above $26.92.
[SPDR Gold Daily (GLD) Bar Chart]
[iShares Silver (SLV) Daily Bar Chart]
Physical gold and silver and the ETFs that hold them have strengthened as economic data has softened and further gained steam when the Fed shifted to a dovish tune. Strength during gold and silver’s typically weak June is further confirmation that stronger forces could be at work this year and above average performance from now to yearend is possible.
GLD could be considered on dips below a buy limit of $131.00. If purchased, set a stop loss at $127.00.
SLV could be considered near current levels with a buy limit of $14.10. If purchased, set a stop loss at $13.45.
Sector Rotation ETF Portfolio Updates
As the markets favorable period nears it end, the Sector Rotation ETF Portfolio has been thinning out. Positions established to capitalize on seasonal weakness in gold and/or silver did not pan out this time around. DB Gold Double Short (DZZ) and the short position in iShares Silver (SLV) were both stopped out on June 19.
Technology strength has persisted into July. iShares US Technology (IYW) was closed out when it traded above its auto-sell price on July 1 for a gain of 23.2% excluding trading costs and dividends.
Remaining positions in the portfolio are defensive in nature. XLP, XLV and XLU are on Hold.
Please see update portfolio table below for the most recent advice, buy limits and stop losses.
[Almanac Investor Sector Rotation ETF Portfolio July 10, 2019 Closes]
Tactical Seasonal Switching Strategy Updates
As it has been the situation since issuing our Seasonal MACD Sell Signal for DJIA and S&P 500, the Tactical Seasonal Switching portfolio is essentially neutral. Continue to Hold QQQ and IWM positions until when NASDAQ’s Seasonal MACD Sell Alert triggers. Defensive positions in bond ETFs, AGG, BND and TLT, are also on Hold as they have rallied nicely in anticipation of a Fed rate cut in the near future.
[Almanac Investor Tactical Seasonal Switching ETF Portfolio July 10, 2019 Closes]