ETF Portfolio Updates: “Best Months” Under Way, Accumulate on Dips By: Christopher Mistal | November 07, 2019 | Email | Print

Since issuing our Seasonal MACD Buy Signal on the close on October 11 through today’s close, DJIA has advanced 3.2%, S&P 500 is up 3.9%, NASDAQ has climbed 4.7% and Russell 2000 has risen 5.4%. DJIA, S&P 500 and NASDAQ have all repeatedly closed at new all-time highs as well. The majority of the market’s recent gains occurred during the historically strong period at the end of October into the beginning of November. More gains are expected through the end of the year and into the first quarter of next year, but some weakness is expected in mid-November and early December before the rally resumes in earnest.

 

 

Although November’s full-month historical performance has been stellar, it has also been common for the market to soften ahead of the Thanksgiving holiday. This weakness can be seen in the above 31-year November seasonal chart. Performance this November, through today’s close, is graphed as well. Two dips are visible in the chart. The first begins around the seventh and eighth trading days of November and the second occurs from around the eleventh trading day through the fourteenth trading day. Depending on index and dip, on average half to nearly all of the gains in the first five or six trading days are surrendered before the strong rally at the end of the November commences. These dips, should they occur again this year, are an opportunity to continue to accumulate long positions for the balance of the “Best Months.”

 

Mid-month November weakness is also visible on the Pre-Election Year Seasonal Pattern that we have been tracking throughout the year. It is modestly stronger for NASDAQ, but it is also present for DJIA and S&P 500.

 

 

The bullish “Best Months” are underway. We have closed out defensive positions in the Sector Rotation ETF Portfolio and Tactical Seasonal Switching ETF Portfolio. We have added positions poised to benefit from historical seasonal strength that lasts into next year. We have a new long basket of stocks that should also benefit from seasonal strength. However, even the “Best Months” do have soft patches. November’s anticipated soft patch could be an opportunity to establish new, long, bullish positions and/or add to existing positions.

 

 

No new Sector Seasonalities begin in November and just one comes to an end. The bearish XOI (oil and gas explorers and producers) finishes at the end of the month. Currently there is no associated position in the portfolio.

 

Recent market strength has lifted the average open position return to 5%. iShares PHLX Semiconductor (SOXX) is the best performing holding in the portfolio, up 8.2% as of its November 6 close. iShares DJ Transports (IYT), iShares NASDAQ Biotech (IBB) and SPDR Financial (XLF) are all up over 7% since being added on October 14. Only Vanguard REIT (VNQ) has been left out of the rally.

 

With the exception of SPDR Gold (GLD), all other positions in the portfolio can be considered on dips below their respective buy limits or in the case of SPDR Consumer Staples (XLP) and VNQ, at current levels. Please note that Buy Limits and Stop Losses have been adjusted to account for recent performance.

 

 

 

In the three and a half weeks since issuing our Seasonal Buy Signal, open position average performance has risen to 4.1%. iShares Russell 2000 (IWM) is the best performer up 5.7%. SPDR DJIA (DIA) is the laggard of the group, up 2.5%. All four positions can be considered on dips below their respective buy limits which have been adjusted to account for recent performance. As a reminder, these positions are intended to be held until we issue corresponding Seasonal MACD Sell Signals next year after April 1. As a result, no stop loss is suggested on these positions.