ETF Trades & Seasonal MACD Update: Bounce Helps, But Damage Done
By: Christopher Mistal
April 02, 2020
Usually at this time of the year, April, the last month of DJIA and S&P 500 “Best Six Months,” the market would have had a nice seasonal rally and we would be on alert for our Seasonal MACD Sell signal. Well, there is nothing usual or normal about the market or the economy this time. Historic levels of volatility in March literally turned modest Best Months gains into losses in a just a few days.
As of today, the new bear market closing lows were on March 23. From their highs DJIA was down 37.1% and S&P 500 was down 33.9%. Since then the market has rebounded to trim those losses but appears to be struggling again as uncertainty remains high and initial weekly jobless claims spike to never before seen levels exceeding 6 million. The rebound did result in a reversal of our MACD indicator on March 26. The bounce higher and the positive MACD crossover have potentially set up our Seasonal Sell Signal for a modestly better exit of DJIA and S&P 500 related positions.
In last week’s April Outlook, we reviewed past Down Best Six Months for DJIA since 1950 and concluded further caution and patience is likely in order. The market could continue to improve in the near-term especially if the spread of COVID-19 can be curtailed, but the growing uncertainty of the longer-term impact on the global economy could trigger a retest of March’s lows before a new bull market can take hold and flourish.
[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 in excess of 20% by DJIA and S&P 500 to turn MACD negative.
Sector Rotation Update – Worst Months Positions on Radar
Not long after last update in early March, the market began its steep slide and every remaining position in the portfolio was stopped out except for SPDR Gold (GLD). Up until March 11 SPDR Consumer Staples (XLP) and iShares NASDAQ Biotech (IBB) had held up reasonably well, but inevitably they also got swept up by broad-based, heavy selling pressure. Last’s months new trades in tech and utilities were not spared and were stopped out shortly after being added to the portfolio.
In preparation for the upcoming “Worst Months,” new trade ideas in SPDR Consumer Staples (XLP), SPDR Utilities (XLU) and iShares NASDAQ Biotech (IBB) appear in the portfolio table below. XLP and XLU trades are based upon their historical tendency to outperform the S&P 500 during the “Worst Six Months,” May to October. IBB has a somewhat mixed Worst Months record but appears to be a possibly timely position to consider this year. 
All three positions have bounced higher with the broader market but remain well below their recent highs. Buy limits are well under current prices as we would prefer to pick them up only modestly higher than their respective recent lows. If they do not trade below their buy limits, we will consider adding them when we issue our Seasonal MACD Sell Signal.
Continue to hold GLD. 
[Almanac Investor Sector Rotation ETF Portfolio – April 1, 2020 Closes]
Tactical Switching Strategy Update
Portfolio results are disappointing this Best Months period. Even though losses in the Best Months are infrequent they do occur (pages 52, 54, 60 & 62 Stock Trader’s Almanac 2020). The pandemic and the ensuing global economic shutdown are outliers that we hope will not be repeated anytime soon. The market’s rebound may provide an opportunity to close out positions at better prices than what was available at times in March.
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, 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 1, 2020 Closes]