ETF Trades & NASDAQ’s Best Eight Months: Market’s Momentum Fading
By: Christopher Mistal
June 04, 2020
In light of all that has happened this year it is quite surprising to see NASDAQ was just 1.39% from its all-time closing high set on February 19 at yesterday’s close so soon. From NASDAQ’s February high, it was down over 30% on March 23 and from that low to yesterday it was up over 41%. Tech did fare much better during the peak of the shutdown and is still benefiting. Arguably, without their products and services the shutdown may not have even been possible and at a minimum it probably made stay-at-home orders slightly more bearable. Furthermore, job losses would likely have been even worse without the ability to work from home.
[NASDAQ Daily Bars and MACD Sell Indicator Chart]
In the chart above, NASDAQ’s dive lower and subsequent rebound are clearly visible in the upper pane. In the lower pane the current status of our Seasonal MACD Sell indicator is positive but fading. As of today’s close, it would take a one-day loss exceeding 60.35 NASDAQ points (0.63%) to turn MACD negative.
When NASDAQ’s MACD Sell indicator turns negative again, 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. Until that time, all related positions are on Hold.
June Sector Seasonalities
There is only one new Sector Seasonality that begins in June, a bearish period for natural gas stocks that is based upon the NYSE ARCA Natural Gas Index (XNG). We are going to pass on this trade setup this time around. XNG has been in a downtrend since early 2014 and may have finally reached a bottom earlier this year in March. At this point, XNG could build on momentum from the economy reopening and easily head higher. And even if reopening does not go perfectly according to plan, delays are likely to be brief, limiting any downside.
[NYSE ARCA Natural Gas Index (XNG) Weekly Bars and Seasonal Pattern]
Sector Rotation ETF Portfolio Updates
Normally at this time of the year we would be in transition from the bullish “Best Months” to the historically tepid “Worst Months.” However, the majority of positions held in the Sector Rotation ETF portfolio were stopped out in early March. At that time the pace of the current market recovery was difficult to envision as job losses were and still are historically massive and the duration of the economic shutdown was also still a major unknown. As a result, we elected to not reenter “Best Months” positions then and instead begin the shift to a more cautious stance in the portfolio.
In early May positions in SPDR Consumer Staples (XLP), SPDR Utilities (XLU) and iShares NASDAQ Biotech (IBB) were established. As of yesterday’s close, all three positions are higher with an average gain of 7.2%. XLU is the top performer, up 12.5%. For now, XLP, XLU and IBB are on Hold
Massive amounts of fiscal and monetary support (here and abroad) have supported the market and also SPDR Gold (GLD). Even as major indexes have rallied to recovery sizable portions of their respective declines, GLD has held up well. Continue to Hold GLD. Gold & silver will soon be entering a seasonally favorable period and could see further gains.
[Almanac Investor Sector Rotation ETF Portfolio – June 3, 2020 Closes]
Tactical Seasonal Switching Strategy Updates
Currently the Tactical Seasonal Switching ETF Portfolio is essentially neutral. SPDR DJIA (DIA) and SPDR S&P 500 (SPY) positions have been closed and positions in bond ETFs AGG and BND have been established. Technology and small-cap related positions remain as they historically remain in favor through June.
All positions in the Tactical Seasonal Switching Strategy portfolio are on Hold.
[Almanac Investor Tactical Seasonal Switching Strategy ETF Portfolio – June 3, 2020 Closes]