As of today’s close, both the slower moving MACD indicators applied to DJIA and S&P 500 are negative (arrows in the charts below point to a crossover or negative histogram on the slower moving MACD used by our Seasonal Switching Strategy to issue a sell signal). At this time, we are issuing our Best Six Months MACD Seasonal Sell signal for DJIA and S&P 500. NASDAQ’s “Best Eight Months” last until June.
Almanac Investor Tactical Seasonal Switching ETF Portfolio Trades
SELL SPDR DJIA (DIA) and SPDR S&P 500 (SPY) positions. For tracking purposes these positions will be closed out of the portfolio using their respective average prices on April 8.
Continue to HOLD Invesco QQQ (QQQ) and iShares Russell 2000 (IWM) as NASDAQ’s “Best Eight Months” ends in June.
For this “Worst Months” period we are going to offer a few options where to put cash from the positions that are being closed out ranging from relatively low-risk/low-reward to high-risk/potentially higher reward. Consider your individual risk tolerance and investment objectives.
Consider establishing a partial position in Vanguard Total Bond Market (BND) with a Buy Limit of $77.62.
Consider establishing a partial position in iShares Core US Aggregate Bond (AGG) with a Buy Limit of $104.75.
BND & AGG can be considered moderate-risk/moderate-reward.
Due to the increasingly hawkish comments by members of the Fed, a partial position in iShares 20+ Year Treasury Bond (TLT) can be considered on dips below a Buy Limit of $124.91. TLT is likely the riskiest bond ETF to consider for the “Worst Months,” but there is the possibility that the Fed is overly aggressive with monetary policy and slows inflation and economic growth too much resulting in a full-blown recession. If that were to transpire, TLT could see a sizable reversal and upside appreciation. This TLT trade idea is best for aggressive traders with a higher risk tolerance as it appears to have the greatest risk.
At the opposite end of the risk spectrum is a position in cash and/or a money market fund. If the Fed is aggressively raising rates, then the interest paid on cash should also begin increasing. An allocation to cash or a money market fund will likely be the least nerve-racking position should market volatility spike during the “Worst Months.” It also has the potential advantage of making the summer months all that much more enjoyable.
Traders/investors following the Best 6 + 4-Year Cycle switching strategy detailed on page 64 of the Stock Trader’s Almanac 2022 should heed this signal.
Almanac Investor Sector Rotation ETF Portfolio Trades
Sell Vanguard REIT (VNQ) as correlating seasonalities end in May. For tracking purposes VNQ will be closed out of the portfolio using its average price on April 8.
iShares DJ Transports (IYT) was stopped out yesterday, April 6, when it closed below its stop loss. IYT has been closed out of the Sector Rotation ETF Portfolio. SPDR Materials (XLB) was also stopped out. XLB was closed out of the portfolio on March 8. IYT and XLB both recorded modest losses excluding any dividends paid and trading costs.
All remaining holdings in the Sector Rotation Portfolio are on Hold.
Today’s Seasonal MACD Sell Signal for DJIA and S&P 500 marks the early beginning of the “Worst Six Months.” We do not simply sell and go away. Instead, today’s trades are the start of tactical adjustments that will be made in the portfolios. From now until when NASDAQ’s Seasonal MACD Sell Signal triggers (earliest it can trigger is on June 1), the portfolios will be shifted toward a neutral stance. Positions that have historically performed well during the “Worst Months” will be held along with positions that correlate to NASDAQ and Russell 2000.
All current stock and ETF holdings will be reevaluated in upcoming email Alerts. Weak or underperforming positions may be closed out, stop losses may be raised, new buying may be limited, and we will evaluate the timing of adding positions in sectors that perform well in the Worst Six Months and presenting you with a new basket of defensive stocks.
The shear volume of seemingly never-ending negative news would make it easy to be outright bearish at this time. Russia has invaded Ukraine, energy prices surged, inflation is persistently high, monetary policy is tightening, parts of the yield curve inverted and on and on. However, we must not loose sight of all the government spending that is still ongoing, strength in the employment market and the fact that the market did hold its intraday lows from February 24 the day Russia first invaded Ukraine in March. This upcoming “Worst Months” is likely to produce little to no gains with plenty of volatility, but eventually the next great buying opportunity will come along, most likely in late Q3 or early Q4 later this year.