ETF Portfolios & Seasonal MACD Updates: On Hold & On Lookout
By: Christopher Mistal
April 06, 2023
If you were unable to attend Monday’s member’s only webinar, the slides and video recording are available here (or copy and paste in a new browser window: In the webinar we reiterated our overall bullish stance for the year, but also expressed concern for the potential for another 2011 federal debt ceiling showdown this year and how this upcoming “Worst Months” could be similarly filled with volatility. In 2011, S&P 500 topped on April 29 and shed 19.4% through October 3 mainly over fears of a possible U.S. default.
Seasonal MACD Sell Signal Update
As a reminder the criteria to issue our Seasonal MACD Sell signal for DJIA and S&P 500 is a new sell signal after the first trading day of April and both DJIA and S&P 500 have to agree. The confirmation by both DJIA and S&P 500 is part of the criteria. For example, if DJIA’s Seasonal MACD indicator turns negative, but S&P 500’s does not, then there is no signal on that day. Both must be negative. Our Seasonal MACD Sell indicator is calculated using daily closing prices with a short exponential moving average (ema) of 12, a long ema of 26 and a 9-period ema for the signal line. This is frequently written as 12-26-9.
As of today’s close, MACD indicators applied to DJIA and S&P 500 remain positive. DJIA would need to drop over 2640 points (7.89%) in a single day to turn its MACD indicator negative while S&P 500 would need to decline over 254 points (6.19%) to turn its MACD indicator negative. 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.
[DJIA Daily Bar Chart and MACD indicator]
[S&P 500 Daily Bar Chart and MACD indicator]
Sector Rotation ETF Portfolio Update
Despite finishing March with respectable gains, the mini banking crisis did some damage to some positions in the portfolio. The first position to be stopped out was SPDR Financial (XLF) on March 13. XLF’s stop loss at $31.90 resulted in a modest 2.6% gain excluding dividends and any trading costs.
As bank concerns and recession fears rapidly ballooned in mid-March, SPDR Energy (XLE) was also stopped out. The timing of this stop was poor as OPEC was quick to respond to falling energy prices with the announcement of supply cuts earlier this week. XLE has rebounded but is still below our original entry price from late last year. Between the upcoming summer driving season, the need to replenish the Strategic Petroleum Reserve, geopolitical uncertainty, and a less than favorable domestic regulatory outlook, it remains challenging to see crude oil making any move other than higher in the near-term. But much of that move may have already been realized so we are going to pass on jumping back into XLE now.
Vanguard REIT (VNQ) was also stopped out in March at $79.94 for a 2.5% gain excluding dividends and fees. VNQ had been slipping since the start of February on the expectation of higher interest rates. Banking uncertainty accelerated the decline, and its bounce back has been muted.
On a brighter note, broad technology strength so far this year has translated into solid gains from SPDR Technology (XLK) and iShares US Technology (IYW), up 21.7% and 20.9% respectively as of the close on April 5. The resurgence of tech in March is encouraging as it aligned well with historical seasonal patterns. XLK and IYW are on Hold.
All other positions in the portfolio not previously mentioned are currently on Hold.
[Almanac Investor Sector Rotation ETF Portfolio – April 5, 2023 Closes]
Tactical Seasonal Switching Strategy Portfolio Update
As of yesterday’s close, the Tactical Seasonal Switching Strategy portfolio had an average gain of 8.2%. Invesco QQQ (QQQ) is now the top performing position in the portfolio up 13.0% as of April 5 close. SPDR DJIA (DIA) is the second-best position up 11.0% while SPDR S&P 500 (SPY) was up 8.6%. iShares Russell 2000 (IWM) has slid all the way back to essentially breakeven after leading in March’s update. All four positions are on Hold.
In preparation for the upcoming “Worst Months,” three bond ETFs appear in the table below. AGG and BND are multi-duration bond ETFs and are generally less volatile than TLT. With money markets and CD’s yielding something other than basically zero for the first time in over a decade, cash is a good option to consider as well for the upcoming “Worst months.” When the Seasonal MACD Signal for DJIA and S&P 500 triggers we will look to move into some combination of these bond ETFs and cash.
Positions in the Tactical Switching Strategy portfolio are intended to be held until we issue corresponding Seasonal MACD Sell Signals after April 1 for DJIA and S&P 500 and after June 1 for NASDAQ and Russell 2000. For this reason, there are no stop losses associated with these positions. There is also a switching strategy outlined on page 64 of the 2023 Almanac that holds these positions throughout pre-election and election years.
[Almanac Investor Tactical Switching Strategy Portfolio – April 5, 2023 Closes]