ETF Portfolios & NASDAQ Seasonal MACD Update: Continue to Hold By: Christopher Mistal | June 01, 2023 | Email | Print

In case you missed the member’s only webinar on Wednesday, the slides and video recording are available here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). In the webinar we reviewed key seasonal pattern charts that we have been tracking throughout the year, current GDP and inflation trends, Fed interest rate expectations, why Russell 2000 is paired with NASDAQ in the Tactical Seasonal Switching Strategy portfolio and NASDAQ’s Best Eight Months. Jeff recapped the federal debt ceiling showdown and how we will be withholding celebration until a bill reaches the President’s desk and is signed. Our full-year outlook is unchanged as we still see headwinds in the near term. 

 

 

Today is the day that the window for NASDAQ’s Seasonal MACD Sell signal first opens. June is the final month of NASDAQ’s Best Eight Months. NASDAQ’s Seasonal MACD Sell signal has triggered as early as June 1, and as late as July 27 (in 1977). More recently NASDAQ strength kept MACD positive until July 14 in 2021. This time around June is starting off strongly, adding to May’s NASDAQ momentum. MACD is positive and trending higher. As of today’s close, it would take a single-day decline exceeding 733.22 NASDAQ points (5.60%) to turn our Seasonal MACD Sell negative.

 

 

With MACD positive and trending higher, continue to hold associated positions in QQQ and IWM. When NASDAQ’s Seasonal MACD turns negative we will send an email to all active members. At that time, we will finish repositioning our Portfolios for the “Worst Months.” We will anticipate expanding existing bond ETF and cash holdings.

 

 

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. Domestic inventories are ample above the 5-year average for this time of the year due to a mild winter and adequate supply which has driven the price of natural gas down to around $2.20 per MMBtu. Natural gas prices could go lower still, but the risk of a spike higher during hurricane season due to supply disruption outweighs any potential reward of a short position.

 

 

Two bullish and two bearish Sector Seasonalities come to an end in June. Starting at the top of the table on the bottom of page 94 in the 2023 Stock Trader’s Almanac, the bullish trade based upon XNG comes first. Our correlating ETF position, first presented in January, First Trust Natural Gas (FCG), is currently in the red after struggling to advance during its historically bullish period. FCG is modestly higher today and this strength appears to be a great opportunity to close out the position. Sell FCG. For tracking purposes, FCG will be closed out of the portfolio using its average price on June 2.

 

The next seasonality to end is a bearish period for gold and silver stocks based upon the Gold and Silver index (XAU). We passed on trading this seasonality earlier this year as gold and silver were rallying in advance of the federal debt limit showdown and likely in anticipation of the Fed pausing interest rate increases. Instead, we looked to trade a breakout of gold last month as it was nearing its all-time highs. A long position in SPDR Gold (GLD) was added to the portfolio on May 16 and is on Hold. iShares Silver (SLV) and Market Vector Gold Miners (GDX) were also added but were quickly stopped out for modest losses. Mixed signals from the Fed on interest rates, varied economic data, and a pending debt limit deal have made the outlook for precious metals and the miners unclear now.

 

Lastly, bullish seasonalities associated with Consumer Discretionary and Staples come to an end in June. The position in SPDR Consumer Discretionary (XLY) was stopped out last December. SPDR Consumer Staples (XLP) could be considered at current levels as the sector has a solid history of performing during the “Worst Six Months.”

 

Recent technology sector strength resulted in above average gains and the triggering of two auto-sells in late-May. iShares US Technology (IYW) traded above its auto-sell price of $101.27 on May 26 and was sold for a gain of 34.3% excluding dividends and trading fees. On the following trading day, May 30, SPDR Technology (XLK) traded above its auto-sell price of $166.71 and was also sold for a 36.9% gain. As a reminder, alternate profit taking strategies are acceptable if you continue to hold IYW and/or XLK. One could wait until NASDAQ’s Seasonal MACD Sell signal and/or utilize a tight trailing stop loss.

 

Positions in sectors that have historically performed well during the “Worst Months,” XBI, IBB, XLP, XLV and XLU can still be considered at current levels or on dips below their respective buy limits.

 

 

 

Continue to Hold QQQ and IWM. NASDAQ’s Seasonal MACD Sell Signal is positive and trending higher. The strategy does not utilize a stop loss on these positions, but should this approach exceed your risk tolerance a trailing stop loss can be considered at this time.

 

Defensive, partial positions in bond ETFs, TLT, AGG, BND, SHV and SGOV, have retreated slightly as expectations for another Fed interest rate increase have crept higher pushing Treasury bond yields slightly higher and prices lower. Our plan is to add to these positions when NASDAQ’s Seasonal Sell signal triggers, but they can be considered at current levels up to their respective buy limits.