NASDAQ MACD & Stock Portfolio Updates: Tech Rally Slowing
By: Christopher Mistal
June 08, 2023
NASDAQ’s rapid ascent that began in May is beginning to show signs of weakening. NASDAQ did manage to breakout above its highs of last August, but the breakout has not triggered a flood of new capital in fear of missing out. We suspect we are not the only ones looking for a similar breakout from DJIA and S&P 500. DJIA has moved closer to its closing high on November 30, 2022, but remains below it. S&P 500 is currently struggling to overcome and breakout above 4300, its peak last August.
[NASDAQ Daily Bar Chart with MACD]
Despite the slowing of NASDAQ’s momentum recently, MACD is still positive. As of today’s close it would take a single-day decline of 328.66 points (2.48%) to turn MACD negative. 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.”
Quick Q & A
Recently we have had several inquires about the parameters we use for our Seasonal MACD Sell Signal for NASDAQ as well as why we are also holding iShares Russell 2000 (IWM). As a reminder we use the common 12-26-9 MACD parameters for our seasonal sell signals, including NASDAQ. The short interval is 12, the long interval is 26 and 9 is the interval used on the difference between the short and long intervals. Our seasonal sell signals are based upon daily closing prices only. In the above chart of NASDAQ and MACD, C equals closing price, 12 and 26 are the short and long intervals. F is a software setting and stands for false.
We had previously attempted to explain why we hold IWM with QQQ in the member’s only webinar on May 31. (The recording and slides are available here (or copy and paste in a new browser window: The bar chart below is the clearest reason why we are holding and why we also trade IWM with QQQ for NASDAQ’s “Best Eight Months.” Using NASDAQ data since inception in 1971 and Russell 2000 data since inception in 1979, average monthly performance for the two indexes has historically been similar. Russell 2000’s laggard performance this Best Months period is not typical. We suspect the nearly 8% gain by IWM so far this month will dampen some concerns over its laggard performance.
[NASDAQ and Russell 2000 Monthly Performance Bar Chart]
[Russell 2000 Daily Bar chart with MACD]
Applying our Seasonal MACD Sell indicator to Russell 2000 we see it is also positive and trending higher as of today’s close. Research is underway to validate any benefits of adding a Russell 2000 MACD Sell Signal and incorporating it into the Tactical Switching Strategy. Provided the data demonstrates improved performance and/or improved risk management, we would likely be ready later this year when the next Best Months period begins sometime on or after October 2, 2023 (the first trading day of the month this year).
Stock Portfolio Updates
Over the last four weeks since the last update through yesterday’s close (June 7), S&P 500 advanced 3.1% while Russell 2000 jumped 7.3%. Over the same period the entire portfolio climbed 4.6% higher, excluding dividends and any trading fees. Mid-cap positions contributed the most, up 53.4% while small caps and large-caps advanced 3.1% and 1.1% respectively.
The brightest stocks in the portfolio are connected to the AI market. Super Micro Computer (SMCI) was the first to trade at twice its original price on May 18. Axcelis Technologies (ACLS) did the same one week later. Per standard trading guidelines (noted at the bottom of the portfolio table below), half of the original position in both was sold when they first doubled. As of yesterday’s close, adjusted for selling half, ACLS was up 111.9% and SMCI was up 146.3% since November 10, 2022. Both stocks advanced today adding to these gains. ACLS and SMCI are on Hold. Suggested stop losses have been updated to reflect recent gains.
Permian Resources (PR), the other mid-cap holding was stopped out of the portfolio on May 11 when it closed below $9.35. PR did rebound modestly since then, but the uncertainty and volatility in the energy sector makes holding PR unpalatable.  
Large-cap healthcare stocks, Elevance Health (ELV) and UnitedHealth Group (UNH) can still be considered. Historically, during the Worst Months, healthcare has been third best by average performance and its frequency of gains at 69.7% is in a three-way tie for third best. ELV can be considered on dips below $450 while UNH can be considered at current levels up to a buy limit of $485.
AT&T (T) remains a drag on the large-cap portfolio. It was originally added for its hefty dividend. Its dividend remains attractive, but interest rates have risen giving investors potentially less risky alternates. There are some positives. T did get an analyst upgrade this week, to market perform from underweight. It also appears that competition between rivals is easing. But the possibility of Amazon offering a low-cost or even free mobile service to its Prime members has offset the positives. T is on Hold.
All positions not previously mentioned are on Hold. DJIA and S&P 500 Worst Months are here. We are officially neutral on the market and transitioning to a more cautious stance in the portfolios. When NASDAQ’s Seasonal Sell signal triggers, we will consider additional defensive measures. In the meantime, the market’s narrow advancing breadth has resulted in the stock portfolio being trimmed back to just 10 positions and a sizable cash balance that is nearly 74%. This would be an easily managed portfolio for the summer months if that is your plan. Plus, with interest rates at their highest levels in nearly two decades, the cash could earn a reasonable return.
[Almanac Investor Stock Portfolio Table]