ETF & Stock Portfolio Updates: Patiently Accumulating on Dips By: Christopher Mistal | October 12, 2023 | Email | Print

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Since issuing our Seasonal MACD Buy Signal earlier this week after the market’s close on Monday, October 9, the war between Israel and Hamas has not spilled over into an even greater, multi-front conflict. Numerous questions remain and geopolitical uncertainty has been dialed back up to lofty levels. Yet, despite all the geopolitical issues, the market still appears primarily fixated on interest rates, mainly the 10-year Treasury yield. Earlier in the week when the market was rallying higher, the 10-year Treasury yield was falling while a jump higher today appears to be the key catalyst for today’s market retreat.

 

A warmer than expected CPI reading for September likely also played a role in the rise of 10-year yield today. But much of the increase was due to housing and it has a well-documented history of lagging whereas more real-time housing metrics have slowed much more than CPI would suggest. And still others, which we agree with, pointed out that today’s CPI was likely not enough to sway the Fed in either direction. Checking the CME Group’s FedWatch Tool confirms only a modest increase in the probability of another rate hike by the Fed. 

 

As we noted earlier this week in the Seasonal MACD Buy Signal email, headwinds remain numerous for the market to overcome, and volatility is likely to persist in the near-term with some backfill of recent gains a possibility. Thus far today appears to be just that, some backfill. Our bullish outlook for Q4 remains intact, but patience is still prudent. Our Seasonal Buy has triggered, but that does not mean the market is going to immediately rocket higher every day. It means that the Q3 pullback/correction has most likely run its course and the market is likely to begin a new trend higher. Weakness can be considered an opportunity to accumulate new long positions for the “Best Months.”

 

 

For those that might be interested, we have looked at the S&P 500 performance on this date often associated with superstition. Since 1930, the S&P 500 has traded a grand total of 157 Friday 13th across all twelve months. The overall track record is 87 up days and 70 down days with a slightly bullish average gain of 0.05% on all Friday 13ths. The worst Friday 13th loss was 6.12% in October 1989. This day is often referred to as “Black Friday.” The best Friday 13th gain was 9.29% in March 2020. Digging deeper into the data reveals that October Friday 13th has been up 6 times, down 7 times with an average loss of 0.58%. Based solely upon average performance, October has been the worst month for Friday 13th. But the last four, October Friday 13th have been positive. 

 

 

 

Per Monday’s Seasonal MACD Buy email, SPDR DJIA (DIA), SPDR S&P 500 (SPY), Invesco QQQ (QQQ), and iShares Russell 2000 (IWM) have been added to the portfolio using their respective average price on October 10. Prior to today’s retreat, all four positions had fractional gains. DIA, SPY, QQQ, and IWM can all still be considered on dips below their buy limits.

 

iShares Short Treasury Bond (SHV) and iShares 0-3 Month Treasury Bond (SGOV) were also closed out of the portfolio on October 10. Performance in the table does not include any trading fees or dividends. During their time in the portfolio, SHV and SGOV paid a dividend six times. In total, SHV paid $2.71 per share while SGOV paid $2.53 per share. This does work out to be an annual rate just above 5%. By no means a homerun, but much better than the essentially 0% earned prior to the Fed raising rates.

 

Other partial positions in bond ETFs iShares 20+ Year Treasury Bond (TLT), iShares Core US Aggregate Bond (AGG) and Vanguard Total Bond Market (BND) remain on Hold. Please note we have added stop losses for TLT, AGG, and BND. As witnessed earlier this week, a few consecutive days of gains would make exiting these positions easier.

 

 

 

In accordance with our Seasonal MACD Buy email new long positions in, XBI, XLV, IYW, IYT, IYZ, SOXX, XLY, XLP, XLF, XLI, XLB, XLK, VNQ, and IBB have been added to the portfolio using average prices on October 10. Short trades in IYT, XLI, and SOXX were covered/closed on Friday October 6. All positions in the Sector Rotation ETF portfolio can be considered on dips below the buy limits.

 

Please note the suggested buy limits, stop losses, and auto-sell prices have been updated based upon the price the ETF was added to the portfolio.

 

 

 

Over the last four weeks since the last update through yesterday’s close (October 11), S&P 500 declined 2.0% while Russell 2000 retreated 3.7%. Over the same period the entire portfolio slipped 0.1% lower, excluding dividends, any interest on cash and any trading fees. Large-cap portfolio positions declined the most, off 3.0% on average. Small caps slipped 2.2%, but Mid-caps advanced 5.7%. The sizable cash balance in the portfolio mitigated some of the volatility in September. We anticipate putting this cash back to work in new stock trade ideas as soon as next week.

 

Highlights from the portfolio include Super Micro Computer (SMCI) and UnitedHealth (UNH). SMCI charged back above $300 per share earlier this week bringing its total gain to 188.5% after accounting for the sale of half the original position when it first doubled from its original entry price. While UNH climbed back above $500 per share and is inching back to its breakeven price.

 

At the other end of the spectrum, Quanta Services (PWR) and Amdocs (DOX) have been stopped out. PWR was closed out last week while DOX closed below its stop loss today and will be closed out of the portfolio on October 13. For tracking purposes, DOX will appear closed out in the next portfolio update. 

 

All existing positions in the portfolio are on Hold. We anticipate putting existing capital to work in a new basket of stocks later this month. As we note on the October 2023 Strategy calendar and on page 101 of the 2023 Almanac, “late October is time to buy depressed stocks especially techs and small caps.”