ETF Trades: Taking Some Profits & Holding
By: Christopher Mistal
January 04, 2024
For those who were unable to attend the member’s only webinar on Wednesday, the slides and video recording are available here (or copy and paste in a new browser window: With the arrival of the New Year, Jeff recapped the market’s performance in 2023 and then shifted focus to our 2024 Annual Forecast and January 2024 outlook. Despite the market’s performance thus far in 2024, and the negative Santa Claus Rally (SCR), the year and January are still young having only completed three trading days out of the total 252 scheduled. Absent a positive SCR, the historically most bullish outcome for our January Indicator Trifecta (page 20 of 2024 Almanac) is no longer in play.
However as we attempted to point out in yesterday’s email Issue, Santa Fails to Call, But Trifecta 2 Out of 3 Ain’t Bad, all is not lost as the First Five Days (FFD) and our January Barometer (JB) could still be positive. Plus, historically when any two of our three January indicators have been positive, full-year performance has still been respectable. This would represent the most bullish outcome still available for our January Indicator Trifecta.
In response to some questions emailed to us and not to overlook or downplay the potentially bearish scenarios for the January Indicator Trifecta that have not yet occurred we present the following three tables. The first is all Down SCRs since 1950 with FFD, JB, Feb, Last 11 Month and Full Year Performance. Based solely upon a down SCR we see a drop in average performance, but the frequency of gains remains respectable. Should the FFD come in negative as well, (Down SCR & FFD table) average performance slips even further, but here again it remains positive, and the frequency of gains is still solid. Finally, the worst-case outcome, SCR, FFD and JB are all negative. Average performance turns negative, and frequency of gains falls to just one better than 50/50.
The most bullish January Indicator Trifecta scenario is no longer in play for this year, but the worst case has not yet occurred. Since we place a greater emphasis on the outcome of the January Trifecta than the individual indicators alone, we remain bullish and our base case scenario for 2024 is still in play. Current weakness still appears to be profit taking and repositioning for the New Year after a solid pre-election-year Q4 rally. We should also not overlook Januarys historical tendency to be softer in election years.
[January Trifecta Tables: Down SCR Combinations]
New January Sector Seasonality
Only one new sector seasonality begins in January. Computer Tech has historically declined from the beginning of the month through the beginning of March. Over the past 25 years, the sector has declined an average of 5.05%, but over more recent periods weakness has not been as pronounced, averaging just 1.05% over the last 10 years and 3.58% over the past 5 years. More aggressive traders could choose to establish a short position correlated to the sector’s historically weak period, but we will officially pass as the potential profit does not currently appear to outweigh the risk.
Since we are passing on the Computer Tech sector’s short trade, we will continue to hold the corresponding position in iShares US Technology (IYW).
Sector Rotation ETF Portfolio Updates
Three sector seasonalities have traditionally ended in December, Gold & Silver, Semiconductor, and Telecom. We did not hold a position in gold or silver. With the market firmly in rally mode last month we continued to hold corresponding positions in iShares Semiconductor (SOXX) and iShares DJ US Telecom (IYZ). Now that the market is taking a pause, and the 10-year Treasury yield has crept higher we are going to close out SOXX and IYZ. Sell SOXX and IYZ. For tracking purposes SOXX and IYZ will be closed out of the portfolio using their respective average price on January 5.
Two out of three of last month’s new trade ideas targeting strength in copper and oil have been added to the portfolio. Global X Copper Miners (COPX) and SPDR Energy (XLE) were both added on December 12 when they traded below their buy limits. As of the close on January 3, COPX and XLE were up 7.1% and 6% respectively. COPX and XLE are on Hold
The final new idea from last month, United States Copper (CPER) has not yet traded below its buy limit and can still be considered on dips below it. We will remain patient with CPER as a modestly stronger US dollar is putting some mild pressure on copper.
All other positions in the Sector Rotation Portfolio are on Hold. Please note stop losses have been adjusted to account for recent gains.
[Almanac Investor Sector Rotation ETF Portfolio – January 3, 2024 Closes]
Tactical Seasonal Switching Strategy ETF Portfolio Updates
After a solid pre-election year Q4, positions in the Tactical Seasonal Switching Strategy portfolio are now up 9.3% on average as of the close on January 3. Our Seasonal MACD Buy Signal did come early in October and per the strategy positions were established. SPDR DJIA (DIA) and iShares Russell 2000 (IWM) are the best performing positions, both up over 10%. QQQ, IWM, DIA, and SPY are on Hold. We still see further upside potential for this “Best Months,” but would not be surprised to see some volatility this month.
[Almanac Investor Tactical Seasonal Switching Strategy ETF Portfolio – January 3, 2024 Closes]
Disclosure note: Officers of Hirsch Holdings Inc held positions in DIA, IWM, QQQ, and IWM in personal accounts.