ETF Portfolios & NASDAQ Seasonal MACD Update: Keep Holding By: Christopher Mistal | June 06, 2024 | Email | Print

In case you missed the member’s only webinar on Wednesday, June 5, 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 Jeff reviewed key seasonal pattern charts that we have been tracking throughout the year, current GDP and inflation trends, Fed interest rate expectations, and the status of NASDAQ’s Seasonal MACD indicator which has NOT triggered yet. More on the signal below.

 

Jeff also reviewed the history of the S&P 500 following a strong May performance (>3% advance in May) and the general market strength that historically followed. This strength is in stark contrast to the historical market weakness that followed a down April. With the aid of a keen Almanac Investor member (hat tip to Mike) we are going to delve deeper into the combination of an S&P 500 down April followed by a positive May, including those up >3%.

 

 

Going back to 1950, a S&P 500 April decline followed by a May gain has happened 10 other times prior to this year. Of the 10 previous occurrences, three transpired in presidential years (shaded rose/orange in all tables). When combined the results are better than just a down April, but still not as solid as the positive May table suggests. Q2 performance remains reasonable firm, up 80% of the time with an average gain of 1.2% while Q3 performance weakens substantially from an average gain of 2.3% following just a strong May to an average loss of 3.2% when the positive May followed a down April. Q4 and full year performance also weakened noticeably. All three tables are below for quick, direct comparison.

 

 

In conclusion it appears that the negative implications of a down April have a greater impact than the positive implications of a strong May. This is supported by the fact that the majority of strong Mays came after positive Aprils. This does not change our outlook. We still anticipate full-year gains in line with our 8-15% annual forecast, and for the market to bounce around and gain little ground over the next couple of months.

 

 

As of today’s close, NASDAQ’s Seasonal MACD indicator is positive and trending higher, continue to hold associated positions in QQQ and IWM. It would take a single day decline exceeding 270.30 NASDAQ points (–1.57%) to turn MACD negative. As a reminder, the criteria we use to issue our NASDAQ Seasonal MACD sell is a new negative crossover of MACD (using 12-26-9 parameters) on or after the first trading day in June.

 

 

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 do anticipate adding to existing bond ETF and cash holdings in the Tactical Seasonal Switching Strategy portfolio.

 

 

There are two new Sector Seasonalities that begin in June, a bearish period for natural gas stocks that is based upon the NYSE ARCA Natural Gas index (XNG) and a similarly bearish seasonality in oil stocks based upon NYSE ARCA Oil index (XOI). We are going to pass on both trade setups. Natural gas prices have been kept in check by domestic inventories that are above the 5-year average for this time of the year due to a mild winter and adequate supply. While natural gas prices could go lower, the risk of a spike higher during hurricane season due to supply disruptions outweighs any potential reward of a short position. Geopolitical instability and OPEC+ confirming supply cuts will remain in place suggesting that crude oil has likely reached a floor after retreating the last two months.

 

 

Three bullish and one bearish Sector Seasonalities come to an end in June. Starting at the top of the table on the bottom of page 94 in the 2024 Stock Trader’s Almanac, the bullish trade based upon XNG comes first. Our correlating ETF position, presented on February 1, First Trust Natural Gas (FCG), was up 17.6% as of its close on June 5. FCG is modestly higher today but has been exhibiting some weakness since peaking in April. Sell FCG. For tracking purposes FCG will be closed out of the portfolio using its average price on June 7.

 

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 and there are no correlating positions in the portfolio to close out.

 

Lastly, bullish seasonalities associated with Consumer Discretionary and Staples come to an end in June. The position in SPDR Consumer Discretionary (XLY) was up 9.0% as of its close on June 5. We will continue to hold XLY until the NASDAQ Seasonal MACD Sell triggers. There are currently two open positions of SPDR Consumer Staples (XLP) in the portfolio. The oldest XLP position from last fall is up 15.4% and will also be closed when the NASDAQ Seasonal MACD Sell signal triggers. The newer XLP position is a defensive position for the “Worst Months.” Older members can consider adding to their existing position in XLP while newer members can still consider XLP on dips below its buy limit of $76.20. We have split the two positions solely for tracking purposes.

 

Recent technology sector strength resulted in above average gains and the triggering of an auto-sell in late-May. SPDR Technology (XLK) traded above its auto-sell price of $214.18 on May 20 and was sold for a gain of 26.2% excluding dividends and trading fees. As a reminder, alternate profit taking strategies are acceptable if you continue to hold XLK. One could wait until NASDAQ’s Seasonal MACD Sell signal and/or utilize a tight trailing stop loss.

 

Positions in other sectors that have historically performed well during the “Worst Months,” XLV and XLU can still be considered 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, are flat to slightly positive. TLT, AGG and BND are on Hold. The performance of TLT, AGG and BND will likely depend greatly upon the timing of Fed rate cuts, which remains highly uncertain. Our preferred bond ETFs are SHV and SGOV as both exhibit relatively stable pricing and have yields exceeding 5%. Our plan is to add to SHV and SGOV positions when NASDAQ’s Seasonal Sell signal triggers, but they can be considered at current levels up to their respective buy limits.