ETF Portfolios Update: New “Shorts” for May By: Christopher Mistal | May 01, 2025 | Email | Print

For those who were unable to attend the member’s only webinar on Wednesday, the slides and video recording with an auto-generated transcript are available here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). The near-term bounce we were looking for in mid-April did materialize, but the initial impact of tariff uncertainty is likely beginning to show up in economic data. Q1 GDP was negative, ADP private payrolls missed expectations, and today weekly jobless claims were also above expectations. Seasonally, historically bullish April was negative for DJIA and S&P 500, the Best Six Months were down, and 2025 continues to track the weaker Republican post-election year pattern noted on page 28 of the 2025 Almanac.

 

The “Worst Six Months” for DJIA and S&P 500 have arrived and the odds for our 2025 Forecast Worst Case Scenario have increased to 60% now. The clock on the 90-day tariff pause is ticking and there still have been no significant deal announcements. The market is likely to continue to endure continued volatility and chop until later in the year. Caution and vigilance still seem to be the best course of action.

 

 

Six sectors’ favorable periods come to an end in May. Portfolio positions associated with Banking/Financials, Healthcare, Industrials, Materials (long trade from last October), Real Estate, and Transports were all closed out of the Sector Rotation Portfolio when the Seasonal MACD Sell signal for DJIA and S&P 500 triggered in early April. If you are still holding any positions associated with these sector seasonalities, consider taking profits and/or raising any stop loss in use this month.

 

From page 94 of the 2025 Almanac, three sectors begin weak/bearish seasonal periods in May: Banking, Gold & Silver (stocks, not the physical metals), and Materials. We are going to look to establish corresponding short ETF positions this month. There are inverse and inverse leveraged ETFs that could be traded, but they tend to have high fees, thin average daily volume, and tracking errors over longer periods of time. Instead, we will look to simply short a typical sector-based ETF. For tracking purposes, these short trades will appear in the portfolio table below with an (S) after their names to designate a short trade. As a reminder, these short trades may not be suitable for everyone. Please do additional due diligence and consider your own personal goals and risk tolerance prior to trading.

 

Beginning with the first new May sector listed on page 94 of the Almanac, our top ETF to take advantage of banking sector weakness beginning in May is SPDR S&P Regional Banking (KRE). It has rebounded off its early April lows but appears to be nearing/running into resistance now right around its rapidly falling 50-day moving average. KRE could be shorted around resistance at $55.70 or on a breakdown below $53.01. If shorted, set an initial stop loss at $57.28. Cover the short position at an auto sell price of $47.96.

 

 

Next up is VanEck Junior Gold Miners (GDXJ). This is likely the most controversial of today’s short trade ideas. Gold has been soaring, new all-time highs, etc. The long gold trade is likely very crowded and new all-time highs were hit last week. Gold has declined over $250 per ounce since trading over $3500 and inflation is in retreat which is likely to push mining stocks lower as well. GDXJ can be shorted near $60.05 or on a breakdown below $56.25. If shorted set an initial stop loss at $65.50. Look to cover the short GDXJ position at an auto sell price of $50.26.

 

 

The final short idea is SPDR Materials (XLB). The materials sector has declined an average of 5.8% over the last 25 years from around mid-May to mid-October. If economic activity does continue to slow, demand for products supplied by the materials sector is also likely to decline, taking XLB lower along the way. XLB can be shorted around $84.10 or on a breakdown below $81.76. The initial stop loss is $87.00. Cover the short position at $72.88 or lower.

 

 

 

“Worst Months” defensive positions in SPDR Consumer Staples (XLP) and SPDR Utilities (XLU) can still be considered below their respective buy limits. Despite the solid rally off the early April lows, a great deal of uncertainty about tariffs still overhangs the market and economic data is beginning to show signs of weakening. XLP and XLU have historically performed during periods of uncertainty and from May to November.

 

Two of the three new trades in foreign currencies presented on April 17 have been added to the portfolio. CurrencyShares Swiss Franc (FXF) and CurrencyShares Japanese Yen (FXY) were added on April 23, when they both traded below their respective buy limits for the first time. FXF and FXY can still be considered on dips. CurrencyShares Euro (FXE) has not been added to the portfolio and can also be considered on dips below its buy limit. Since presenting these currency ETFs, the U.S. dollar has strengthened modestly but remains well off its recent highs. If economic data continues to weaken and confidence in the market remains shaky, the U.S. dollar could easily resume its slide lower.

 

Invesco DB Agriculture (DBA) could also benefit from a falling U.S. dollar. DBA can still be considered on dips below its buy limit.

 

 

 

Per our April 17 email Issue, Invesco QQQ (QQQ) and iShares Russell 2000 (IWM) have been added back into the portfolio. Both were added during typical day after Easter weakness on April 21. As of April 30, QQQ and IWM were up an average of 8.2%.

 

NASDAQ’s Seasonal MACD Sell signal has not triggered. QQQ and IWM are on Hold. From now until sometime on or after June 2, 2025, the earliest date that NASDAQ’s Seasonal MACD can trigger, we will be maintaining a cautious stance in the portfolio. SHV and SGOV are currently our preferred bond ETFs. SHV and SGOV both pay their dividend monthly, and their current yields are still over 4%. Other funds of similar style are also fine alternatives if your choices are limited and SHV and/or SGOV are not available. Money market funds are also great alternatives.

 

TLT, AGG, and BND have exposure to long-dated Treasury bonds that have historically exhibited more price volatility than short-dated funds such as SHV and SGOV. Should weakening economic data spur the Fed into cutting rates sooner, rather than later, TLT, AGG, and BND could enjoy respectable price appreciation, but if the Fed is forced to delay reducing rates, and/or if inflation and growth accelerate, these ETFs could easily suffer losses as interest rates rise.

 

Positions in TLT, AGG, and BND are on Hold. If the outlook for interest rates warrants it, we may add to these existing positions when NASDAQ’s Seasonal MACD Sell triggers.