January 13, 2021

*** Equity Portfolio – Trade Update ***

Portfolio Managers: Michael Lebowitz/Lance Roberts

We are adding a 2% position of ZM (Zoom Video) to the portfolio. As shown in the chart below, the stock has had a large retracement, is oversold, and the short-term MACD has triggered a “buy signal.” We will add to our position if the longer-term MACD also turns positive. This is a purely technical based trade so we are carrying a fairly tight stop for now, but if the position migrates into a stronger technical position by breaking above the recent downtrend at $400, then we will consider it a longer-term hold.

(Click To Enlarge)

• Buy 3% of the portfolio in ZM / Stop-loss is $330
• Rebalanced FANG (Diamond Back Energy) back to original position weight 1%. 

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*** Dynamic Portfolio – Trade Update ***

Portfolio Managers: Nick Lane/Lance Roberts

As noted above we also bought ZM (Zoom Video) into the portfolio after a large correction back to long-term support. Given that even with a vaccine it doesn’t look like we are returning to normal any time soon, the stock price should be a setup for a decent bounce if earnings come in better than expected.

We also bought BBBY (Bed, Bath & Beyond) which is in the process of buying back 15% of their outstanding shares. Such sets the company up for a short-term “short-squeeze” as BBBY carries a large net-short positioning currently. This is a short-term trade and not an investment.

We added a position in both AMZN and NFLX which have been basing along support and have turned up. These are technical trades only with tight stops.

• Buy 3% of the portfolio in ZM / Stop-loss is $330
• Buy 3% of the portfolio in BBBY / Stop-loss is $18.05
• Buy 3.1% of the portfolio in AMZN / Stop-loss is $3122.00
• Buy 3% of the portfolio in NFLX / Stop-loss is $493

January 12, 2021

*** Equity Portfolio – Trade Update ***

Portfolio Managers: Michael Lebowitz/Lance Roberts

As we have discussed in recent missives, the Utility sector is extremely oversold. However, with rates pushing higher on expectations of more deficits, stimulus spending, and higher inflation, the “Utes” remain under pressure. While we like the sector defensively, we were stopped out of both of our positions this week:

• Sell 100% of D (Dominion Energy)
• Sell 100% of WEC (WEC Energy)

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Top 10 Buys And Sells

From TPA Research (Click on RIAPro+ today to add TPA Research to your subscription.) 

Click To Enlarge

January 11, 2021

*** Dynamic Equity Portfolio – Trade Update ***

Portfolio Managers: Nick Lane/Lance Roberts

We initiated a 5% position in BGSF. The stock is currently forming a bullish technical trading pattern with support near $12.50 per share. Additionally, the price remains roughly 34% below its level one-year-ago, leaving plenty of room for price appreciation as the economy recovers.

• Buy 5% of the portfolio into BGSF.  Stop-loss is set at $12.50

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The following CNBC article reports on JNJ ‘s COVID vaccine that could significantly speed up the vaccination process. Unlike the Moderna and Pfizer vaccines, theirs requires only one shot and can be stored in a traditional refrigerator, not in specialized refrigeration systems at sub-zero temperatures.

We own 2% of JNJ in the equity model.

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So Goes The First 5-Days Of January

** Click Charts To Enlarge **

For the week, the market churned out a 1.97% rate of return. As the old Wall Street axiom goes “So goes the first 5-days of the year, so goes the month. So goes the month, so goes the year.”

While you may be tempted to just “shut off the lights” and come back next January, while the year may indeed turn out positive, it likely won’t do so without some significant volatility along the way.

We got a few questions like week why we were adding broad index position weightings to our portfolios. As shown in the chart below, while the market is overbought short-term, the money flows, and the MACD is turning positive. With the market close to the top of its Bollinger Bands, upside may be more limited, but the setup is similar to what we saw in July which could give us a month or two of upside before we get a much-needed correction.

The current exuberance in the markets is extreme particularly in the small/mid and international/emerging market space. As shown below, IWM and EEM are trading at extremes and when a correction comes it will likely have a large impact on these two areas.

The one thing that derails this particular train is a reversal in the U.S. Dollar. We have opined on it previously, but continue to watch the dollar closely as money flows have turned positive and a buy signal has now been triggered.

It is still very early, and we have seen failed rally attempts previously over the last year. However, the negative sentiment, along with the net short positioning, is now at extremes. Such has usually been an ideal setup for a counter-trend rally.

Current Positions

We recommend currently holding your positions for now. But keep an eye on some of the more extreme levels of markets. We are now at a point where reversals happen, and they happen for the most unexpected reasons. With the current technical backdrop of the markets positive, I suspect that markets will continue to rise through January. However, sometime between February and early April, we suspect there will be a decent corrective action we can buy into.

Keep stops tight and maintain your risk controls for now.

 

January 9, 2021

Newsletter Is Out! 

Bulls Loving The “Heads I Win, Tails I Win” “Market

Click to enlarge charts

Market Fear Greed Gauge at 97.50 / 100 for the week ending 1/8/21

Technical Gauge at 91.07 for the week ending 1/8/21

January 8, 2021

*** EQUITY / ETF MODEL ***

Portfolio Manager: Michael Lebowitz/Lance Roberts

This morning we added 5% of SPY and 2% PFF, we sold all of IAU and GDX as they are breaking below support this morning.  Given that GDX and IAU were in the equity portfolio our equity exposure is largely unchanged.

• Sell 100% of GDX from portfolios.
• Sell 100% of IAU from portfolios.
• Buy 5% of portfolio value in SPY
• Buy 2% of portfolio value in PFF

*** Dynamic Equity Portfolio Model Update ***  

NOTE:  There is a pricing error on SNOW.  We are aware of it and are fixing it.

Portfolio Manager: Nick Lane/Lance Roberts

We initiated 3% positions in each of the following to start building out the “new economy” side of the portfolio.

• SNOW – Entry $314.9 / Stop Loss $260
• PLTR – Entry 25.92 / Stop Loss $22.50
• SQ – Entry 242.97 / Stop Loss $215
• PINS – Entry $72.96 / Stop Loss $65
• ETSY – Entry $177.00 / Stop Loss $166
• AAPL – Entry $131.20 / Stop Loss $126
• MSFT – Entry $219.14 / Stop Loss $210

January 7, 2021

*** Dynamic Equity Portfolio Model Update ***  

Portfolio Manager: Nick Lane

We initiated 2.5% positions in each of Kinder Morgan and Exxon Mobil in order to gain exposure to the reflation trade. Both stocks are also setting up a nice technical picture.

KMI –  KMI just triggered a money-flow buy signal. Additionally, the stock recently held support at the 50-dma and is setting up to form a “golden cross”, a bullish signal where the 50-dma crosses above the 200-dma. The close proximity of these moving averages also provides strong support for the stock near the $13.75 range.

XOM – Similarly to KMI, XOM recently triggered a money-flow buy signal. The stock is also setting up for a “golden cross”, so long as the current trend continues. The close proximity of these moving averages provides fairly strong support near $40 per share.

January 6, 2021

*** Portfolio Model Update ***  

We are rebalancing the equity model. We reduced the following stocks below (tech, communication, and healthcare) and added 5% of RSP as a placeholder for now.

While this is a net reduction of equity exposure, it is only temporary as we look for short-term corrections to add to current holdings or add new holdings.

Currently, the equity model has 64% equity and the sector model has 66%. Both figures include gold and gold miners.

Selling In Both Models

• CLX – 100% of position

In the Equity Model

• AMZN – Reduce to 1.5%
• AAPL – Reduce to 2%
• NFLX – Reduce to 2%
• ADBE – Reduce to 1.5%
• CRM – Reduce to 1.5%
• MSFT – Reduce to 2%
• JNJ – Reduce to 2%
• ABT – Reduce to 2%
• UNH – Reduce to 1%
• CMCSA – Reduce to 1%
• VZ – Reduce to 1.5%

January 5, 2021

Top 10 Buys And Sells

From TPA Research (Click on RIAPro+ today to add TPA Research to your subscription.) 

Click to Enlarge

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Technically Speaking – Market Trading At Extremes

January 4, 2021

*** Portfolio Trading Update ***

This morning we opened up a new trading account and have launched a new equity portfolio managed by Nick Lane with RIA Advisors. The portfolio has no boundaries or set allocation structure and can invest in any asset class, ETF, equity, or mutual fund seen as an opportunity.

NOTE: This is an aggressive portfolio model and will trade as needed. Therefore, it is not recommended for those seeking lower volatility, safer returns over time, and income. 

This morning we initiated two new 3% positions in both Lennar (LEN) and Microchip Technology (MCHP).

LEN – We like the stock based on favorable fundamentals and a technically oversold level that may begin to reverse soon. We expect an extended period of accommodative economic policy and housing shortages to bode well for the stock heading into the spring and summer of 2021. LEN’s status as the largest homebuilder in the nation (measured by revenues) should help it stave off increases in input prices over this period as compared to industry peers.

MCHP– We initiated a position in the stock based on favorable future growth prospects in the industry as well an improving picture based on technical analysis.

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A Technical Review Of The S&P 500

Welcome to 2021. As we kick off a new year, it is important to have some perspective in order to set reasonable expectations for returns. Currently, Wall Street analysts are wildly exuberant on expectations of explosive economic growth, rising interest rates, and inflation. The problem with those expectations is that in an economy that is $85 Trillion in debt, higher rates and inflation are a “death knell” to economic growth.

Yes, while the Fed may come to the rescue with more QE, with markets already trading at 36x times earnings it is becoming much more difficult to justify continuing to overpay for earnings. Eventually, corporate earnings are going to have to markedly improve, or prices will revert.

In the short-term, the S&P is currently overbought and trading significantly above its 200-dma. With the Bollinger bands narrowing the next move of the market will likely be either sharply higher or lower.

We currently expect the bullish trade to continue into January. However, somewhere between February and March, we could see a correction take hold. Much the same as we saw in Q1 of both 2018 and 2019.

Where it becomes much more troubling is when we look at the markets from a longer-term perspective.

On a weekly basis, the market is trading 3-standard deviations above its long-term mean and is incredibly overbought. At the same time, there is a negative divergence in relative strength (RSI) which is cause for concern. However, since weekly charts are longer-term, such does not mean the markets will crash immediately. Momentum driven markets can remain irrational much longer than logic would predict.

The monthly chart of the S&P 500 is likewise just as worrisome.  Again, long-term charts predict long-term outcomes and are NOT SUITABLE for trading portfolios short-term. As shown the deviation from long-term monthly means and negative divergences in relative strength have previously been warning signs for more significant corrections.

What could cause a correction in 2021? 

Lots of things. The market is currently priced for perfection betting on explosive economic growth, a falling dollar, interest rates remaining low, consumer spending surging sharply, and inflation remaining muted. The reality is that none of those things will likely turn out to be the case.

The one thing that always trips of the market is the one thing that no one is paying attention to. For me, that risk lies with the US Dollar. As noted previously, everyone expects the dollar to continue to decline, and the falling dollar has been the tailwind for the emerging market, commodity, and equity-risk trade. Whatever causes the dollar to reverse, will likely bring the equity market down with it.

That is the risk we are paying attention to right now.

January 2, 2021

Trading Desk Notes From Victor Adair

December 29, 2020

*** Portfolio Trade Update ***

Increased our S&P Index trade for the year-end “window dressing” run in both models.

• Add 5% SPY bringing total position to 10%. 

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A couple of reads as we wrap up 2020 and holiday-shortened trading week.

Shades Of 1999 – Market Mania Returns In 2020

“Maybe this time is different. Those words, supposedly the most dangerous to utter in the investing realm, came to mind amid the frenzied pops in the highly anticipated IPO’s. We discuss why the current market mania reminds us of the “Shades of 1999.”

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Technically Speaking: Navigating Market Lingo In 2021

“A recent article from Institutional investor decode ‘fund manager speak’ when you see them on financial media. Here are the 10-Investing Rules to improve you investing and avoid the noise.”

December 28, 2020

2020 will go down in the record books for a year when “anything that could happen, happens.”

It is also a year that led to many frustrations for portfolio management as the level of “risk-taking” by market participants derailed both technical and fundamental metrics. While this was initially driven by the Federal Reserve’s massive monetary liquidity programs, it was exacerbated by sports gamblers turning to the stock market to “get their fix.” 

Is this going to end badly? Definitely.

When? We don’t have a clue.

Markets can, and do, remain irrational longer than logic (or fundamentals or technicals) would predict.

As such, we are making a change to our portfolio models to allow us more flexibility to participate in market trends while still employing a level of risk management.

Importantly, this change is driven by three primary factors:

1. Bonds, at below 1% yields, no longer offer the “hedging” ability they previously did. Over the last several years, a significant portion of our returns came from our bond portfolio. Going forward that is no longer a possibility.
2. Hedging provides a drag on a portfolio’s performance. While this is what it is supposed to do, with bonds also likely to underperform, hedging is becoming more challenging.
3. The exposure we have to equity risk needs to perform with the market when the market advances. 

Currently, our portfolio models are 60% equities and 40% fixed income.

However, in the equity “sleeve,” we have positions that are more non-equity and provide some form of risk control. These can range from preferred issues to gold, gold miners, short-market positions, etc.

In order to reduce the potential future drag of the bond holdings, along with our non-equity risk management positions, we are adjusting our portfolio as follows going into 2021.

As such, the new model will allow us to maintain more equity exposure as markets are advancing to increase returns while still being able to risk-adjust the total model. The “hedge” sleeve can hold anything from short-market positions to currency, gold, or any other asset we see an opportunity to create returns from.

With rates currently below 1%, we are going to become more focused on trading duration in the years ahead. When yields rise substantially, we will reduce the duration. Conversely, when yields fall we will increase duration.

2021 will likely be a challenging year to create returns in markets that are currently “priced for perfection.” In other words, there is likely far more that could wrong in 2021, than what could go right.

We will have to trade accordingly.

December 23, 2020

On Monday we initiated a position in Diamondback Energy (FANG). We were eyeing FANG for a few weeks but held off as it was technically overbought on a short term basis. Prior to Monday, the stock had fallen about 10% and its level of overboughtness was greatly alleviated. Over the weekend they purchased QEP Resources, which further weighed on FANGs stock price. We took advantage of the lower price and quite frankly a beneficial purchase for FANG. On Monday, Grants provided their thoughts on the takeover as follows:

While the AT&T c-suite works through buyer’s remorse, one shale player laments the deal that got away. Today, Diamondback Energy announced it will buy driller QEP Resources, Inc. in a $555 million, all-stock deal equal to roughly $2.22 per share, based on current trading levels. That price represents a discount to QEP’s $560 million market cap as of Friday, spurring a selloff of as much as 11% in the target company’s shares today as frustrated investors headed for the exits.

For QEP, missed opportunities color today’s transaction. Last year, minority shareholder Elliott Management Corp. bid $8.75 a share to acquire the remaining 95% of the company it did not own, valuing the equity at some $2 billion. That approach was followed by an “intense” 90 day negotiation that broke down after the parties “couldn’t come together on price,” Bloomberg reported in August of last year. After deal talks fizzled, QEP CEO Tim Cutt explained management’s rationale: “As we evaluated opportunities, it was apparent that none of the potential transactions recognize the intrinsic value of our assets.”

December 22, 2020

Sector Review

As we noted in yesterday’s “Major Market Review” (scroll down):

“No matter how you want to cut it, the markets are exceedingly overbought on every front. Extensions from long-term means are historically wide, investor confidence is exuberant, and the markets are priced for perfection as we enter into 2021. The risk of ‘disappointment’ has rarely been greater.”

The sector charts, unsurprisingly, tell much of the same story. Such is always the case when you have investors chasing assets without regard to the underlying risk. However, as John Maynard Keynes once quipped, “the market can remain irrational longer than you can remain solvent.”

I want to highlight a couple of sectors we are watching closely for a potential “risk-off” rotation in the markets after passing into the New Year.

The sector rotation table below shows the most “out of favor” sectors of the market currently. We have discussed recently, below, that if I were a “betting man,” I would be considering adding long bonds and USD trades to portfolios. (We are doing that work now to identify the correct timing.)

The rotation model also suggests that Real Estate, Utilities, and Staples (and we still like Healthcare here for demographic reasons) will lead the market during a more “risk-averse” environment.

Real Estate

There is more downside to XLRE in the short-term as eviction moratoriums continue. However, much of the risk has already gotten priced into the sector. While you can play the industry as a whole, we like REITs involved in storage, healthcare services, and communications the most. These sectors tend to be more economically agnostic.

Look at add to, XLRE between $34.50-35.50 with a stop at $33.50.

Utilities

As with Real Estate, the Utility sector is also positioning for a counter-rotation trade. Utilities have been grossly underperforming the market over the past year. Better performance returns over the next year would be of no surprise.

Buy XLU between $60-61 with a stop at $58.

Staples

Lockdowns, or a return to economic recovery, staples will continue to play a vital role as people have to eat and continue life basics. While Staples is short-term overbought, the sector has been underperforming the market since the pandemic started. A correction to reduce the overbought condition will set up Staples for a better trading opportunity into 2021.

Look for a correction between $62-64 to add to holdings. Move stops on current holdings up to $60.

Healthcare

Due to the aging demographic, healthcare will continue to generate revenue regardless of what politics try to get enacted in Washington. While Healthcare is short-term overbought, like Staples, the rather severe underperformance puts the sector in a position for better future performance.

Look to add to current holdings between $102.50-105. Move stops on existing holdings up to $100.

December 21, 2020

PORTFOLIO UPDATE – TRADE ALERT

With TSLA entering the S&P 500 index today, the rebalancing of sectors put downward pressure on energy stocks. We have been looking for a pullback in a couple of stocks to their support levels to start adding positions to the portfolios. We are using this opportunity today to start that process.

EQUITY Model

• Reducing CLX from 3% to 2% (Tax loss selling)
• Initiating a 1% position in KMI 
• Initiating a 1% position in FANG

ETF Model

• Reducing CLX from 3% to 2% (Tax loss selling)
• Initiating a 2% position in XLE

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Major Market Update

No matter how you want to cut it, the markets are exceedingly overbought on every front. Extensions from long-term means are historically wide, investor confidence is exuberant, and the markets are priced for perfection as we enter into 2021. The risk of “disappointment” has rarely been greater.

The charts below are MONTHLY charts overlaid against a 4-YEAR moving average. These charts are NOT SUITABLE for short-term trading BUT they do provide a much better observation about some of the most extreme overbought conditions we have seen over the last couple of decades.

In each of the cases below, the deviations from long-term means suggest that an eventual mean reverting event will be costly to investors. While it does NOT mean you should sell everything and go to cash immediately, it does suggest at least planning for an eventual correction by not turning a blind eye to the risk.

S&P 500 Index

Russell 2000

International

Emerging Markets

Investor Confidence

As we noted in the past weekend’s newsletter:

“The chart below shows the combined average of institutional and individual investor valuation confidence subtracted from future returns confidence. When the reading is positive, it means the confidence the market will be higher one year from now is more elevated than the confidence in the market’s valuation.  The opposite is the case when the reading is in negative territory.

The key takeaway is that investors think simultaneously, the market is over-valued but likely to keep climbing.”

“Such is the same phenomenon famously described by former Fed Chair Alan Greenspan in a December 1996 speech on “Irrational Exuberance.”

Trade carefully, there is very little room for “disappointment” in 2021.

December 19, 2020

The Real Investment Report Is Published!

Updated Sentiment and Allocation Gauges

4-Week Average Of Fear/Greed is at 94.5 out of 100.

Technical Gauge is very overbought at 88.48

December 18, 2020

Adding a bit of exposure to portfolios as some sectors and positions have consolidated recent gains and/or are starting to trigger money flow “buy signals.”

EQUITY Portfolio

• Initiate a 2% position in UNP (Union Pacific) into the portfolio.
• Add 1.5% to RTX (Ratheon Technologies) to bring the exposure up to 2%. (We had reduced previously to take profits)

ETF Portfolio

• Add 1% to XLU to increase to 5% of the portfolio.
• Add 1% to IYT to increase to 2% of the portfolio

December 17, 2020

Dominion Energy (D) recently received analyst upgrades at Credit Suisse and Bank of America. The basis for the upgrades centers around strategic actions taken in 2020 to reduce risks as well as positive guidance from Management. We currently hold a 1% position in Dominion in our Equity Portfolio.

 

December 15, 2020

Portfolio Update – Trade Alert

Adding 5% of SPY to Equity and ETF portfolios for the end-of-year strength. As noted in both posts below, there is a 76% win ratio for the S&P between the 15th of December and the first week of January.

• Initiate a 5% position of SPY in portfolios

Update 12:30 pm EST

Technically Speaking

3-Minutes On Markets & Money – Santa Claus Rally

IF I WAS A BETTING MAN…

There are a few setups in the market that are hard to ignore particularly when it comes to very “out of favor” trades. Two such trades are the Dollar and 10-Year Treasury Yields.

Let’s start with the dollar.  The dollar is so extremely oversold, with a very large net-short position against it, that any event which causes a flight to safety is going to lead to a sharp counter-trend rotation in the dollar. While there is not a tremendous move in the dollar to the upside, the ramifications of that move would ripple through the current “reflation bets” of emerging markets, international, energy, and commodity stocks.

Of course, if money rotates into the dollar for safety, foreign governments storing their reserves in the US Dollar would buy Treasuries which has a higher yield than most bonds globally. TLT is currently sitting on very important support and extremely oversold. Like the dollar, the negativity on bonds has once again reached the point that any event which disrupts the “bullish mantra,” is going to lead to a sharp drop in rates and a rise in bond prices.

So, if I was a “betting man,” the current setup to hedge portfolios against an unexpected risk is currently very tempting. What risk could that be? As noted in this past weekend’s newsletter, it will be the one thing that no one is currently paying attention to. Such can also be seen in BofA’s list which has a “Less than 5% chance” it is none of risks on the list.

As I stated:

“What exactly will that catalyst be? No one knows, just as no one expected the ‘pandemic’ in March. Whatever the catalyst eventually is, the media’s excuse will be: ‘No one could have seen it coming.’”

However, bonds and the U.S. dollar will likely both forecast, and protect, portfolios against whatever event it turns out to be.

December 14, 2020

MAJOR MARKET REVIEW

Last week, the market began a very mild corrective process as the “bullish bias” provided enough support to offset mutual funds’ distributions. However, with the markets still overbought and money flows currently slipping, there remains some downside pressure to stock prices heading into the Christmas break. The good news is that if we get some further weakness this week, such will likely provide a decent opportunity to add exposure for a post-Christmas “Santa Claus” rally as portfolio managers allocate money for year-end “window dressing.” 

S&P 500 Index

As shown, the S&P 500 is finally coming off its more extreme extension; however, there is definitely a downside risk to the 50-dma in the short-term. Whether such a correction happens before Christmas or after the New Year is unknown, but a deeper correction will occur before the next leg higher can begin.

Use weakness to add exposure for trading positions, but maintain stop-loss levels to protect capital in the near-term.

Emerging Markets & International

Both of these markets are grossly extended and overbought. A correction will likely be somewhat painful and sharp when it happens and will likely coincide with a rally in the US Dollar. (More on that in a moment).

The deviation between the current price levels on both indices and the 50-dma is extreme. With the “buy signal” extremely elevated, and markets very overbought, the downside risk outweighs the reward.

Take profits and reduce risk accordingly for now, and look for a correction to add back exposure opportunistically.

Mid And Small Caps

As with international and emerging markets, the small and mid-cap markets have been on “fire” as of late as portfolio managers play the “catch-up” trade into year-end. While the “theme” is that there will be explosive economic growth next year, such is unlikely to be the case. The market has already front-tun most, if not all, of that growth.

The risk is very elevated. Take profits and reduce risk accordingly. Look for pullbacks to add exposure opportunistically.

Dollar And Rates

The “Pin that pricks the bubble” in the commodity, energy, small- and mid-cap, international, and emerging market trade is the dollar.

The dollar is extremely depressed, the opposite of the market, and has a huge net-short positioning against it by traders. Such is the perfect combination for a very sharp reflexive bounce in the dollar. When that occurs, two things happen:

1. Foreign reserves shift into the dollar to protect purchasing power against rising commodity prices, and;
2. Those foreign inflows buy US Treasuries to store reserves pushing Treasury bond prices up and “yields” down.

Investors should consider building hedges in both the dollar and Treasury bonds to reduce portfolio risk as needed.

This potential counter-trend rally in the dollar will likely also negatively impact the energy trade, which has also gotten way ahead of itself currently.

December 12, 2020

REAL INVESTMENT REPORT IS OUT

Risk-Measures Are Updated

Fear/Greed Gauge

Technical Gauge

December 11, 2020

Pay attention to this chart.

We have been discussing that distributions heading into Christmas could weigh on asset prices short-term which is why we raised cash recently. (We were a little early.)  However, if we get a further correction over the next week heading into year-end options expiration, such would set us up for the traditional “Santa Claus” rally.

We would look to add exposure opportunistically if our thesis plays out accordingly. But the risk is to the downside currently.

December 8, 2020

Energy Sector

On Friday, I published a piece about “The Energy Rally Is Likely Pre-Mature.”

The basic premise is that despite the collapse in oil prices, the supply of oil available has not dropped much at all. With global demand weakening, and OPEC+ now talking about increasing production, the supply gut is likely going to continue to impact companies going forward.

As we have discussed recently the rally in energy is now way ahead of both the economic recovery and fundamentals. With such exceeding dislocations and deviations, from the underlying averages, it is likely wise to be looking to take profits in the short-term and use corrections to continue to build exposures near term.

The Rest Of The Story

The rest of the market remains extremely overbought and speculative activity is at a record. Consider using this rally to raise cash levels, and reduce portfolio risk, currently. These speculative phases can last longer than you would expect, but the correction will come quickly, and when you least expect it.

This note from SentimenTrader sums it up well.

“It’s worth noting this again. While options traders have been picking up their speculative activity since getting slapped in September, by some measures it’s back to record levels. Last week, speculative call buying-to-open among the smallest of traders, those buying 10 or fewer contracts at a time, reached a record high relative to all opening transactions.”

Again, such doesn’t mean the market will correct immediately. What it does mean is this “excess speculative attitude” provides the “fuel” for a reversion when it occurs.

Caution is advised.

December 7, 2020

2:00 pm EST

GOLD

Over the last 6 trading days, gold has had an impressive run, gaining almost 6%. It is now hitting formidable resistance in both the top of the recent channel and the 50-day moving average. If gold can break through both barriers and take out the early November highs, it may likely make a run for all-time highs. If it fails here, we will look for the 200-day moving average and then the lower channel band for support.

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MAJOR MARKET REVIEW

The markets are pushing extremes rarely seen in history. The downside risk currently outweighs the reward from excessive bullishness from investors, extensions, and deviations from long-term trends.

S&P 500 Index – Take Profits

The commentary for the S&P 500 holds through all the charts below.

As shown, the S&P is now 3-standard deviations above its moving average, and more importantly, extremely deviated from its 200-dma. This is a situation that has historically not ended well for investors.

We recommend taking profits, reducing risk, and being patient for an opportunity to deploy capital. While we were a bit early in our actions, we expect to be rewarded sooner than later.

Small and Mid Cap – Take Profits

The same applies to Small and Mid-Cap exposure. While the recent rally has been based on a rebounding economy as the vaccine is distributed, there is little “value” left in the small and mid-cap trade.

As above, take profits and reduce the risk for now. The deviation from the long-term means is so great that a reversion will be quite nasty. All you need is the right catalyst, which will likely come rather unexpectedly.

Emerging Market and International – Take Profits

Again same story as above. Take profits and reduce risk.  Extreme deviations from the long-term means suggest a reversion will be larger than normal. Also, whatever “value” that existed based on economic recovery has been fully priced-in and then some.

USD and Bonds – Build A Position

The biggest risk to the Small, Mid, Emerging Market, and International trade is the US Dollar.

The dollar is so deeply oversold and extended below the long-term that a reversion is exceedingly likely. The counter-trend bounce will get “fuel” from the large net-short positioning that has piled into the Dollar. If you want to hedge your portfolio, now is a good time to start building or adding to your long-dollar hedges.

Of course, if the dollar does rally, that means foreign inflows will have to go into U.S. Treasuries, which will drop rates back towards the recent lows. The run-up in rates towards 1% is approaching the “danger zone,” where it will begin to impact current economic activity and valuations.

We removed our TLT position last week as we begin to restructure our bond portfolios, BUT there is a good trade set up for TLT or EDV that we may look to take advantage of short-term.

THE REAL INVESTMENT REPORT IS OUT!

The first week of December continued the bullish run as exuberance exploded higher in anticipation of more stimulus and a vaccine. If there was only a sign that told us that risk outweighs the current reward.

December 3, 2020

PORTFOLIO UPDATE – EQUITY PORTFOLIOS

We are increasing our holding in PSA (Public Storage) from 1% to 2% in portfolios.

After adding our position initially, PSA advanced strongly. We have been waiting for an opportunity to bring the position up to normal portfolio weight. With the pullback to the bottom of the Keltner Channel, and the MACD looking to turn positive, with the Williams %R turning up, we are adding to the position.

December 2, 2020

PORTFOLIO UPDATE – EQUITY / ETF PORTFOLIOS

As we continue to adjust our portfolio exposure, we added positions that have gotten oversold as of late and may provide a bit of hedge against a potential risk-off rotation. We are also taking profits in a couple of extremely overbought positions.

EQUITY

• AMD – reduce by 0.5% from 2% to 1.5%
• CMCSA – reduce by 0.5% from 2% to 1.5%
• GOOG – reduce by 0.5% from 2% to 1.5% (See note below)
• CRM – increase by 0.5% to 2.5% (Acquisition of Slack will be accretive to future growth)
• WEC – add 1% (open new position)
• D – add 1% (open new position)

(GOOG – in the RIAPRO portfolio there was NO transaction in GOOG due to the dollar size of the stock. The live account we set up for RIAPRO was $100,000 in 2019. However, for RIA Advisor Clients, whose accounts are much large in size, they own multiple shares of GOOG which allowed for a reduction in total size. While there was NO transaction in the RIAPRO portfolio, it did occur for our client portfolios.)

ETF

• XLC – reduce by 1% from 6% to 5%
• XLY – reduce by 1% from 5% to 4%
• XLU – add 2% to increase the position to 4%.

Why XLU, D, and WEC?

We thought it would be helpful to walk you through our analysis backing the addition of XLU, D, and WEC to our models. For starters, we think the markets are overbought, exuberant, and due for a correction. We are reducing equity exposure and shifting exposure to “safer” sectors/stocks to help manage the situation. The utility sector is traditionally a lower beta, safer sector.

Second, the utility sector has been among the most oversold sector on a relative basis versus the S&P and an absolute basis. The first graph below shows that utilities are the most oversold of the sectors on an absolute basis. This came from our latest weekly Technical Value Scorecard.

So if we increase XLU in the sector model, which stocks should we buy for the equity model? To help answer the question, we use a similar analysis that breaks out the company’s Utility sector, as shown in the second graph. This table compares each utility company versus XLU as well as each company against each other company. In today’s instance, AEP, WEC, XEL, ED, and D are the most oversold versus XLU and most other utility companies. From there, we use fundamental and technical analysis to help choose between the five.

December 1, 2020

PORTFOLIO UPDATE – EQUITY / ETF PORTFOLIOS

We are making some changes to our bond portfolio as we wrap up the year to put us in a position to capitalize on our portfolio allocations next year.

• Selling 100% of TLT
• Reducing PFF from 5% to 3% of the portfolio

Such will drastically shorten our duration temporarily to hedge risk, but give us the flexibility to restructure the fixed income portfolio as we enter into 2021.

SECTOR REVIEW 

If you didn’t catch this week’s newsletter yet, here is the link. (The Real Investment Report)

Yesterday, the sectors we have been warning about being egregiously overbought, extended, and deviated from long-term means, corrected. These sectors also coincide with our recent reductions in Industrials, Materials, Transportation, Financials, and Energy exposure.

These sectors are part of the “reflation trade” that took off post the election; the problem, as shown in the charts below, is that they all trading far above whatever “reflation” in the economy there will be.

CLICK on any image to enlarge.

XLB – Materials

Basic Materials started a correction process yesterday after surging well into 3-standard deviations above its longer-term averages.

Notably, Materials are significantly deviated from its 200-dma and well above the pre-pandemic highs. Such is essential considering that economic growth is substantially weaker than it was then, and materials are a function of actual economic activity.

As noted previously, take profits and reduce the risk for now. There is a decent amount of downside risk if the “bullish trade” begins to unwind.

XLE – Energy

Like Materials, Energy pushed well into 3-standard deviations territory and is well ahead of the economy’s underlying fundamentals and potential earnings growth. I have an article coming on Friday explaining why the rally in oil was premature and why we previously reduced our position in CVX.

Take profits and rebalance risks for now. Look for a pullback towards the 50-dma to start adding back to exposures.

XLF – Financials

Financials are exceptionally far ahead of the economy. Financials depend on higher interest rates for profitability. Furthermore, with the end of the year approaching, the moratoriums on housing and rent go away. There is a substantial risk to financials from a weaker economy ahead. Take profits in financials and markedly reduce the risk for now.

XLI – Industrials

Industrial, like Materials, depend on real economic activity for profitability. With industrials trading well ahead of actual economic growth, take profits and rebalance risk. Look for a pullback to start looking to add back to exposures. However, be aware of the relatively massive deviation from the 200-dma, which could quickly get filled if economic weakness shows up sooner than expected.

XTN – Transportation

Transportation also is heavily dependent on real economic activity. We have reduced our exposure to the sector and are looking for a correction back to the 50-dma to add back to holdings. Like with Industrials, the deviation from the 200-dma is rather extensive and is not outside the realm of possibility for a correction to fill. Trade accordingly.

November 30, 2020

MAJOR MARKET REVIEW 

First, grab this weekend’s full commentary which discusses the more extreme nature of the market currently.

The major market review follows with some expanded commentary by Michael Lebowitz on gold.

The Real Investment Report Is Out

With the November market surge, the risk of a correction is elevated with distribution season for mutual and pension funds. A look at the deviations in markets, a review of the risks, and 7-trading rules to follow.

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The message this week is simple. “Time To Take Profits” and look for the next trade. As you will see in all of the charts below, the deviations from intermediate-term means are now extremes. As such, this is an excellent time to take some actions to reduce risk and hedge for short- to intermediate-term market correction.

WTIC – Oil

Over the last 3-years, whenever oil prices have become more than 3-standard deviations above the mean, a correction has ensued. Such will likely coincide with a counter-trend rally in the dollar and gold. With oil prices and energy stock prices grossly extended, this is an excellent time to take profits and reduce position sizing near-term.

EEM – Emerging Markets

Emerging Markets have had a huge run over the last couple of weeks, far ahead of any potential economic recovery. Given the dependence of emerging markets on the U.S. for activity, there is a very high likelihood of disappointment. Take profits and reduce exposure currently. Look for pullbacks to support and decent oversold conditions to add exposure to portfolios.

EFA – International Markets

So goes Emerging Markets, so goes International. Same story, just a different basket of countries. Notably, the US Dollar is critical here. So far, the markets have been unable to muster a robust counter-trend rally in the dollar, but it is coming. Take profits and reduce risks currently. Look for a deep oversold condition and correction to start adding positions into portfolios.

GLD – Gold (and by extension Gold Miners)

Conversely, Gold and Gold Miners are incredibly oversold. A correction in the markets will likely push money into gold as a hedge temporarily. With gold 3-standard deviations OVERSOLD, and the long-term sell signal at the lowest levels seen in years, gold could have a powerful counter-trend rally. We added to our gold miners (GDX) last week and will look for signs of life to add to our gold holdings (IAU).  Traders can start building positions here.

“The last time gold was as oversold as it is today was in mid-March. As shown below, gold is trading slightly below its 200 dma and at RSI and MACD levels last seen in March. Making the recent sell-off more interesting is that a weak dollar and record negative-yielding debt, as we have today, have been decently correlated with increasing gold prices. However, and as we will show and discuss later today, real interest rates are rising which has a strong negative correlation to gold prices.” – Michael Lebowitz

SLYV – Small-Cap Value & MDYV – Mid-Cap Value

Small and Mid-Cap stocks (and particularly value stocks) have gone parabolic. Furthermore, this sector of the market is very dependent on strong domestic growth. Given that economic recovery shows signs of stalling, these markets are too far ahead of what will come to pass.

Take profits, reduce holdings, and look for deep correction and oversold conditions to add positions back to portfolios.

November 29, 2020

The Real Investment Report Is Out

With the November market surge, the risk of a correction is elevated with distribution season for mutual and pension funds. A look at the deviations in markets, a review of the risks, and 7-trading rules to follow.

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Trading Desk Notes For The Week

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November 29, 2020

The Real Investment Report Is Out

With the November market surge, the risk of a correction is elevated with distribution season for mutual and pension funds. A look at the deviations in markets, a review of the risks, and 7-trading rules to follow.

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November 27, 2020

Trading Desk Notes For The Week

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What You Missed on Real Investment Advice 

• A vaccine and the NEW “New Normal”
• Investors go ALL IN without a net.
• The great #Medicare mistake by Richard Rosso
• Best of The Real Investment Radio Show 
• The “MoneyShow” Full Presentation
• Our best Tweets, and more.

November 25, 2020

9:50 am EST

As shown below, we are continuing to use this rally to raise cash and reduce portfolio risk heading into December. We will add back to our holdings on a decline.

Today, we are taking small profits in areas that are pushing 3-standard deviations above their 50-dma’s.

Equity Portfolio:

• CMCSA – reducing from 2.5% to 2.%
• KHC – reducing from 2.5% to 2%
• GDX – increasing from 2% to 2.5% due to its move to 3-standard deviations below the 50-dma

ETF Portfolio:

• IYT – reducing from 2% to 1%. 
• GDX – increasing position from 2% to 2.5%

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9:35 am EST

Investors are ALL In.  A correction is very likely over the next two weeks as pension funds have to rebalance and mutual funds have to distribute capital gains and income. Both have record low levels of cash on hand.

November 24, 2020

9:30 am EST

Technically Speaking: Investors Are “All-In” Without A Net

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9:21 am EST

Three Minutes On Markets & Money

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8:00am EST

Sector Review

As noted in today’s Technically Speaking Report investor exuberance is way ahead of reality currently. However, such is not surprising in a holiday-shortened trading week. With the “inmates running the asylum” there is general upside bias heading into Thanksgiving.

However, as we kick off the first two weeks of December, there will be selling pressure as mutual funds have to make capital gains distributions and pension funds will rebalance for year-end. Such could certainly weigh on asset prices short term particularly with the extreme extensions seen currently.

Such is particularly the case in Industrial, Basic Materials, and Energy. These sectors have gone parabolic over the last couple of weeks on a belief that a vaccine will cure what ails the economy. The problem with the economy is much more than the “pandemic” and these sectors are heavily dependent on stronger economic growth which will be unlikely given the massive increase in debts and deficits.

Take profits and rebalance portfolios. Move stop-loss levels up to the 200-dma for now. 

It is also recommended that you take profits in Financials and reduce risk accordingly. Move stops up to the 200-dma for now. Financials depend on higher interest rates for increased profitability which are not coming due to the negative impact on the economy from rising rates.

Technology, Healthcare, Utilities, and Staples are all correcting a bit as of late. Such will provide a good opportunity for a “risk-off” rotation as portfolio rebalancing occurs over the next few weeks. Once we get into 2021, we will be able to start gauging the effectiveness of potential policies and just how soon a “vaccine” will or won’t be available.

 

November 23, 2020

12:05pm EST

Portfolio Trades – Equity & ETF Models

With the Money Flow “sell signal” now triggered, see 3-minutes on Markets, we are continuing to reduce our exposure gradually as we head into Thanksgiving.

• Reducing TLT by 2.5% after a nice runup. Taking profits and reducing position size to 10% from 12.5%.
• Reducing CRM by 0.5% from 2.5% to 2.0% (Equity Portfolio)
• Reducing XLK by 1% from 10.5% to 9.5%. (ETF Portfolio)

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12:00pm EST

Presentation AND Slide Deck From The MoneyShow Virtual Event

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11:48am EST

Three Minutes On The Market

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8:00am EST

Small Cap Value – No Value

Over the last two weeks, the media has been repeating the latest narrative – the “value rotation” is finally here. While small-cap value certainly had a big week, it is now the most overbought it has been in 15-years. More importantly, the small-cap space is the most vulnerable to an economic shutdown, rising virus cases which crimps spending, and sentiment. Also, there is actually very little “value” in value currently due to the price increases, and small-cap companies is the one area most burdened by debt. Be sure and know what you own.

We would recommend taking profits and reducing risk if you have exposure to this area.

Taking Profits In Bonds

Two weeks ago we added 5% to our TLT position in our portfolios. For us, bonds are a hedge against market weakness as money rotations to bonds for safety. That trade has worked well over the last few days and we sold 1/2 of our previous addition early last week, and we will sell another 2.5% to 5% most likely this week as bonds are now back to extremely overbought and running into the 200-dma.

Time To Sell Energy Stocks

We have been discussing a setup for an energy trade for several months and it finally occurred. However, both energy stocks and oil prices are very extended short-term so look for weakness here soon. In fact, every time oil prices have been this extended (note red circles) oil prices have corrected which will take energy stocks down with it.

Take profits, reduce risk, and rebalance as needed.  Be careful speculating in this sector. Energy stocks need much stronger economic growth to increase profitability and that isn’t happening anytime soon.

NEW DASHBOARD LAYOUT

We are in the process of redesigning the dashboard to provide you a quick snapshot of what is going on, what’s driving markets, and some things to help you generate trading ideas.

Let me walk you through it.

• Starting at the top you will see major market data. We will be adding selectable major market graphs very shortly.
• We are moving away from writing lengthy articles, to running a “daily diary.” The Real-Time Commentary and Portfolio Trading Diary will house our ongoing comments throughout the day on what we are watching, trading, and looking at. Sectors, Markets, and Fixed income comments will be found here. Links to articles we write will also appear here.
• Moving down, you will find a daily economic calendar and what is moving markets
• Below that you will find the latest major news headlines from major news sources. MyNews and MyAlerts are specific to stocks in your portfolio, watch lists, or alerts (set alerts up in the Portfolio tab) Also, we have set up two tabs to show you what Dividends are being paid, and who is announcing Earnings, over the next 15-days.
• Now that you know what’s going on and what is moving markets, it’s time to start thinking about generating some trading ideas.
• We give you a list of the Top and Bottom-10 stocks in the S&P 500 index.
• Next are the stocks with the highest and lowest momentum.
• Lastly, and my favorite, is a heat map of the sectors of the market. CLICK on any stock in the heatmap and below the heat map, you will see its performance versus the S&P 500, our quick synopsis of the stock, and a list of comparative stocks to consider. Next to each symbol in the table click the (+) sign for a “popout” window of charting and analysis on the stock.

COMING SOON

We have a laundry list of new things coming soon:

• Auto-generated portfolios for stock / etf selection
• Advanced charting (save your settings and create your own styles)
• Graphing fundamental data
• Trade direct from your portfolio to your account. (Interactive Brokers)
• Chart Click-To-Trade while in a chart, you can “right-click” and trade the stock in your IB portfolio.
• Auto-Traded Models – you will be able to select a model and have it automatically managed for you.
• New sentiment and trading measures will be added to the Market Internals page including our Technical Gauge, Greed/Fear Allocation Gauge, and our proprietary Money Flow indicator.
• Financial planning tools
• and more.

If you have any questions or comments simply click the MESSAGE BOX in the lower-right hand corner of the screen to drop us a line.

November 16, 2020

As noted in this past weekend’s Real Investment Report the market has gotten back to more extreme overbought, extended and bullish levels. Historically, such a setup has led to short-term corrections, or worse.

While the vaccine news on this morning is certainly welcome, the markets have already priced much of that into stocks currently. Considering a vaccine won’t be widely available to mid- to late-next year, the economic weakness will continue to weigh on profitability for now.

As such, we are taking profits in some of our more egregiously extended positions and will use a post-Thanksgiving correction to add back to holdings at a cheaper level.

Equity Portfolio – Taking Profits 

• CVX from 2.5% to 1.5%
• CMCSA from 3% to 2.5%
• GOOG from 2.5% to 2%
• AAPL from 3% to 2.5%
• VZ from 3% to 2.5%
• UNH from 2.5% to 2%
• CVS from 2% to 1.5%
• TLT from 15% to 12.5%

ETF Portfolio – Taking Profits

• CVX from 2.5% to 1.5%
• XLV from 9% to 8%
• XLP from 6.5% to 5.5%
• XLB from 3% to 2%
• TLT from 15% to 12.5%

November 11, 2120

EQUITY & ETF Portfolios:

While the Pfizer news caused a couple of days of sector rotation, the reality is that a vaccine is not coming soon. As such, the markets are going to start gravitating back to companies that can grow earnings regardless of the economic environment as people remain working from home and the virus remains a threat.

As such we used the pullback in CLX to add to our position.  Also, bonds got extremely oversold (3-standard deviations below the 50-dma) which is an ideal setup for a trade.

In Both Portfolios:

• Add 1% to CLX bringing the total weight up to 3% of the portfolio. 
• Add 5% to TLT bringing the total weight up to 15% of the portfolio. 

November 4, 2120

EQUITY & ETF Portfolios:

While the actual Presidential election is still up in the air, it appears that the GOP will retain control of the Senate which greatly limits the ability to the President to do drastic things. As such, this shifts the focus of the market back to areas that can create earnings growth in a slower economic environment and areas that will benefit from more “stay-at-home” companies.

This clears the path for the market over the next couple of months of some of the downside risk, and with the money flow signal turning positive, we are adding to the “growth areas” of our portfolios.

EQUITY –

• Selling 100% of SH
• Selling 100% of DOX
• Adding 1% to our current holdings of AAPL, CRM, ABT, CMCSA, NFLX, AMD, UPS, and KHC.

ETF – 

• Adding 1% to our current holdings of IYT, XLK, XLV & XLP
• Adding 2% to our current holdings of XLY, XLC

November 2, 2120

EQUITY & ETF Portfolios:

As we have discussed in the newsletter over the last couple of weeks, we have continued to raise cash and de-risk models as we get closer to the election. While polls have tightened considerably in recent days, we have absolutely no idea who will win the election. However, such is not the risk. The risk to the markets is a “contested” election which could likely last days to weeks to find out the results. There are many states which have between 3-10 days to certify their vote tallies. Then there is the risk of the lawsuits that follow.

As such we are hedging our portfolios by adding a 5% position in SH – Short S&P 500 Index.  We will remove the position as soon as we have some clarity on the election outcome and market direction.

• Buy 5% SH in portfolios (new position)

October 27, 2120

EQUITY Portfolio:

• Sell 100% of MCHP for a gain
• Initiate 1% of AMD in portfolios

We are swapping out chip companies in the portfolio. We very much like the acquisition by AMD of XLNX which puts them in a prime position to take market share from INTC.  We are starting with a 1% holding and will add to AMD on further weakness.

October 23, 2120

 

ETF Portfolio:

• Reduce XLU by 1.5% from 3.5% to 2.0% weighting.

Utilities have gotten egregiously overbought in recent weeks and is due for a correction. We have milked that position for a bulk of its gains, so we will look for a correction to rebuild the position.

October 22, 2120

** UPDATE **

Equity Portfolio:

• Buy 1% of GOOG bringing allocation up to 2% of the portfolio.

The position broke above the recent consolidation suggesting we could see higher levels in the short-term.

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Prepping For The Election (Continued)

As noted during the entirety of this week’s portfolio transactions, we are continuing to prep for the election, and lack of stimulus, by raising cash and reducing risk as needed.

Equity & ETF Portfolio: 

• Sell 100% of AT&T (T)

We originally purchased AT&T with an expectation that value would provide some relative safety to the market. However, the position violated our stop-loss with the recent breakdown. We held the stock for earnings expecting an earnings beat might lift the stock to give us a better exit point.

This morning, AT&T reported earnings were actually were weaker than estimates but guidance was good and the stock popped nicely at the open. We used that as an exit for the position.

October 21, 2120

** Updated**

Prepping For The Election (Continued)

Continuing from yesterday’s portfolio update, we are continuing to slowly raise cash ahead of the election.

Equity Portfolio: 

• Reducing NFLX by 1.00%
• Reduced TLT by 5% (from 15% to 10%)

ETF Portfolio

• Reducing XLC by 1.00%
• Reduced TLT by 5% (from 15%  to 10%)

October 20, 2020

Prepping For The Election

Given the potential for a contested election, which is likely the biggest risk for the market short-term, we are beginning the process of raising a bit of cash in the portfolios. This is a process we will continue over the next week as reduce/sell laggards, take profits, and rebalancing hedges.

Once we get through the election, if everything goes smoothly we will then bring weightings back up in portfolios.

Equity Portfolio: 

• Reducing CRM by 0.50%
• Reducing AAPL by 0.50%

October 8, 2020

Equity / ETF Portfolio Update

Lately, Utilities (XLU) have been on a run and have gotten both very extended and overbought. We are taking profits in the sector. DUK had a big jump due to takeover rumors from NEE. We are closing out the entire position to remove the “buyout risk” of something falling through. We were very overweight XLU so we are reducing that position by 50%.

In the Equity portfolio, we are adding 0.5% to our holdings of T and VZ.

In the ETF portfolio, we added 1% of the portfolio to XLB and XLY to bring those positions up to weight.

Equity Portfolio: 

• Sell 100% of DUK
• Add 0.5% of portfolio weight to VZ bringing total weight to 3%
• Add 0.5% of portfolio weight to T bringing total weight to 3%

ETF Portfolio

• Sell 3.5% of XLU – Reducing weight from 7% originally.
• Buy 1% of XLY – Bringing total weight up to 3%
• Buy 1% of XLB – Bringing total weight up to 3%

October 6, 2020

Equity / ETF Portfolio Update – Adding To Long Holdings / Adjusting Fixed Income

As noted yesterday, with the President back at the WhiteHouse, the short-term risk trade against our long-positions was removed. With the break above the 50-dma yesterday, there is upside bias short-term potentially back to all-time highs. The MACD turned positive, but the Williams %R is starting to hit back into overbought territory.

Given the more bullish tone short-term, we are adding to some of our underweight positions that we previously took profits in, and adjusting our fixed-income bucket to add additional yield.

Equity Portfolio

Bonds

• AGG – 100% of holding
• PFF – Initiating a 5% position of the portfolio.

Equity

Adding 0.5% of each:

• V – increase weight from 1% to 1.5%
• KHC – increase weight from 1% to 1.5%
• MCHP – increase weight from 1% to 1.5%
• ABT – increase weight from 1% to 1.5%

ETF Portfolio

Bonds

• AGG – 100% of holding
• PFF – Initiating a 5% position of the portfolio.

Equity

• XLB – initiate new position of 2% of portfolio value.

October 5, 2020

Equity / ETF Portfolio Update – Closing Short Position

As we discussed on Friday,

“We have written previously that the one thing that will trip up the markets is an “unexpected and exogenous” event.”

On Friday, we hedged both portfolios for a worse than expected outcome from the President’s COVID infection. This morning, he seems to be out of the woods and back on the path to recovery. Therefore, with the markets clearing the 50-dma, we are removing our hedges to allow our recent portfolio additions room to work.

• Selling 100% of SDS (2x Short-S&P 500) 

October 2, 2020

Equity / ETF Portfolio Update

We have written previously that the one thing that will trip up the markets is an “unexpected and exogenous” event. The majority of the time, the markets tend to price in things that are “seen,” such as the lack of fiscal support short-term or a “s***-show” of an election.

What they weren’t expecting was the President to contract COVID just 30-days before the election. There are many potential ramifications from his incapacity to run, VP Pence running for President, or nothing happening, and Trump fully recovers in a couple of weeks.

We don’t know. So, while the markets are still operating functionally today, we are taking a bit of caution and increasing our hedges by taking the following actions:

• Adding 2% of SDS (2x Short-S&P 500) to hedge our recent additions. We will increase sizing if markets begin to deteriorate. 
• Adding 1% to GDX – increasing our weighting to 3%.
• Adding 1% to IAU – increasing our weighting to 3%.

October 1, 2020

Equity Portfolio Update (We are aligning portfolio weights with our Sector ETF portfolio)

This morning we got stopped out of our holdings in VIAC. We had added a 1% position to start but “value” is still not getting any attention for the time being. Also, with COVID cases kicking up in the NBA and NFL, it does not bode well for revenues over the next several months. We will revisit the position at a later time. In the meantime, we are keeping our same communications exposure by adding slightly to T and VZ.

As we reduce that one position, we are adding to areas that have been performing stronger as of late. After increasing our technology weighting and adding GOOG earlier this week, we are now adding to our Healthcare sector.

Trades:

• Sell 100% of VIAC
• Buy 0.5% of T increasing weight to 2.5%
• Buy 0.5% of VZ – increasing weight to 2.5% 
• Buy 1% of UNH – increasing weight to 2.5%
• Buy 1% of JNJ – increasing weight to 3%

September 28, 2020

Portfolio Update

We are adding equity exposure this morning as we are getting buy signals on some of our indicators. We remain cautious with only 50% equity exposure including the trades below. We may likely add further if the major indexes can rise above their respective 20 and 50-day moving averages.

Equity Portfolio:

• +1.5% GOOG
  
• +.5% AAPL
• +.5% MSFT
• +.5% ADBE
• +.5% NFLX
• +.5% CMCSA
• +.5% VZ

ETF Portfolio:

• +2% XLK
• +2% XLY
• +1% XLV
• +1% XLC

 

September 24, 2020

Portfolio Update

We are adjusting our bond duration exposure and shifting our credit quality up the scale a bit to provide an additional level of defense as we move into a potential hotly contested election. Also, the strength in the dollar rally, should it continue, will attract more dollars towards Government bonds.

Equity & ETF Portfolio:

• Reduce AGG from 12.5% of portfolios to 6%.
• Increase MBB by 3% from 10% to 13% of portfolios.
• Add 6% of IEF to portfolios

September 23, 2020

Portfolio Update

We have been discussing the extreme oversold condition of the US Dollar index combined with an extreme net-short positioning for some weeks now. The negative impact of a dollar rally would be felt most in Emerging Markets, International, and Commodities.

Due to the dollar strength and the increasing potential that it is breaking out of its recent consolidation range, we are reducing IAU and GDX by half. Also hampering the positions over the last couple of days is options expiration. We like the positions long term so will look to add back the sales when the time is right. Keep in mind we may sell the other half before adding back.

Equity & ETF Portfolio:

• Sell 50% of GDX – Reduce to 1% of the portfolio
• Sell 50% of IAU – Reduce to 2% of the portfolio

September 18, 2020

Portfolio Update

We are continuing to rebalance and consolidate our Equity portfolio, as noted in our previous trade alert.  Today, we are selling two positions that we can concentrate on our holdings in DUK and PSA.

Equity Portfolio:

• Sell 100% of WELL
• Sell 100% of AEP

September 16, 2020

Portfolio Update

We are adding a starter position to RTX in the portfolio today. We are continuing to look to add yield as we rebalance and consolidate holdings.

• Add 1% RTX

September 14, 2020

Portfolio Update

As noted last week, we are continuing to rebalance and consolidate our Equity portfolio. As noted:

“The overall decision is to reduce the overall number of holdings, eventually, to 20-25 so we can run more concentrated positions in companies we like long-term. This will give our winners more of an impact on overall portfolio performance going forward.”

We are continuing this process today by making additional changes due to the recent sell-off and oversold condition of the market short-term.

Equity Portfolio:

• Sell 100% of PG
• Adding 1% to CLX bringing total position weight to 2%
• Adding 0.25% to AAPL bringing the position to 2% 
• Adding 0.50% to MSFT bringing the position to 2%
• Adding 1.00% to CRM bringing the position to 2%
• Adding 1.00% to ADBE bringing the position to 2%

ETF Portfolio:

• Adding 1% to CLX bringing total position weight to 2%

September 11, 2020

Portfolio Update

With our concerns growing about the speculative underpinning of the market, longer-term more extreme deviations and overbought conditions, and a still weak economic backdrop we are beginning to restructure our portfolios to be more nimble with respect to risk management, but still maintain performance.

The overall decision is to reduce the overall number of holdings, eventually, to 20-25 so we can run more concentrated positions in companies we like long-term. This will give our winners more of an impact on overall portfolio performance going forward.

We are starting this process today by beginning to sell positions that are not performing as expected.

We are selling 100% of the holdings in both portfolio models.

• Sell 100% of XOM
• Sell 100% of PFE

September 4, 2020

*** Trade Update ***

Selling 2.5% of our recent TLT purchase to take the profit on that position. Moving TLT back to target portfolio weight of 15% down from 17.5%.

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Over the last couple of weeks, we have been prepping portfolios for this decline. Now, with a pretty brutal 2-days of selling, we are going to add some trading positions for a potential bounce next week.

Given the momentum markets are very hard to kill, it is likely we will see some attempts to jump back into the previous leaders next week. So we are going to add some small amounts to our momentum trades, and counter that exposure with additional value trades.

EQUITY PORTFOLIO:

BUY

• 1% DOX – New portfolio position (Read Value Seeker Report)
• 1% KHC – New portfolio position
• Add 0.50% to AMZN
• Add 0.50% to AAPL
• Add 0.50% to MSFT
• Add 0.50% to COST
• Add 0.50% to CVS

ETF PORTFOLIO:

BUY

• 1% of Portfolio Value into XLK 

September 2, 2020

As noted in our previous trading update, we are continuing to follow our process of reducing risk as the deviation from long-term means is hitting historic extremes.

Since we have added another 10% to our Treasury Bond holdings (TLT) the need for the US Dollar hedge is no longer necessary. Also, given it is a small percent of the portfolio, it isn’t large enough to add any additional benefit at this juncture due to the increase in our bond allocation.

We are also selling our position in CSCO. The reason for the sale is simply to reduce laggards in the portfolio and raise a bit more cash to the portfolio for now. We still like the company fundamentally and will likely return it to the portfolio in the future if performance begins to improve.

Selling:

• 100% of UUP
• 100% of CSCO

August 31, 2020

As noted in this past weekend’s newsletter, we discussed the more extreme overbought and extended conditions of the market. We also discussed the potential rotation to value during any forthcoming pullback/correction in the market to reduce some of the most extreme overbought conditions we have seen throughout market history.

As such we are taking some actions in portfolios, as we have been, to continue to hedge against a potential risk-off rotation and correction.

EQUITY PORTFOLIO

• Sell NFLX from 2.5 to 2%
• Sell VZ from 1.5 to 1%
• Sell ABT from 1.5 to 1%
• Sell MSFT from 1.5 to 1%
• Sell MCHP from 1.5 to 1%
• Rebalancing, after taking profits recently, CRM and ADBE back to their model weights (1% each)
• Buy 2.5% TLT increasing stake from 15% to 17.5%

ETF PORTFOLIO

• Sell XLK from 8 to 6.5%
• Sell XLC from 5 to 4%
• Buy 2.5% TLT increasing stake from 15% to 17.5%

August 28, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

After the Fed’s announcement yesterday, we are using the opportunity to add back into our gold and gold miner positions.

Adding in both portfolios.

• IAU – Buy 1%. (Increasing from 3% to 4% of the portfolio.)
• GDX – Buy 1%. (Increasing from 1% to 2% of the portfolio.)

August 21, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As we have been discussing lately, we are making subtle changes to the portfolio to rebalance the risk profile to a more defensive allocation. With markets overbought, on a money flow sell signal (see video), and entering into a pre-election September, we are raising a bit of cash today in the most aggressively overbought positions.

Today, we made the following changes:

Equity Portfolio:

SELLS

• 100% EFV from 3.00% to 0.00%
• Sell 0.5% AAPL from 1.75% to 1.25%
• Sell .5% ABBV from 2.00% to 1.50%
• Sell .5% ABT from 2.00% to 1.50%
• Sell .5% ADBE from 1.50% to 1.00%
• Sell .5% AMZN from 2.50% to 2.00%
• Sell .5% CRM from 1.50% to 1.00%
• Sell .5% PG from 1.25% to 1.00%
• Sell .5% V from 1.50% to 1.00%
• Sell .5% VZ from 2.00% to 1.50%

BUYS

• Buy 0.5% NFLX from 2.00% to 2.50%
• Buy 1.00% PFE – New Position

ETF Portfolio

• Sell .5% XLI from 1.50% to 1.00%
• Sell .5% IYT from 1.50% to 1.00%
• Sell 100% EFV (Liquidate position)

August 18, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As discussed yesterday:

“We are starting to make subtle changes to the portfolio to rebalance the risk profile to a bit more defensive allocation. We are doing this is two steps by making ‘sells’ today, and tomorrow morning we will make the ‘buys.'” 

Today, we made the following changes:

Equity Portfolio:

• Buy 1% VIAC (New position)
• Buy 1% WELL (New position)
• Buy 1% PSA (New position – Trade corrected for proper entry price $198.99)
• Buy .5% MCHP (Increase from 1% to 1.5%)

ETF Portfolio

• Sell 1% XLI (Reduce from 2%)
• Sell 1% XLV (Reduce from 6%)
• Sell 1% IYT (Reduce from 2%)
• Buy 3% XLRE (New position)

August 17, 2020

TRADE UPDATE – EQUITY PORTFOLIOS

As discussed in this past weekend’s newsletter:

“With the markets overbought on several measures, there is a downside risk heading into the end of the month. These risks come from several fronts we will discuss momentarily. However, from a technical perspective, the downside risk is about 5.6% to the 50-dma and 9.4% to the 200-dma. (Shown above)

A 5-10% decline in any given year is not outside of the norm. However, since investors have entirely forgotten what a drop feels like, a 5-10% slide will “feel” worse than it is.”

With this in mind we are starting to make subtle changes to the portfolio to rebalance the risk profile to a bit more defensive allocation. We are doing this is two steps by making “sells” today, and tomorrow morning we will make the “buys.” 

REDUCING POSITIONS:

• UPS from 1.25% to 1.00%
• UNH from 2% to 1.50%
• MSFT from 2% to 1.50%
• PG from 1.50% to 1.25%
• WMT from 1.25% to 1.00%
• CMCSA from 2% t0 1.50%

August 14, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As noted yesterday, we are beginning the process of adding some “value” to the portfolio. We added to both portfolios a 3% weighting in International Value (EFV) with a 3.46% yield. We are in the process of adding a couple of other value related names here soon.

We continue to hedge our exposure opportunistically, so we are adding to our long-dollar position which is extremely oversold and deviated from its long-term mean. More importantly, the net short positioning in the dollar is now at levels which historically coincides with bottoms.

That net-short positioning in the dollar is also a “Buying” opportunity for Treasury bonds as well.

We are adding:

• UUP increasing 1% from 2% to 3% of portfolio.
• TLT increasing 2.5% from 12.5% to 15% of portfolio.

STOP ALERT – CSCO (Update)

CSCO is extremely oversold after yesterday’s selloff, so we are looking for a bounce to sell into. We will update when we execute.

August 13, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As noted yesterday, we are beginning the process of adding some “value” to the portfolio. We recently added AT&T, and previously bought XOM. (See latest value report here)

We are adding to both portfolios a 3% weighting in International Value (EFV) with a 3.46% yield. We are looking to add a couple more “value” holdings to the portfolio over the next couple of weeks as well.

• Buy 3% EFV

STOP ALERT – CSCO

We have been stopped out of Cisco Systems (CSCO) with the earnings report today. Earnings were good but forward guidance was disappointing. We are going to wait until tomorrow to sell the position to see if the knee-jerk selloff this morning gives way to some early buyers in the morning.  Net loss will be between 5-6% on the position.

August 12, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As we have noted over the last few weeks, both precious metals have become grossly overextended, and as such, we were expecting a pullback. In this week’s Major Market Buy Sell Review we stated the following:

• Gold is extremely overbought and starting to push 4-standard deviations above the 200-dma. 
• We suggest taking some profits for now and look for a pullback to increase our sizing. 

We had previously taken profits, and hedged the position with a long $USD trade, but the pullback was so sharp yesterday it gave us an opportunistic entry point to add back into our Gold Miners (GDX) that we had bought and sold previously.

We are also making room in the portfolio to add some additional “deep value” positions to go along with our recent purchase of AT&T (T).

EQUITY PORTFOLIO

• Buy 1% GDX
• Sell 100% of BLL
• Sell 0.5% of CLX (Holding 1%)

ETF PORTFOLIO

• Buy 1% GDX
• Sell 0.5% of CLX (Holding 1%)

August 6, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As noted in our “Value Seeker Report” this morning, we added a 2% weighting of AT&T (T) to both portfolios this morning. We continue to look at building a small portion of the portfolio based on “value,” plus the 7% dividend yield gives us return while waiting for appreciation.

• Buy 2% T

August 3rd, 2020

TRADE UPDATE – EQUITY PORTFOLIOS

** Trade Correction: On 7/28 we sold EFA but incorrectly listed the sale price as $83.701 vs $63.701. That was corrected today.

After adding to our technology holdings last Thursday, Apple (AAPL) sprinted higher after earnings and is well into 3-standard deviation extremes from its moving average. We are taking some profits here.

• SELLING 0.5% Apple taking it from 2% to 1.5% in portfolio models.

We have been looking for a candidate to add to our Technology holdings in the semi-conductor space. While there are other companies we like better, many of theme (like Nvidia as 20x price-to-sales) are trading at extreme valuations.

We are added 1% of Microchip Technology (MCHP) to our portfolios.

It is currently trading at a much more reasonable valuation (although still expensive), EPS have been rising without the benefit of share buybacks, and carries a 1.45% yield currently. We are carrying a close stop at $100. If our thesis plays out we will add to the position on a breakout above current resistance.

• Buy 1% – MCHP

July 30, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

As discussed in Tuesday’s Sector Buy/Sell Review – we there were several sectors like Transportation, Materials, and Industrials which were getting more extreme in terms of their overbought conditions. Technology, conversely, has been in a consolidation over the last couple of weeks working off some that extreme short-term.

As we also discussed, the U.S. Dollar is deeply oversold, which is why we are accumulating a position in it now, which will also weigh on sectors with large international exposures when it rebounds. As such we have rebalanced some weightings in portfolios but have NOT increased overall exposures.

In the EQUITY Model.

After taking profits in our tech positions at the peak a couple of weeks ago, we added back to those expsoures.

• ADBE 1 to 1.50
• CRM 1 to 1.50
• AAPL  1.5 to 2
• NFLX  1.5 to 2
• AMZN  2 to 2.5
• MSFT  1.5 to 2

We sold 100% of the following to reduce our dollar exposure risk:

• RTX – Sold All
• NSC – Sold All

In the ETF Model we made the following changes.

• Add 2% to XLK
• Sell 1% XLI
• Sell 1% IYT

July 28, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

As discussed in Monday’s Major Market Buy/Sell Review – the U.S. Dollar is now 3-standard deviations oversold. Also, the over riding sentiment from the mainstream media is massively negative. (This is always a good contrarian indicator).

Given the deep oversold condition of the dollar, we are expecting a counter-trend rally over the course of the next month which will coincide with a correction in EXTREMELY extended Gold, Silver, Commodity, International and Emerging Market positions.

We have taken the following actions in our portfolios today:

EQUITY PORTFOLIO

• Sell 100% EFA 
• Sell 1% IAU
• Buy 1% UUP (Bringing weighting up to 2% – we are scaling up the position.)

ETF PORTFOLIO

• Sell 100% EFA
• Sell 100% EFG
• Sell 1% IAU
• Buy 1% UUP (Bringing weighting up to 2% – we are scaling up the position.)

July 24, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

With Gold and Silver getting all the attention as of late, it is important to know when this happens, it is generally a sign of excess and a good time to take profits and hedge some risk.

For precious metals, commodities, and emerging and international markets, the key to watch is the dollar. The fall in the dollar over the last couple of months has sent those “dollar sensitive” assets soaring. With the dollar now deeply oversold on an intermediate term basis, a reversion is quite likely. Timing is all the key issue.

We are starting to build a long dollar position in portfolios to hedge our risk in Gold and International Markets. We are going to start small and add to the position as it bottoms and turns up.

Buy 1% of UUP.

July 21, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

Yesterday, the S&P 500 broke out of its 45-day long consolidation, this is “bullish” especially when combined with the recent “Golden Cross” of the 50- and 200-dma.

We have also recently discussed the weakening of the US Dollar and the potential benefit to commodities and international stocks. As such we have been slowly increasing exposure to these areas.  (I am not a huge fan of international exposure for a multitude of reasons discussed previously, so these will likely not be long-lived positions.)

Today, we are adjusting our holdings a bit to both more closely align us with our benchmark index weightings, and to take further advantage of the weakening of the US Dollar.

Equity Model:

Buying:

• 1% ADBE 
• 1% CRM
• 2% EFA – adding to existing position.
• 0.5% BLL – adding to existing position.

ETF Model:

Buying:

• 3% EFG – international growth to compliment current value tilt.
• 1% XLV – adding to existing position.
• 1% XLC – adding to existing position.
• 1% XLI – adding to existing position.

July 16, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

After failing to break above the June highs again yesterday, we are closing out of our SPY “rental trade” for the time being. We we look to re-add the position on either a further pullback towards the 50-dma that works off some of the short-term overbought condition, or a breakout above the June highs and the recent consolidation range.

• Selling 100% of SPY

July 14, 2020

TRADE UPDATE – EQUITY AND ETF PORTFOLIOS

We are continuing our “risk” rebalancing in portfolios again this week after selling extremely overbought positions in Technology last week. We are selling our “Rental Trade” in DIA in both models to free up cash to add exposure to defensive rotation areas of the portfolio.

Equity Model

Selling:

• CLX from 2% to 1.5%
• UPS from 1.5% to 1.25%
• WMT from 1.5% to 1.2%

Adding To:

• BLL from 1% to 2%
• XOM from 2% to 2.5%
• CVX from 2% to 2.5%
• CMCSA from 1% to 2%

Sector Model

Selling

• CLX from 2% to 1.5%

 Adding:

• XLI (New holding) to 2%
• XOM from 2% to 2.5%
• CVX from 2% to 2.5%

July 10, 2020

TRADE UPDATE – EQUITY PORTFOLIOS

We are continuing to reduce risk slightly in portfolios as we head into August and September (typically weak performance months) by trimming out profits in stocks that are grossly extended and deviated from intermediate-term moving averages.

Today we are trimming slightly two more positions.

• Reducing COST from 1.5% to 1%, and
• Reduced PG from 2% to 1.5%.

July 9, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As we continue to watch the unfolding of the economic environment, we have grown ever more risk adverse to Real Estate due to potential impact of revenue shortfalls. While we liked the yield, performance has been a drag to the portfolios.

In both portfolios we are selling Real Estate:

• SELL 100% of MPW
• SELL 100% of WELL
• SELL 100% of XLRE

We are adding 3% of EFA to both portfolios as we are seeing continued weakness in the US Dollar. With European countries handling the virus better than the U.S. combined with a potentially weaker US Dollar, we are hedging portfolios with a small weighting of International exposure.

• BUY 3% EFA

July 8, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

As discussed in today’s Portfolio Position Review we took action in both of our models to take profits in our positions which have been extremely overbought and deviated from their 200-dma. Such extensions tend not to last long, and we will look to add back to our holdings following a correction or consolidation that reduces risk to a degree.

In the equity models we reduced our holdings in the following:

• AAPL from 2% to 1.5%
• AMZN from 3% to 2%
• NFLX from 2% to 1.5%
• MSFT from 2% to 1.5%

In the Sector Models we reduced the following:

• XLC from 5% to 4%
• XLK from 7% to 6%

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July 6, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

• Added 2.5% SPY in both portfolios to bring the total weight up to 5%.

In the EQUITY Portfolio – we made changes to rebalance the compensation of the portfolio but did not change overall equity exposure by much. Hedges remain in place.

• Reduced DUK and AEP by 1% each to make room in the portfolio to rebalance equity exposure.
• Added 1% to CSCO to bring up to weight in portfolio.
• Added 1% to BLL as we are underweight industrials in the portfolio.
• Sold 100% of INTC which continues to underperform and broke our stop level.

July 2, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

• Bought 2.5% SPY in both portfolios to replace the sale of 2.5% of DIA.
• Sell all (2%) of XLE in the Sector Portfolio
• Sell (rebalance) UPS to take profits and bring it back to the 1.5% model weighting.

 

Wishing you a happy and festive holiday weekend!!

June 30, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

We reduced our equity exposure slightly this afternoon as follows:

• Sell 2.5% DIA – leaves 2.5% remaining
• Sell CLX to bring it back to the 2% model weighting.

 

June 23, 2020

TRADE UPDATE – EQUITY & ETF PORTFOLIOS

After a brief rally in the US Dollar, we are selling 100% of UUP to reduce that hedge in the portfolio after making adjustments to our bond portfolio. (We are just rebalancing the hedges in the portfolios.)

A couple of weeks ago, we took profits in both XOM and CVX near their recent highs. Since then both have pulled back to support and gotten short-term oversold. As such, we are taking the opportunity to slighting increase those holdings in portfolios taking them back to 2% of the portfolio each.

• Increasing XOM to 2% of Portfolio
• Increasing CVX to 2% of Portfolio.

June 16, 2020

With the update to the corporate bond buying program, Trump’s touting of an “infrastructure bill,” and better than expected economic data on the retail sales front, the market was able to recover from yesterday mornings selloff and confirm support at the 200-dma.

With push by the Fed to support the corporate bond market we are swapping IEF for AGG to pick up some corporate bond exposure and improve our overall portfolio yield. This is in conjunction with our swap yesterday of SHY for MBB.

Equity & ETF Portfolio

• Sell 100% of IEF
• Buy 12.5% of portfolio in AGG
• Buy 5% DIA

June 15, 2020

This morning we swapped SHY for MBB to pick some additional yield for the portfolio. There is little “upside” currently with rates so low, but with the Fed buying mortgage backed securities, we can add some “yield” to the portfolio with some potential upside and defensive positioning against a market decline.

• Selling 100% of SHY
• Buying 10% of MBB

June 12, 2020

After the market dropped over 5% yesterday and successfully tested the 200 day moving average, we made slight additions to the portfolios. The positions are small and we remain vigilant to potentially more downside as the S&P 500 sits on top of its 200 day moving average.

Equity Portfolio Buys

• CMCSA – Initiate 1% position
  
• CSCO – Initiate 1% position

ETF Portfolio Buys

• XLE – Add 1% to bring total to 2%
  
• XLP – Add 1% to bring total to 5.5%

We continue to hold our TLT and UUP positions for now as a hedge.

June 9, 2020

After adding some defensive rotation exposure yesterday, we took profits in a couple of positions that are extremely overbought currently.

Equity Portfolio Sells

• PHG – Sell 100% of position 
• XOM – Sell down to 1%
• CVX – Sell down to 1%

ETF Portfolio Sells

• PHG – Sell 100% of position
• XOM – Sell down to 1%
• CVX – Sell down to 1%
• XLE -Sell down to 1%

We are continuing to hold our TLT positions for now as a hedge.

June 8, 2020

The rally in the most fundamentally weak sectors of the market such as small, mid, materials, and industrials on the hope of a “V-shaped” recovery has gotten well ahead of itself and the potential for recovery. As discussed in today’s Major Market Review, those sectors are now 3-standard deviations overbought will Treasury bonds are 3-standard deviations oversold.

Our expectation is the momentum chase will fade pretty quickly as the realization of a slower economic recovery becomes more prevalent. This should lead to a defensive rotation in fairly short order where money starts to look for safety over risk.

As such we made the following trades today in both the Equity and ETF Models

Equity Model:

Added To

• VZ – 1.5% to 2%
• DUK – 2% to 3%
• PG – 1.5% to 2%
• INTC – 1% to 2%
• NFLX – 1% to 2%
• MSFT – 1% to 2%
• AEP – 2% to 3%
• ABT – 1.5% to 2%
• ABBV – 1.5% to 2%
• JNJ – 1.5% to 2%
• AMZN – 1.5% to 3%
• AAPL – 1% to 2%

ETF Model:

Added To:

• XLK – 6% to 7%
• XLV – 5% to 7%
• XLRE – 4% to 7%
• XLU – 3% to 7%

 

June 5, 2020

Selling 100% of GDX to close out for gain. Holding IAU for now.

June 4, 2020

Today, we sold Community Healthcare REIT (CHCT) in our portfolio in its entirely.

While we like the position very much, and there is nothing wrong the holding, we made the decision to sell based on the lack of liquidity for the shares in the market.  We had an extremely difficult time liquidating the large number of shares that we owned (roughly 1/2 of the daily volume.).

We will be replacing the position with another REIT very shortly as soon as we identify the position.

*** UPDATE ***

We swapped CHCT with WELL in the portfolio at a 1.5% position. (1/2 target weight)

June 3, 2020

On Monday, we removed our “rental trade” on the S&P 500 for a small profit due to the rising protests across the country which could impact the economic reopening. The market didn’t even notice and has continued to push higher. With the market up 4-days consecutively, we will wait for a small correction back to towards the 200-dma to re-add that broad market position to the portfolio.

However, we continue to add equity exposure in areas that we like, with a focus on dividend yield, and continue to hedge that equity risk with offsetting bond and dollar exposures. (Bonds and the dollar are extremely oversold, so a rotation is likely near term which will coincide with a short-term market correction or consolidation)

In the EQUITY PORTFOLIO we are adding:

• CVS – 1.5%  – With people returning to activity, sales should pick up on the retail side.
• UPS – 1.5% – Economic re-opening should see a pick up in shipping rates.
• NSC – 1.5%  – Same with transportation.

In the ETF PORTFOLIO we added:

• XLU – 1% addition to current holdings.
• IYT – 3% – Transportation sector to capture an increase in shipping with reopening.

In BOTH PORTFOLIOS we hedged the increases in equity risk with an addition of 2.5% to TLT which is currently deeply oversold relative to equities.

June 1, 2020

Last week, we added a 5% “rental trade” in SPY to the portfolio for a break above the 200-dma.

While the backdrop to the market is still bullish, as noted this weekend, we are VERY overbought short-term and extended on many measures.

With the riots breaking out all across the country, this is a new dynamic to the markets that potentially leads to some short-term selling. We are going to step aside on the rental trade at a small gain until we see how things shake out.

We will re-add the position to the portfolio when the risk/reward becomes a bit more clear.

May 28, 2020

If you didn’t read our trade update yesterday, we added 5% to SPY.  For more commentary on why, read Michael’s note below:

Rebalancing Equity Portfolio

In the equity portfolio we have rebalanced our exposures to align with our Relative Value Sector Report:

Taking profits in:

• AAPL – 1.5% to 1% portfolio weight
• MSFT – 1.5% to 1%
• CHCT – 1.5% to 1%
• MPW – 1.5% to 1%
• RTX – 1.5% to 1.25%
• ABBV – 1.5% to 1.25%

Added exposure to:

• UNH – 1.5% to 2% portfolio weight
• DUK – 1.5% to 2%
• AEP – 1.5% to 2%
• NFLX – 1% (Trade only – see Jeffrey Marcus commentary)

May 27, 2020

TRADE UPDATE: EQUITY & ETF MODELS

Over the last couple of weeks we have talked about the consolidation of the markets between the 50% retracement levels and the 200-dma. This consolidation can either be bullish or bearish depending on which way it breaks out of that consolidation.

Today, on a second attempt, it appears the market will break out above the 200-dma and hold this time. With that breakout we are adding a 5% weighting to both EQUITY and ETF Models in SPY.

If the breakout holds the entirety of the week, or we have a pullback that holds the 200-dma, we will then add a second tranche of 5% to the portfolio.

Stop-loss is currently set at 2965

May 22, 2020

TRADE UPDATE: EQUITY & ETF MODELS

My wife and I went to the store today to pick up some cleaning supplies for the house. There were NONE in stock at 8-different locations we went to. After selling a portion of our CLX holdings at $205.69, we are adding 1% back to portfolios at $198.22 bringing our holding to 2%.

However, we are keeping our equity weighting the same by making some offsetting sells.

EQUITY MODEL

• Buy 1% CLX
• Sell 100% of CMCSA – stock is overbought, underperforming, and at a gain. We are going to take the profits and re-evaluate our communications holdings.

ETF MODEL

• Buy 1% CLX
• Sell 1% XLC – reduces our weighting back to 5% of the portfolio, selling recent addition for a gain.

May 21, 2020

TRADE UPDATE: EQUITY & ETF MODELS

In keeping with our process, and as we have detailed weekly in our newsletter, as we continue to add equity “risk” to portfolios, we also “hedge” that risk to protect our capital. In keeping with that process, we have added to our bond portfolio along with rebalancing duration a bit.

IN BOTH MODELS

• SELL SHY – we reduced short-duration bond exposures from 11% to 8%.
• BUY TLT – increased our 20-year duration from 8% to 10%
• BUY IEF – increased the 7-10 year duration from 10% to 12.5%

May 20, 2020

TRADE UPDATE: EQUITY & ETF MODELS

With the markets successful retest of the consolidation breakout above the 61.8% retracement level today, we are adding additional exposure to our portfolio models at the close today.

EQUITY MODEL

• INTC – 1.5% – Intel is a maker of semiconductors and broke above its consolidation channel today.
• PHG – 1.5% – Phillips makes a variety of health care related products, but we are particularly interested in the UV (ultra-violet) lighting for disinfection purposes.

ETF MODEL

• PHG – 1.5%

May 18, 2020

TRADE UPDATE: EQUITY & ETF MODELS

As we have been doing over the last couple of months, we continue to incrementally add exposure to portfolios as previous support levels hold, and resistance levels are taken out. Today, the markets broke out of the previous trading range we addressed over the weekend, which led us to increase exposure across both models.

Equity Model Additions: Current weighting next to symbol:

• UNH – 1.5%
• CMCSA – 1.5%
• AEP – 1.5%
• VZ – 1.5%
• AEP – 1.5%
• DUK – 1.5%
• IAU – brought up to 4% of the portfolio
• XOM – 1.5%
• CVX – 1.5%

ETF Model Additions: Current weighting show next to symbol:

• XLK  – 6%
• IAU – 4%
• XLV – 5%
• XLRE – 3%
• XLC – 6%
• XLU – 3%
• XOM – added 1% to round out position in XLE
• CVX – same as XOM

May 15, 2020

TRADE UPDATE: EQUITY MODEL

We added to our current holding of CHCT (Community HealthCare REIT) after it held support and rebounded late yesterday. As we have noted in our recent commentary, REITs have been lagging the market, so we have added to our REIT exposure this week to bring our weighting up for a rotational market play.

Earlier this week, we added MPW (Medical Properties REIT).

We also added 1.5% of Visa (V) to our equity holdings this morning as well.

Despite a slate of terrible economic news, the liquidity being pushed into the market is keeping stocks elevated so we are trading accordingly. We are currently on a seasonal SELL signal, so we continue to hedge our equity increases with offsetting purchases in fixed income. We added to IEF earlier this week bringing our overall weighting to 10%.

May 13, 2020

TRADE UPDATE: EQUITY & ETF MODELS

UPDATE – ERROR CORRECTION:  We added 11-shares to IEF after the close today for a transaction we missed in November, 2019 in the ETF Model. 

In both the equity and sector models we:

• Added 2% of IEF to bring the total holding to 10%
• Rebalanced and took some profits on CLX by reducing it down from 1.5% to 1% of the portfolio.

We still like CLX and believe their sales/revenue will be strong as the need for their products will improve upon the reopening of the economy. The stock was on a tear and we wanted to take some profits and hopefully add back to CLX at lower prices.

Trades will be posted once we get settlement details from the custodian.

 

May 11, 2020

TRADE UPDATE: EQUITY & ETF MODELS

(Trade Error – I entered the wrong symbol of CVS on the initial trade. I have corrected that in the portfolio.)

Equity Model:

We added

• 1/2 position (1.5%) of WalMart (WMT) to the portfolio on its recent pullback to support. 
• Brought Costco (COST) up to 1/2 position by adding .75% to our previous holding.

ETF Model

We added

• 1% to Staples (XLP) bringing that sector up to 4.5% of the portfolio.
• 1% to Communication (XLC) bringing exposure up to 5% of the portfolio.
• Technology (XLK) remains at 5% of the portfolio 
• Healthcare (XLV) is slightly underweight at 4%. (Will likely be our next addition)

Real estate is lagging in performance and given the “yield chase” preference in the market, we will likely see some “catch up” in the sector over the summer. (For more on this reasoning please review our report on Relative Value Sector)

May 8, 2020

TRADE UPDATE: EQUITY & ETF MODELS

We are continuing to use the rally in the market to concentrate our holdings and rebalance the models the next leg of the market.

• We SOLD 100% of Conagra Foods (CAG) in both portfolios for a small gain. 
• In the Equity Model we added 1.5% MPW (Medical REIT) to our Real Estate holdings of CHCT. This brings our total exposure to 2.25% currently.
• In the ETF Model we added a 2% weight to XLRE (SPDR Real Estate).

Real estate is lagging in performance and given the “yield chase” preference in the market, we will likely see some “catch up” in the sector over the summer. (For more on this reasoning please review our report on Relative Value Sector)

May 7, 2020

TRADE UPDATE: EQUITY & ETF MODELS

After a 36% gain in GDX we are rebalancing the position back to our current model weight of 1.5%. Gold miners are extremely overbought and need to correct a bit before we can add back to the holding. We are looking to increase our weighting to 3% of the portfolio on the next opportunity.

May 5, 2020

TRADE UPDATE: EQUITY & ETF MODELS

With today’s rally, we are selling 100% of our “rental trade” in the S&P 500 (SPY) for a small gain.

While there is certainly an ability for markets to rally tomorrow, there is so much economic data coming into the end of the week on the employment front, we are just going to step aside and evaluate the data and reconsider our equity exposure at that time.

Given that we are heading into the seasonally week period of the year, the risk/reward dynamics aren’t great so we will take small wins where we can get them.

May 4, 2020

TRADE UPDATE: EQUITY MODEL

Our SPY trade is flirting with its stop loss level, so we are watching that closely.

However, we are reducing our equity exposure in the Equity Portfolio by 1.5% today by selling the remaining holdings of PEP and CVS for gains.

Heading into summer we are wanting to lower our risk profile in both portfolios to 30% equities, or less by adding hedges, as risk remains elevated.

Also, while we like both companies, our goal is to consolidate, and concentrate the number of holdings that we have in portfolios to 20-25 with larger weightings as we come out of the current malaise. This is just the first steps in that process. This does not preclude us from buying these shares back in the future.

May 1, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

We are taking profits in Merck (MRK) today selling 100% of the position.

We are sitting on our STOP LOSS for our SPY trade, but need to close below, and remain below on Monday to confirm the break if it occurs. We will update accordingly.

Part of the process this summer is to reduce the total number of equity holdings in the portfolio to 20-25 and run a more concentrated equity positioning coming out of this current consolidation/bottoming/bear market process. We are evaluating each position in the portfolio for long-term value, positioning, and relative performance.

Watch for changes.

April 30, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

Over the last few weeks, we have been steadily increasing equity exposure, but balancing that exposure with hedges against risk. This one step forward and pause method allows us to continue managing portfolio risk in a market that will likely correct in the month ahead. (Nothing goes straight up…even with QE)

Today, we added to existing holdings which have more “defensive” properties to them. This is setting us up to eventually start adding a hedge to our portfolio when we see a break of the bullish trendline from the recent lows.

Equity model: Increased exposure from 0.75% to 1.5% of portfolio:  AAPL and MSFT

ETF model: We added 1% each to XLV now 3%, XLU now 2% and XLP now 3.5%

April 28, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

To help hedge our increased exposure to equities we added 2.5% of TLT to both models. This increases our total holdings of TLT to 7.5%.

Trade details will be released when the allocations settle at the custodian.

April 27, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

In this past weekend’s newsletter we discussed the market being range bound and that a breakout would likely lead the market higher. To wit:

“If the markets can rally more on Monday and break above the downtrend, the 61.8% retracement level becomes a viable target. Above that resides the 200-day moving average. Both levels are going to provide formidable resistance to a move higher.”

With the breakout on Monday, we added a “RENTAL TRADE” for that move using the S&P 500 ETF (SPY) as our proxy position. We put that on at the end of the day.

• Position size is 5% of our portfolio. 
• Stop-loss is the 50-dma at $278
• Target for trade is $293.60 to $297.60

This is a trade only, and we fully expect to get stopped out. (Risk/Reward is not optimal.)

April 24, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

As has been commonplace for us over the last couple of months, as we continue to add some equity exposure in areas that we like, or think are undervalued, we are hedging that risk accordingly.

Previously, we discussed reducing our bond portfolio to align with our reduced equity exposure, however, over the last couple of weeks, we have been adding positions in CLX, MRK, CAG, XLE, XOM, and CVX, along with increasing exposures in our Staples (XLP), Healthcare (XLV) and Communications (XLV).

Today, we are increasing our bond exposure a “smidge” to compensate for the risk of increased equity exposure by adding a 5% weight of TLT (iShares 20-Year Treasury Bond) to our portfolio. 

This will increase our bond “duration” a bit so that if the market declines, the pickup in yield will hedge our equity risk to some degree.

April 23, 2020

TRADE UPDATE: EQUITY MODEL and SECTOR MODELS

Over the last few days, as the oil price rout has ensued, energy stocks have been providing a very encouraging relative outperformance in the sector. We have discussed for quite some time that we have been looking for a reasonable risk/reward setup to begin building positions into our portfolios.

Today we are starting that building process. We have added 1% into our models as follows:

Equity Model:

• Exxon Mobil – XOM
• Chevron – CVX

ETF Model

• SPDR Select Sector Energy ETF (XLE)

On our ALERTS page (In the PORTFOLIO TAB) we are adding our stops AND our breakout buy levels to add to our holdings.

• XOM – Add @ $46.50  /  Stop set @ $38
• CVX – Add @ $91 / Stop set @ $78
• XLE – Add @ 37 / Stop set @ $30

***We just rolled out the ability to set email price alerts on your RIA Pro portfolio holdings. In the Portfolio tab go to Alerts. From this screen you can set alerts based on the stock price or daily percentage change. When your alerts are triggered you will receive an email.

April 14, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

In both models we bought 3% of UUP, and added  3% IEF, .50% of CAG, and .50% of CLX

We sold all of STIP 5% in both models

In the equity model we added: .75% PG

In the sector model we added 1% XLP

We sold STIP and took profits as inflation expectations have risen from near zero to 1.25%. Our concern is that another bout of stock weakness and economic concerns would revive deflationary concerns. We may likely buy STIP or TIP in the future as our inflationary concerns rise.

We added dollar exposure (UUP) to both portfolios as we recognize that a shortage of dollars globally should promote a stronger dollar.

Despite the strong rally we remain concerned this is a bear market rally and are buying conservative stocks/sectors that we think have value and whose earnings should hold up well in a recession.

We will have more details on trades shortly when they become available from our custodian.

April 7, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

In both models we were stopped out of SH and sold all of the shares.

In the equity model we bought: 1% of the following: IAU, GDX, DUK, RTX

In the sector model we bought 1% of the following IAU, GDX, XLU

Despite the strong rally we remain concerned this is a bear market rally. We will have more details on trades shortly when they become available from our custodian.

April 6, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

In the equity model we sold UTX (United Technologies) and Bought RTX (Ratheon Technologies) to account for the merger over the weekend.  This is simply a bookmark entry to account for the merger. We did not add/reduce any exposure.

We are being stopped out of our short-hedge potentially in the morning. If the market opens down in the morning, we will maintain the hedge. Otherwise we will close it our tomorrow. Today’s action smacks of a short-covering “bear rally” so we are looking for confirmation of a breakout above last weeks consolidation highs.

April 2, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

We added a second round of 2.5% of SH (S&P 500 Short) into both portfolios.

Stop is 2600 on the S&P 500 Index.

April 1, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

The market failed at previous resistance confirmed by today’s sell-off. We are going to start building a hedge into our portfolios which will eventually get to 10% of the portfolio.

We started today by adding 2.5% of SH (S&P 500 Short) into both portfolios.

If the market opens up tomorrow, we will add another 2.5%, etc.

Stop is 2600 on the S&P 500 Index.

March 31, 2020

TRADE UPDATE:

EQUITY MODEL and SECTOR MODEL

Equity Model- Selling Visa (V) and buying 1% of ConAgra (CAG)

Sector Model – Adding 1% of CAG

We are concerned that delinquencies and defaults will surge at Visa and instead prefer to keep leaning towards the safety and consistency of needed staples.

 

March 30, 2020

TRADE UPDATE: EQUITY MODEL

We are rebalancing holdings in the equity model this morning to continue shifting our risk profile to a move conservative stance for the next month as we continue to progress through the onslaught of poor economic data coming our way.

Selling 100% of KHC and HCA.

We still like these positions longer-term but had to sacrifice them to add to our stronger positions for now. We will buy them back at a later date most likely.

Added to: JNJ, ABT, and ABBV

We doubled our holdings in these companies which are on the forefront of a vaccine, testing and distribution of products for the COVID-19 pandemic. Plus we like the healthcare space going forward on an earnings basis.

March 27, 2020

TRADE UPDATE: BOTH MODELS

Selling 100% of QQQ

We placed a trade on QQQ for a “bear market rally,” which has potentially reached its logical conclusion. Plus since bad things typically happen over the weekend, we are going to take the “win” for now and lock in some gains.

On Monday, we will see where the market opens and then evaluate our next set of trades.

Importantly – coming in our weekend newsletter:

1. The long term bull pattern that existed since the 3/9/09 is over.  That means the pattern of investors confidently buying every decline is over.
2. The market became historically oversold on 3/23 using many metrics and that oversold condition coincided with the long term support area of S&P500 2110-2180.
3. Short covering and rebalancing has a lot to do with the size and speed of the 3 day rally.  Also, we know that the lack of ETF liquidity played a role. 
4. Technically the market (S&P500) can still go up 6.9% higher from here to hit the 50% retracement level (3386 – 2237 = 1149/2 = 574 + 2237 = 2811….2811/2630 = +6.9%.  I would not bet on it.
5. The S&P500 will unlikely hit a new high this year, and potentially in 2021 as well.

March 26, 2020

**We fixed our 60/40 Index Benchmark in the RIA Pro Portfolio graphs.  The prior benchmark was not static. As the stock and bond markets went up and down, the allocations to equities and bonds were changing and straying from a 60/40 stock/bond allocation. This became obvious during the sharp sell off of the last few weeks. The current benchmark will constantly rebalance to a 60/40 allocation.

TRADE UPDATE: BOTH MODELS

We are buying 1% of CLX (Clorox) into both the equity and sector model. While CLX is not a sector, it is a special situation which has no ETF equivalent. Going forward we will be flexible in the sector model with individual names if needed to meet our strategic goals.

As noted previously over the next several months, as we go through this market, we will be blending the ETF and Equity Models together.

TRADE UPDATE: EQUITY MODEL

We are buying 1% MRK (Merck) in the equity model today. We are positioning the portfolio to maintain a consistent equity weighting as we will be selling highly leveraged positions during this rally.

March 24, 2020

Trade Update: ETF MODELS

As noted below, we were waiting for the market to pull back a bit before completing the swap from XLRE and XLU to XLK and XLC.  The purpose primarily is to reduce the leverage in sectors most susceptible to default risk. There are several REITs which are going to liquidate over the next couple of months which will impact the whole sector.

Increasing weights in portfolios:

• XLK to 4% of the portfolio
• XLC to 4% of the portfolio.

Trade Update: ETF MODELS

This morning we sold XLRE and XLU. We plan on replacing those positions with additions to XLC and XLK.

We are having problems with the custodian so we will update the portfolios as soon as trades settle.

 

March 24, 2020

Trade Update: ETF MODELS

This morning we sold XLRE and XLU. We plan on replacing those positions with additions to XLC and XLK.

We are having problems with the custodian so we will update the portfolios as soon as trades settle.

March 23, 2020

Trade Update: ETF & EQUITY MODELS

This morning the Federal Reserve went “ALL IN” with unlimited QE.  As we addressed in this weekend’s newsletter, the markets are extremely oversold and a “bear market” rally is highly likely.

We want to focus our attention of sectors which are lesser affected by the “viral impact” to the economy, and the reality the Fed has just unleashed “Pandora’s Box” with their massive interventions.

As such we are taking on a very small exposure in portfolios adding:

• 2.5% of QQQ
• 1% of IAU (inflation hedge) (Read market buy/sell report today for parameters on Gold)

Stops are set very tight, but we will add to the holdings if a rally begins to mature over the next few days. Such a rally could get an additional boost from Congress if they can get their stimulus bill passed.

Will update the portfolios as soon as trades settle.

March 19, 2020

Trade Update: ETF & EQUITY MODELS

We have settled the sells of DBLTX and PTIAX in the models this morning.

We bought STIP this morning. More details on why we executed this trade are below.

We also closed out our short-hedge (SH) for now as the markets are grossly oversold.

Also, we are considering putting on a small position in SPY if this consolidation over the last couple of days holds through Friday. What we HAVE NOT had, as of yet, is TWO POSITIVE RETURN days in a row. However, the recent market action has been more constructive in holding recent lows. We may look to add a trading position and build into it if we get follow through.

As the chart below shows, the TIP market now implies that inflation will average +0.16% for the next five years. If inflation is higher on average than 0.16%, STIP should outperform similar maturity Treasury bonds and vice versa if lower. We are in the midst of a short term deflationary bust, but given the massive fiscal and monetary stimulus we think a good majority of the next 5 years will see normal to much higher than normal inflation.

March 18, 2020

Trade Update:

“Too Damn Cheap…” 

With the markets in full “margin call” liquidation mode, everything is being sold from bonds, to stocks, to gold, to equities. This is like an Oriental Rug Company – “Everything Must Go.” 

With that said there is real value coming into the markets and over the next 30-45 days we are going to start picking through the rubble nibbling on things that are just “too damn cheap.”

We started that process today with a 1/2% position in GDX in the Equity and ETF Portfolios.

• Buy 0.50% GDX

NOTE: The ETF PORTFOLIO is going to migrated into the EQUITY MODEL over the next few months. With valuations finally getting cheap, bonds no longer a hedge for portfolios, and dividends escalating sharply, we will want to more selective buying individual companies, increasing holding sizes, and maximizing returns going forward. This makes ETF’s a less “optimal” strategy for portfolios going forward. 

Trade Update:

We sold our holdings in DBLTX and PTIAX in the sector and equity funds. With our equity exposure so low at this point, we do not need as big a bond position to hedge our equity positions. Also, with rates so low they provide little coupon interest but significant risk if interest rates rise.

Trades will be posted tomorrow as the securities are mutual funds and will not occur until later tonight.

March 16, 2020

IMPORTANT UPDATE

We have been holding on to some equity exposures in anticipation of a “Fed Bazooka.” Given the markets pre-disposition to rally on liquidity pushes, we didn’t want to get caught on the wrong side of the “trade.”

However, one concern we have had for some time is what if QE doesn’t work? We MAY have that answer.

More importantly, QE doesn’t solve the problem of a global pandemic recession and market shutdown.

As such we have NO IDEA where the bottom is, and we simply do not want to take any additional risk until there is some certainty and clarity in terms of risk and reward. MAYBE IT IS TODAY? We just don’t know.

Most importantly, this morning we broke the long-term bullish trend from the 2009 lows and as such:

• We are closing out our core and
• Selling 1/2 of our tactical equities.
• We are maintaining our bond and short exposures. 
• We have closed our the Dynamic model entirely at this point and will rebuild that portfolio when the “dust” settles.

Overall, we have been taking profits and reducing risk for quite some time and have a performance gap over the S&P 500. We can allow the S&P to play catch up with us and rebuild our portfolios when there is a clearer view of risk and reward.

Right now, we have no clarity.

I will post the trades up later today once they all settle and we know what our fills are.

Thank you.

March 11, 2020

ALL MODELS

As noted yesterday:

“We are going to change our “CORE” allocations positions and weightings to give us better flexibility with the two portfolios in the future. We are going to increase IVV to 10% of the portfolio and sell both RSP and VYM. This will give us more room to add selective equity and sector exposure while giving us an exact hedge with a SHORT S&P 500 Index.”

This morning we added IVV to portfolios to bring that “CORE” weighting up to a full position.

We have stated for some time that the Fed was likely to extend their Repo facilities and increase the funding. They did that today and the market did not respond.

There is simply too much “bad news” swirling in the headlines and our last support was taken out today. We used the brief rally at the end of the day to liquidate RSP and VYM and reduce our overall core position.

The markets are DEEPLY oversold, as stated in today’s commentary, so, while it may not seem likely at the moment, there is a potential for a fairly sharp one to two day rally. We will short against the core position at that point taking it to market neutral.

We did short against the core holdings in the Dynamic model to limit downside risk as we are at our stop limits for the whole portfolio currently.

March 10, 2020

EQUITY & ETF Models

We are going to change our “CORE” allocations positions and weightings to give us better flexibility with the two portfolios in the future. We are going to increase IVV to 10% of the portfolio and sell both RSP and VYM. This will give us more room to add selective equity and sector exposure while giving us an exact hedge with a SHORT S&P 500 Index.

This will be done opportunistically with the sells occurring on any sustained counter-trend bounce to the 200-dma.

DYNAMIC MODEL

I placed orders for ADBE and CRM below the market opens today and got filled on the selloff earlier today.

• Bought 1/2 positions in ADBE and CRM.

March 9, 2020

EQUITY & ETF Models

The impact of the decision by Saudi Arabia to boost production and lower prices to preferred partners, along with Russia not participating in cuts, has created unexpected risk for markets that we can not quantify at the moment.

While markets are oversold on a short-term basis, we used the small bounce from this mornings to sell our “rental trade” for the time being. Once the market bottoms, we will look to reintroduce the trade.

We expect the markets to bounce over the next few days, and we will use that opportunity to most likely raise more cash and short against remaining long positions.

• Selling 100% VOOG

DYNAMIC MODEL

• Selling 100% of IVE

March 6, 2020

We are giving up on our “beaten up, out of favor, fundamentally strong” energy thesis for the time being.  We still like the sector and will come back to it later when a better bottom has formed.

We need to raise cash for the portfolios to be more defensive here, and with Russia failing to join the OPEC+ cut, we have more downside risk in the sector.

We also sold XLY as discretionary is subject to an earnings shortfall with the impact of the virus and the global supply chain impact.

ALL MODELS: 

• Selling 100% of XOM, AMLP, RDS/A and XLY

March 3, 2020

** UPDATE ** 3-4-2020

TD Ameritrade finally allocated our trades this morning for the equity model. Please review the PORTFOLIO POSITION REPORT today for analysis on why we brought selected positions up to target weights in portfolios.

AAPL, MSFT, HCA, CHCT, AEP, ABT, COST, CVS, JNJ, VZ, V, UNH, KHC, PG, CMCSA

**UPDATE** 3-3-2020

We have updated the portfolio holdings with the below listed trades. 

However, we had a problem with TD Ameritrade today, and some of our trades have not settled into accounts yet, so I am missing cost basis on the equity positions. 

I should be able to update them in the morning.

Portfolio Trading Update:

We are doing a lot of rebalancing in portfolios today, so there will be updates through out the day as we rebalance models.

As discussed in the SECTOR BUY/SELL UPDATE we are:

Selling Areas Most Exposed To Corona Virus:

• XLF, XLB , and XLI in the ETF Model
• JPM, NSC, and MU in the Equity Model

Rebalancing to Target Weights

• XLK, XLRE, XLU, and XLV in the ETF Model
• AAPL, ABT, AEP, CHCT, CVS, MSFT, PG, and V in the Equity Model

We will update portfolios as all the trades settle from our client accounts so that we have the average cost basis and execution levels.

February 28, 2020

Portfolio Trading Update:

In the EQUITY and ETF PORTFOLIOS, because immediately below, the very oversold condition suggests a short-term bounce is likely so we are reducing some of our hedges and taking in profits.

While TLT proved to provide great protection, but it is very extended and while we like bonds as a hedge, if the impact to the global supply chain is as we suspect, it could be inflationary and way on longer-duration bonds.

We sold GDX as well, because Gold Miners are people intensive and are in countries, primarily, which are more subject to the effects of the Coronavirus. We are keeping our GOLD position which will benefit from reduced supply as well as the potential inflationary impact with respect to the global supply chain. Gold is an insurance policy against reckless central bank policies.

Selling:

• TLT
• GDX

***Important Market Message

The market is currently extremely stretched to the downside, as shown below, with very negative sentiment. Thursday afternoon saw a flush of sellers, and it looks like we will see a continuation of that this morning. We suspect a rally could begin later into the afternoon to try and defend the 200-dma.

If correct, we will probably get a reflexive rally back to 310 to 315 on SPY, and then we will most likely sell off our trading positions and reduce our equity exposure further.

Importantly, despite the selling, the bull trend is still intact, so while we have triggered some short-term sell signals, it isn’t time to become completely bearish just yet.  However, I suspect that time will come in the next few months.

Click to enlarge.

February 28, 2020

***Important Market Message

The market is currently extremely stretched to the downside, as shown below, with very negative sentiment. Thursday afternoon saw a flush of sellers, and it looks like we will see a continuation of that this morning. We suspect a rally could begin later into the afternoon to try and defend the 200-dma.

If correct, we will probably get a reflexive rally back to 310 to 315 on SPY, and then we will most likely sell off our trading positions and reduce our equity exposure further.

Importantly, despite the selling, the bull trend is still intact, so while we have triggered some short-term sell signals, it isn’t time to become completely bearish just yet.  However, I suspect that time will come in the next few months.

Click to enlarge.

February 27, 2020

ETF, EQUITY & DYNAMIC PORTFOLIO 

As noted into today’s POSITION COMMENTARY report, with energy stocks trading at extreme deviations BELOW their 200-dma, we said we were going to start nibbling into positions in the energy space.

As such we added 0.50% to our current AMLP position which resides in all 3-portfolio. AMLP is 3-standard deviations below its long-term mean with an 11.5% dividend yield currently.

In the EQUITY and DYNAMIC models we added a small 1% position of Royal Dutch Shell (RDS-A) which currently is more than 3-standard deviations oversold and carrying an 8.4% dividend yield.

February 25, 2020

ETF, EQUITY & DYNAMIC PORTFOLIO 

This morning in the DYNAMIC PORTFOLIO we closed out of the rest of the SHORT S&P 500 INDEX position and added a 5% trading position in VOOG.

In the ETF and EQUITY PORTFOLIOS we added a 5% trading position in VOOG.

These are “RENTALS” on the S&P 500 for a tradeable bounce. We will likely sell these on this rally over the next couple of days as markets approach resistance and then add back the SH position to hedge our other longs.

This is a tricky market right now, so don’t try and get “cute” with it and take on unnecessary risk.

February 25, 2020

ETF, EQUITY & DYNAMIC PORTFOLIO 

With the decline this morning we were stopped out of several positions in both the Equity and Dynamic Portfolios:

• DOV
• VMC
• LVS

Also, with yields dropping rapidly and yield curves inverting, our yield-curve steepening trades have been closed our for now with nice gains.

• AGNC
• NLY
• REM

We are raising cash to limit further downside risk at the current time, but also to position the portfolio for potentially weaker economic growth going forward. The cash raised will be redeployed back into our stronger positions that we have previously taken profits in. We are also looking to reduce our exposure to impacts to global supply chains so we are shifting away from Materials and Industrials to some degree.

There are a lot of moving pieces right now, so nothing is firm yet.

February 24, 2020

DYNAMIC PORTFOLIO (Updated)

Sold 1/2 of the short-hedge position in the account due to the more extreme oversold condition that currently exists. We will likely see a bounce over the next day or two which will let us add the hedge back for the continuation of the correction for now. We were also stopped out of our Pfizer (PFE) position.

EQUITY & ETF PORTFOLIO

As we have addressed over the last couple of weeks, we were close to getting stopped out of small cap, international and emerging market positions. DEM, EFV and SLYV, along with PFE in the Equity model, were stopped out today. These positions were laggards to the portfolio and were underperforming.

Both XOM and AMLP are trading at extreme discounts to fair value as well as deep deviations from the their long-term moving averages. We are going to hold these positions for now and will reconsider our positioning on a rally in the next few days.

February 21, 2020

DYNAMIC PORTFOLIO

We are continuing to work on using opportunistic pullbacks in the market to build out the Dynamic Model Porttfolio.

This morning we put in a limit order to buy the Vanguard S&P 500 Growth Fund (VOOG) at 186.00.  The trade was executed late afternoon.

The Dynamic Portfolio carries a long-term “CORE” position of broad market indices which use as a base to build the rest of our exposure off of. It is also the primary position which we hedge against, including our current Short S&P 500 Index fund (SH).

As we get the portfolio built out we will begin to rebalance and adjust weightings in all of our positions.

February 19, 2020

All Fund Data up to date.

February 18, 2020

NOTE: These are mutual fund trades which take some time to settle after the market closes. I will update the portfolio positions as soon as I have the transaction data.

PORTFOLIO TRADING UPDATE: EQUITY & ETF MODELS (FIXED INCOME TRADE)

This morning we swapped half of DBLTX for PTIAX for the Equity and ETF models.

In a 60/40 portfolio, we reduce DBLTX by one-half weight and added and equal amount of PTIAX. We did the trade as an exchange, meaning we bought the same amount we sold. Therefore, total fixed income exposure did not change.

PTIAX has a $2500 minimum, but there are no transaction fees.

Why we did the trade:

PTIAX is conservative, like DBLTX, but provides us with better diversification in our fixed income holdings and a history of outperformance versus both DBLTX and the Barclays Aggregate benchmark. Whereas DBLTX is largely in Agency mortgages, PTIAX has some residential and CMBS holdings but is largely into tax exempt munis. Like DBLTX, PTIAX sees little to no value in corporates at the moment. From an underlying ratings perspective they are both similar. Note the lower rated securities are bonds that have not been re-rated since the financial crisis.

Essentially the swap allows us to diversify into a fund with better performance and strong track record of outperformance in bad fixed income environments.

February 14, 2020

PORTFOLIO TRADING UPDATE: DYNAMIC MODELS

This morning, I took the SHORT S&P 500 (SH) to 10% of the DYNAMIC MODEL.

We are still trying to build this model out and I am hedging a chunk of the portfolio for a short-term corrective action in the market so I can add to existing positions, and add new ones, more opportunistically.

This is simply a hedge to protect newly invested capital and not a “bearish” call on the market.

February 12, 2020

PORTFOLIO TRADING UPDATE: EQUITY / DYNAMIC MODELS

This morning we added a position in both models of Las Vegas Sands (LVS).

In the EQUITY model we SOLD our position in SLYV.  It has been underperforming and we needed to make room to add LVS. We are looking at two additional additions to the portfolio currently which will require some further adjustments.

LVS is just triggering a MONTHLY BUY signal which is bullish, and more of the technical aspect are turning bullish as well. as noted in our analysis:

Click To Enlarge

With a 4.5% yield, it adds to our income flow of our portfolio, as well as with the technicals improving the potential for a decent total return.

February 11, 2020

PORTFOLIO TRADING UPDATE: EQUITY / ETF MODELS

With the markets pushing more extreme extensions once again, as discussed in today’s #TechnicallySpeaking,we are beginning to add on some additional hedges. The first step is we are starting to extend our duration in our bond portfolio a bit as a correction will push money into

BUY – TLT @ 144.22

Looking to add further hedges later this week if needed.

February 5, 2020

PORTFOLIO TRADING UPDATE: EQUITY / DYNAMIC MODELS

As noted in our POSITION UPDATE REVIEW this morning, we made a few minor changes to our Equity and Dynamic Portfolios this afternoon. We noted that we previously took profits in some of our most grossly extended positions like AAPL, UNH, UTX and others. As noted at that time, we were expecting a 3-5% correction to work off some of the excess which did occur.

While the markets are still extended there were a few positions that had more substantial pullbacks and offered better entry points. The following purchases were made:

EQUTIY MODEL:

• ADDED TO UNH bringing position back to target weight @ 288.125
• BUY PFE @ 37.9995
• ADDED TO ABBV bringing position to full portfolio weight @ 85.3258
• BUY JPM @ 136.6599
• ADDED TO AMLP bringing position to full portfolio weight @ 8.22

DYNAMIC MODEL

• BUY PFE @ 38.205
• BUY UNH @ 289.5271
• BUY ABBV @ 85.6144
• BUY AMLP @ 8.2101
• BUY JPM @ 136.712

February 4, 2020

PORTFOLIO TRADING UPDATE: ETF / DYNAMIC MODELS

As noted in our SECTOR BUY/SELL REVIEW, we discussed that we took profits yesterday in the ETF Model to reduce our holdings slightly in Utilities & Real Estate.

This morning we added exposure as discussed to XLF and XLV as we work on rebalancing portfolios for risk.

We also continue to build out the new DYNAMIC model which we reduced our market neutral hedge by 1/2 today, and added XLV, XLF and IVV to the portfolio.

ETF MODEL:

• Increased XLV back to target weight @ 101.42
• Added XLF to 1/2 portfolio weight @ 30.65

DYNAMIC MODEL

• Sold 1/2 SH @ 23.52
• Added XLF  @ 30.65
• Added XLV @ 105.02
• Added IVV @ 330.325

February 3, 2020

PORTFOLIO TRADING UPDATE: ETF MODELS

As noted in our SECTOR BUY/SELL REVIEW, which will be posted in the morning, we took profits today in the ETF Model to reduce our holdings slightly in Utilities & Real Estate.

The reasoning for taking profits is that over the last couple of weeks interest rates have had a huge move lower which boosted the prices of Utilities and Real Estate which are interest rate sensitive. With both sectors, along with rates, very overbought, we are taking some profits here to be able to rebuild the positions following a correction. We will also look to increase our bond exposure as well.

Sold 1/3 of our position in:

• XLU @ $69.133
• XLRE @ $39.395

TRIAL USERS

Click the link below for the promotional analysis on the Energy sector.

PORTFOLIO TRADING UPDATE #2 – 01/10/2020:  EQUITY & ETF MODELS

As noted in our previous post, the market is SO very extended, overbought, and complacent that we needed to take some profits and temporarily reduce equity exposure in both the EQUITY and ETF Portfolios.

As such we have taken profits in the following positions:

Equity Portfolio: SELLING PARTIAL POSITIONS OF

• MSFT
• AAPL
• AGNC
• CVS
• HCA
• JNJ
• MU
• UNH

ETF Portfolio: SELLING PARTIAL POSITIONS OF

• REM
• XLC
• XLK
• XLV
• XLY

PORTFOLIO TRADING UPDATE – 01/10/2020:  DYNAMIC PORTFOLIO

As noted at the beginning of the year, we launched the DYNAMIC EQUITY PORTFOLIO with a purchase of 10% of the account value in a large capitalization VALUE fund (IVE).

However, as we have noted repeatedly in our “Major Market Review:”

• The S&P is currently more than 2-standard deviations above the 200-dma (shaded blue area).
• The “buy signal” (lower panel) is back to levels of extensions normally only seen with short-term tops and corrective actions, particularly when combined with extreme extensions and deviations from long-term means.

Because of this extreme extension we have been unable to complete building out our “core” holdings, until the market reverts some of the overbought condition.

Therefore, given that complacency is high, put/call ratios are at extremes, and the markets are extended and deviated from long-term means, we have taken the portfolio to a “MARKET NEUTRAL” position for now by adding an equal SHORT-S&P 500 position to the model.

BUY: 10% SH – Proshares Short-S&P 500 Index

This will allow us to protect our capital and will provide the opportunity to build out the core S&P 500 position on a market correction. At that point we will remove the short and build out the rest of the portfolio.

As noted previously, the Dynamic Model is an 80/20 portfolio allocation, which is more aggressive than normal, and is a go anywhere, do anything, model. As such we are looking for potentially longer-term investments in “out of favor” areas of the market while still investing in current market trends.

01/03/2020

We are starting the launch of the DYNAMIC EQUITY PORTFOLIO today with a purchase of 10% of the account value in a large capitalization VALUE fund (IVE).

The Dynamic Model is an 80/20 portfolio allocation, which is more aggressive than normal, and is a go anywhere, do anything, model. As such we are looking for potentially longer-term investments in “out of favor” areas of the market while still investing in current market trends.

Our initial purchase is the start of building a “core allocation” which we will eventually “hedge” against. Given the market is extremely overbought currently, we will look to use further pullbacks and corrections to build out the core opportunistically.

12/31/2019

TRIAL SUBSCRIBERS

If you are trial user looking for our special report on the Energy Sector click the link below.

Scroll down to read more about our portfolio recommendations, changes, and trades.

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12/31/2019 – PORTFOLIO UPDATE

As mentioned previously we are doing some tax loss harvesting in the Equity Portfolio this morning. (Please read the Portfolio Update Report)

EQUITY Portfolio

Selling:

• 100% of Boeing (BA) at the open
• 100% of Wells REIT (WELL) at the open

After these sells are completed we will then look at rebalancing risk in the broader portfolio.

In early January we will look to hedge the our portfolio against a short-term correction.

We will update the transactions once they are filled.

TRIAL SUBSCRIBERS

If you are trial user looking for our special report on the Energy Sector click the link below.

Scroll down to read more about our portfolio recommendations, changes, and trades.

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12/16/2019 – PORTFOLIO UPDATE

As noted in our previous portfolio update:

“With the markets back on a monthly “buy” signal, we will likely be added a bit more weight in the days ahead, so we will keep you apprised.”

Given the resolution of the “trade war”, “Brexit,” but primarily because the Federal Reserve is injecting nearly $500 billion in liquidity over the next 6-weeks, we are adding some additional exposures to portfolios. We have discussed in our previous market update, the breakouts occurring in Small-Cap, Emerging and International Markets.

These are trading positions only with VERY TIGHT stop parameters. If the positions continue to perform as expected we will increase holdings accordingly.

EQUITY Portfolio

Selling:

• 100% of Duke Energy – DUK 

Buying:

• 1% of Small-Cap Value – SLYV
• 1% of International Value – EFV
• 1% of Emerging Market Value Dividend – DEM

ETF Portfolio

Buying:

• 1.5% of Small-Cap Value – SLYV
  • (Which we are blending with the recent purchase of KGGIX to balance performance short-term)
• 1.5% of International Value – EFV
• 1.5% of Emerging Market Value Dividend – DEM

TRIAL SUBSCRIBERS

If you are trial user looking for our special report on the Energy Sector click the link below.

Scroll down to read more about our portfolio recommendations, changes, and trades.

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12/12/2019 – PORTFOLIO UPDATE

EQUITY Portfolio

As discussed in previous updates, we took profits in Gold Miners and Gold near the peak of the advance this summer. However, we like the positions as a hedge for our portfolios longer-term against a pickup in volatility and risk. We have added back 1% in each of the positions bringing them back to slightly overweight in the portfolio.

ETF Portfolio

Also, as noted in the sector update on Tuesday, Healthcare (XLV) was just grossly extended with the position up sharply in recent weeks. Given that we had overweighted the sector earlier in the year expecting a pickup in performance, we have now reduced the position back to a normal full weight. (We reduced the total holding from 4% of the portfolio to 3%)

We also add a “starter” position of a small-cap deep value mutual fund (KGGIX) which essentially replicates our previous thesis on the coming rotation to value from growth. (The link below is for Part V  – all other previous links are contained therein)

With the markets back on a monthly “buy” signal, we will likely be added a bit more weight in the days ahead, so we will keep you apprised.

PORTFOLIO UPDATE

BOUGHT – 1/2 Position Of AMLP (Alerian MLP)

Over the last couple of weeks we have been discussing picking up some exposure to the energy sector and have been digging around for opportunities. We have identified several E&P companies as well as looking at some MLP’s for both potential price appreciate and yield.

However, the issue with MLP’s are the K-1 issues particularly for IRA accounts. Therefore, we are taking an initial 1/2 position in AMLP which has 1099-tax treatments. We are giving the position a little wider than normal stop-loss of $7.00/share because with the end-of-year tax loss selling season in progress, we could see some downward pressure on the holding short-term. We will add our second 1/2 position on weakness.

If you have not read our thesis on AMLP, please do.

PORTFOLIO UPDATE

Selling 100% of SDS (2x Short S&P 500 index) hedge.

We had expected a 2-5% correction in the market to resolve the overbought and extended condition of the market. That correction occurred on Monday and Tuesday (almost precisely 2%) before “trade deal” headlines begin flooding the airwaves.

For the week, the market will end virtually flat, but that consolidative action was enough to reduce portfolio risk enough to warrant removing the hedges for now. With the end of the year portfolio window dressing coming, it is likely the market will try to move higher over the Christmas holidays.

After taking short-term trading profits out of positions earlier this year we are “tax loss harvesting” the portfolio hedge through the end of the year. We will add the hedge back on as soon as the next signal warrants adding additional protection. For now, we want to let the markets “bullish bias” work in our favor through the holidays.

After all….Santa Claus is coming to town.

TRIAL USERS:

As referenced in our weekly newsletter, here is the referenced report on QE-4:

Click The Image To Read

PORTFOLIO UPDATE

As we are writing for tomorrow’s “Technical Update” – the risk of a short-term correction has hit pretty extreme levels with “Short VIX” positioning now at record levels.  With the markets back to extreme OVERBOUGHT on virtually every measure, we have added a SHORT S&P 500 ETF to our portfolios.

This will be removed over the next few weeks as we get the anticipated correction. However,  we are also keeping a fairly tight stop on the position just in case the market decides to rocket off higher into year end.

BUY – 5% weight SDS (ProShares Ultra-Short S&P 500)

November 5, 2019

Portfolio Action Update

Equity Portfolio

We have recently talked about the rotation from “defense” back to “offense” as QE gained traction in the market. That is occurring so we have reduce WELL from 1.5% of the portfolio to 0.75%.

Also, a reminder (as we are getting emails), we have closed out the Long-Short Portfolio in order to launch a Dynamic Equity Income Model on January 1st. Here was our previous note:

LONG-SHORT PORTFOLIO

We have been wrestling with TD Ameritrade for several months now to get a waiver to allow us to short individual equity positions in an IRA account. We have not been successful.

We are going to terminate this portfolio and relaunch it in January to follow our DYNAMIC GROWTH Portfolio we are launching for our clients. The portfolio, which was conceived from your subscriber requests, is an all-weather portfolio allocation that can buy any asset class, short markets, and take advantage of any opportunity. There is no set allocation mix so weightings can float between equities, commodities, fixed income, and cash as needed to create growth or hedge risk.

We are putting the finishing touches on the model now and will look to launch the portfolio live on January 1st.

October 30, 2019

Portfolio Action Update

Equity Portfolio

As we have been discussing in our portfolio commentaries over the last couple of weeks, we are making some changes to our portfolio.

(Click to Enlarge Charts)

• SELLING 100% of YUM Brands (YUM) 

As shown in the chart below, Sales have been declining with earnings being supported by a massive share buybacks.

• SELLING 100% of Mondelez (MDLZ)

Sales at MDLZ have also been falling with earnings supported by share buybacks. We are taking our profits out the position and looking to reallocate.

• REDUCING Apple (AAPL) to take profits heading into earnings. (Risk from China)

After taking 20% in profits in AAPL earlier this year, we are reducing once again due to stagnant revenue growth and EPS supported by share buybacks.

• BUY Full Position of Kraft Heinz (KHC)

KHC is a “SPECULATIVE” trade based on earnings tomorrow. There is a HIGH PROBABILITY we will be stopped out. Therefore, DO NOT enter this trade if you are not keen on a potential short-term loss. As noted in our Portfolio Postion review:

• Last week we talked about our speculative turnaround story in KHC. We still think that is the case and we will add a “trading position” to the portfolio.
• With a 6% yield, and the stock turning higher, we are liking the position more.
• This is a speculative trade set up with a tight stop at recent lows.

October 22, 2019

Portfolio Action Update

Equity Portfolio

Read yesterday’s note for explanation on actions we are taking currently and yesterday’s trades.

Today, we are adding:

• 1/2 position of ABBV 
• A full position of AMZN

We are also looking to rebalance and add exposure to the ETF model as well.

LONG-SHORT PORTFOLIO

We have been wrestling with TD Ameritrade for several months now to get a waiver to allow us to short individual equity positions in an IRA account. We have not been successful.

We are going to terminate this portfolio and relaunch it in January to follow our DYNAMIC GROWTH Portfolio we are launching for our clients. The portfolio, which was conceived from your subscriber requests, is an all-weather portfolio allocation that can buy any asset class, short markets, and take advantage of any opportunity. There is no set allocation mix so weightings can float between equities, commodities, fixed income, and cash as needed to create growth or hedge risk.

We are putting the finishing touches on the model now and will look to launch the portfolio live on January 1st.

October 21, 2019

Portfolio Action Update

Equity Portfolio

As noted in the last update we took profits from positions that were grossly extended and showing signs of correction. The second was to add to, or add new, positions in the portfolio to keep current allocations levels.

Today, we took some initial actions in the Equity Portfolio and added:

• 1/2 position of XOM which brings our position up to a full weight.
• A full position of MU

We have 3-other positions slated to add over the coming days and will do so opportunistically.

We are also looking to rebalance and add exposure to the ETF model as well.

October 15,2019

Portfolio Action Update

Equity and ETF Portfolios

Over the last several weeks we have been discussing the need to take profits out of positions (for a third time this year) as prices had just gotten way to extended. Furthermore, we appear to be in the early stages of a rotation from more “safe haven” investments back into “risk on” as the Federal Reserve begins to once again be expanding the balance sheet.

We are making the adjustments to the EQUITY portfolio in 2-steps.

The first step is taking profits from positions that are grossly extended and showing signs of correction. The second step will be adding to, or adding new, positions in the portfolio to keep current allocations levels.

Today we have taken profits in the following positions:

• AEP
• CHCT
• DUK
• GDX
• IAU
• PG
• VMC
• YUM

In the ETF portfolio we are reducing IAU by 50%.  

We will look to increase exposure to either the core or sectors weightings over the next couple of days if necessary.

October 11, 2019

Equity Long/Short Portfolio Trade Update

Buy 100 shares of TBX and Buy 100 shares of SHY

As discussed in our just released RIA Pro article –Non-QE QE and How To Trade it, we believe the yield curve will steepen. Today the Fed announced that they will buy $60 billion per month of Treasury Bills for at least six months.

The trade above in the RIA Pro portfolio is slightly different than that which we recommended in the article. Because of difficulty in shorting IEF, we instead purchased TBX, the inverse ETF of IEF. Due to this change we had to adjust the ratio of SHY and TBX. Please read the article for more of a discussion on the trade and the details.

 

October 9, 2019

Equity Portfolio Trade Update

Sell 1/2 ABT

As noted in today’s POSITION UPDATE REPORT our holding in Abbott Laboratories broke support and triggered our adjusted stop loss.

After taking profits in the position previously, we have sold 1/2 of the remaining position.

Over the next couple of days, as we see how things develop with the “trade negotiations,” and the Fed, we are going to rebalance our portfolio holdings accordingly by trimming profits and adjusting the overall risk profile.

We are optimistic some form of a trade deal will be completed and the markets will likely rally into the end of the year. However, until we have some clarity, it makes sense to hedge risk currently.

Remember, it is always easier to add money to a rising market versus trying to figure out how to make up losses.

September 27, 2019

** RIA Pro Web Site Upgrades **

In the Portfolio Tab you will now find a gold plus sign to the left of the ticker. When you click on it you will access key information about the company.

Within this menu is a listing of past and future dividend and earnings dates and data for the company. To see this information for your entire portfolio you can click Dividend at the top of the page to the right of the large performance graph. This will display dividend and earnings information for your entire portfolio.

In the Research menu you will now find global dividend and earnings calendars. Clicking it will display a list of companies with dividends or earnings for the specific date.

These upgrades were based on comments from subscribers. Please keep the great ideas coming.

September 26, 2019

** Trade Update **

BUY – Boeing (BA)

EQUITY PORTFOLIO

Yesterday, I noted that we added the 2nd half of a position to BA to the LONG-SHORT PORTFOLIO as discussed in our Portfolio Position Update report.

We completed the process of adding to 2nd half of the BA position to our EQUITY PORTFOLIOS today.

Models have been updated.

September 25, 2019

** Trade Update **

EQUITY/ETF Portfolios

We had previously added a short-term trading position in VXX as a hedge against the Federal Reserve announcement on rates.

These positions, due to the optionality inside of the ETF, can NOT be held for long-periods of time as they “bleed” relative to the performance of the underlying index due to the “decay of premium” in the underlying options.

With the market oversold short-term, and sitting on support, we are closing out the position with a slight gain. We will look for the next opportunity to hedge which will be coming around mid-month with the “trade negotiations.” 

EQUITY LONG-SHORT

We added the 2nd half of a position to BA today as discussed in our Portfolio Position Update report.

September 24, 2019

** Trade Update **

ETF Portfolios

We have been talking for a while about the really overbought conditions of “defensive” sectors of XLP, XLRE, and XLU.

We have been carrying an overweight position in XLP since earlier this year. Today we reduced that overweight to portfolio weight to take in some gains.

September 17, 2019

** Trade Update **

Equity and ETF Portfolios

We are starting to add a hedge to our portfolios heading into the Fed meeting tomorrow and the “trade negotiations” in mid-October.

We added our 1st-stage of VXX to both models and will continue to build into the position as volatility drops further. Markets are extremely overbought short-term and a correction is pending in the next few weeks.

This is a short-term hedge which will maintain both a tight stop as we build into it, and will be sold on a spike in volatility.

September 12, 2019

** Trade Update **

Equity Long-Short Portfolio

We closed out our 2x S&P 500 trading position after adding to the position twice in recent weeks. As noted previously, the trade was put on after the S&P 500 broke out of consolidation and above the 50-dma which gave us a trade target of the July highs. We reached that target this morning and with the market back to extreme overbought we have closed the trade and taken in profits. We are now looking for an opportunity to potentially short against our remaining long “core” S&P 500 positions.

The chart below shows the overbought short-term condition.

Equity Portfolio

In the core equity portfolio we have been discussing needing an opportunity to increase duration in our bond holding and add to our gold positions. The announcement by the ECB to go deeper into #negative #rate territory and restart QE was the point we needed.

• SELL – GSY (Entire Position) (Short-Duration Bond)
• BUY – IEF  (7-10 Year Treasury) 
• BUY – IAU (Gold)
• BUY – GDX (Gold Miners)

ETF Portfolio

We took similar actions in the ETF Portfolio as well for the same reasons.

• SELL – GSY (Entire Position) (Short-Duration Bond)
• BUY – IEF  (7-10 Year Treasury) 
• BUY – IAU (Gold)

September 9, 2019

** Trade Update **

Added to the 2x S&P 500 holding in the EQUITY LONG-SHORT Portfolio for a one or two trade trade opportunity. Market approaching overbought so rally is likely to fail at all-time highs.

September 6, 2019

NEW SITE FEATURES

RIA PRO portfolios are now compared to an equal benchmark of S&P 500 and Fixed Income which more appropriately represents the risk management features of the portfolio.

Click to Enlarge Image

We have also added a screen for DIVIDEND YIELD.  

Click Images To Enlarge

You can screen for high dividend yielding stocks and then sort by yield  We have included our ranking system to help sort out the good from the bad.

September 5, 2019

Trading Alert:

With breakout above the 50-dma and the trading channel we have been in over the past month we have added 1/2 of a trading position to the EQUITY LONG-SHORT Portfolio. We will add a second half-position in the next day or so if the breakout holds.

In the ETF Portfolio we added to our existing exposures of XLC and XLY bringing both of those positions up to target weights.

August 28, 2019

As discussed in this mornings SELECTED PORTFOLIO POSITION REVIEW there are several positions currently under scrutiny for liquidation as market risks rise relative to economic, technical and fundamental outlooks. The ongoing trade war is wearing on profitability as well as the inversion of the yield curve suggesting something more serious damage is occurring in the economy.

As such our first actions in this regard was the liquidation of our financial positions as the inversion of the yield curve, along with the Fed cutting rates, negatively impacts bank profitability.  Also, credit risk is rising which also makes banks more vulnerable.

Equity Model – Sell JPM

ETF Model – Sell XLF (FNCL for RIA Advisor Clients)

Portfolio models have been updated.

August 23, 2019

• President Trump ordered companies in the United States to look for an alternative to doing business with China and warned that he would further retaliate.
• China had threatened new tariffs on $75 billion worth of American goods in an escalation of the trade dispute between the world’s two largest economies.
• After Powell’s closely watched speech in Jackson Hole, Trump tweeted, “As usual, the Fed did NOTHING!”
• Trump has frequently pressed the Fed to aggressively cut interest rates, but Powell stopped short of promising any specific monetary-policy easing, saying instead the central bank was “carefully watching developments” in the economy and would “act as appropriate.”
• After China announced more import tariffs on U.S. goods early Friday, Trump said he would respond Friday afternoon. The president also asked “who is our bigger enemy,” Powell or Chinese President Xi Jinping.

With that type of rhetoric flying around, it is impossible to trade the market at this moment.

We closed out our remain portion of the 2x S&P 500 long and will wait for things to settle down a bit and see where next supports are.

August 22, 2019

NO LONG-SHORT LIST TODAY

With the Jackson Hole Conference starting today, there is too much risk to be short in the market currently.

As noted yesterday, we have sold into this rally and reduced our 2x SP500 position.  We are maintaining our core S&P 500 positions as the bias is currently bullish. The support that has been building around the recent lows is positive and a break above the 50-dma could lead to a retest of previous highs.

With the volatility seen in just the past two weeks, it is too difficult to trade short positions without being “whipsawed” out of the holdings.

Trading Rule:

When you are “unsure” about the best course of action, the best course of action is to “do nothing.”

We will wait for a clearer picture.

August 21, 2019

** UPDATE **

EQUITY LONG SHORT PORTFOLIO:

We sold another 25% of the 2x S&P 500 position that we added for the bounce last Thursday.  This leaves us with 1/2 of the original position. With the market still contained below resistance, and working off the oversold condition, there is probably not much more upside to the trad currently. However, IF we get a break above the 50-dma, then a rally back to highs is possible.

Comments from the FOMC minutes or the Jackson Hole summit which tilts towards more rate cuts or QE could push asset prices above resistance.

August 19, 2019

** UPDATE **

EQUITY PORTFOLIO:

We have been discussing for a while that we would be eliminating PPL from the portfolio, but we were waiting to find a suitable replacement. While we have a couple of candidates to add to the portfolio, we decided to go ahead and sell PPL and use the proceeds to add to AGNC and JNJ.

We are continuing to leg into our Agency positions which will benefit when the yield curve starts to steepen as the Fed cuts rates and implements QE. Today, the White House starting applying pressure to accomplish this goal. We are saving some powder momentarily add to NLY as the steepner becomes more evident.

We are adding to JNJ as we feel much of the legal issues surrounding “talc” are likely embedded into the stock price. We are increasing our holdings slightly given the recent pullback to support.

EQUITY LONG SHORT PORTFOLIO:

We sold 25% of the 2x S&P 500 position that we added for the bounce last Thursday.  With the market not yet back to “overbought,” we will continue to monitor and sell more on the approach to the 50-dma.

August 15, 2019

** UPDATE**

EQUITY LONG SHORT PORTFOLIO:

I added a 2x S&P 500 position to the Long-Short portfolio for an “oversold trade” and a bounce into the end of the week. We will re-evaluate the holding tomorrow.

____________________________

We have released a SPECIAL REPORT covering the S&P 500 index on a daily, weekly & monthly basis to weigh the possibilities and probabilities of what happens next, the “yield curve,” and why the inversion was “no surprise.” 

August 14, 2019

**UPDATE**

ETF Portfolio Change

This morning we sold XLE as it violated our stop loss levels. At the moment we are being cautious and replacing it with short term treasuries (BIL).

The portfolio has been updated.

We have also implemented a new ALERT SYSTEM which will send an email to all subscribers when we make changes to the RIA PRO Portfolios.  See below:

CLICK TO ENLARGE

 

 

August 13, 2019

ETF Portfolio Change

With Trump caving to corporate pressure (Christmas shopping season right around the corner), and suspending tariffs on technology and apparel goods, we are tweaking our exposures in our portfolios. We started with the ETF model today, and are reviewing the EQUITY model for changes as well.

Today, we took profits in XLU as the sector was grossly extended. We reduced XLF as rate cuts by the Fed will reduce their future net margin interest.

We added to our existing Technology position (XLK) and added a 1/2 position in Communications (XLC)

I will address the reasoning in more details in our blogs and newsletters over the next couple of days.

August 12, 2019

Today, we made a small adjustment to the bond side of the portfolios by swapping the Treasury Floating Rate Fund (TFLO) for a bit longer duration Treasury bond fund (SHY). Our expectation is the Fed will cut rates again in September, which will suppress the short-end of the curve faster than the long end. By increasing duration a bit, we can add some incremental returns to the portfolio without taking on additional credit risk.

If we get a pullback in bond prices in the next couple of months, which is very high probability, we will increase duration further in the portfolio. Credit quality is important at this late stage of the investment cycle, so maintaining a high level of credit quality is very important to capital preservation in the months ahead.

August 9, 2019

Yesterday, as the market opened up fairly sharply, we temporarily closed out the 2x S&P 500 short position to allow the long-side of the portfolio to gain ground.

If today closes below the 50-dma we will begin looking for an opportunity to reinstate the short-position.

August 2, 2019

Not surprisingly, following the addition of new tariffs on China, something we had previously predicted would be the case, the market turned ugly over the past few days.

We were stopped out of NVDA and CRM this morning with breaks below support.

We will probably look to put these trades back on heading into earnings for both companies, but there is simply too much uncertainty at the moment regarding the war breaking out between the White House and the Federal Reserve.

We continue to carry our 2x S&P 500 short but will look to close that trade out as well as the market approaches an oversold condition.

August 1, 2019

** EMN stopped out at $74.75 today.  Position has been closed.**

NO LONG-SHORT IDEA LIST Today

Yesterday, the Fed cut rates a quarter point and, as noted in our daily commentary, it was the suggesting of a “mid-cycle” cut which sent stocks reeling.

Given this turmoil, it is too risky to take on additional long-short bets at the moment until we can see how this is going to play out.

As noted, we sold our long GOOG position following earnings. We remain long in our 2x S&P 500 short fund to hedge our long S&P positions.

We are close to being stopped out of our remaining trading positions. However, as noted, we didn’t want to sucked in by the announcement turmoil yesterday, so we are going to wait and see how our positions trade over the next 24-48 hours.

• NVDA 
• CRM 
• EMN 

We  will update you accordingly.

July 25, 2019

Following last week’s LONG-SHORT IDEA list, we bought 4-positions long for trading:a  CRM, NVDA, EMN and GOOG.

This morning we sold our position in GOOG this morning following their earnings announcement with an average price of $ 1247.84.

Trading lesson RE-learned:

I knew better than to sell at the open this morning, but I did it because I was concerned that with AMZN’s miss, it might drag prices lower early.  We got an “okay” price at the open but if I would have waited for the “robots” to finish their opening “buying,” I could have done a bit better on the trade.

This is what happens when you let emotions dictate your trading. Unfortunately, that is the lesson that must be re-learned from time to time.

• NVDA is holding ground. 
• CRM is up slightly (waiting on earnings)
• EMN is close to being stopped out. 

We are still holding a small 2x-short S&P 500 index in the portfolio as a hedge going into August/September seasonal weakness.

July 24, 2019

On Monday we noted that we were taking profits in positions that had become grossly extended in the EQUITY portfolio.

Yesterday, we took similar actions in the ETF model and sold 10% of our over-weight defensive positions:

• Sold XLU @ 59.94
• Sold XLP @ 59.98
• Sold XLF @ 28.21

This raise our cash position slightly and we are maintaining our other hedges accordingly for now.

July 22, 2019

** Updated**

In this past weekend’s REAL INVESTMENT REPORT we wrote:

“Equity Model: No changes this past week. We are looking to taking profits across the breadth of our portfolio as we are currently sporting gains of 20-40% in many positions just since the beginning of the year. We have already taken profits once back in May, and taking profits a second time will allow us to remove our stop-loss levels for now and look for deep corrections to rebuild holdings.”

This morning, that action was taken and we took profits on 10% of the following 11 Equity model stocks. All of these had >20% gains.

• CHCT – Sold 3 shares @ 40.2559 
• COST – Sold 1 share @ 281.385
• DOV – Sold 2 shares @ 98.2807
• MDLZ – Sold 2 shares @ 54.7749
• V – Sold 1 share @ 179.5506
• GDX – Sold 9 shares @ 28.0965
• VMC – Sold 1 share @ 138.7877
• NSC – Sold 1 share @ 196.65
• MSFT – Sold 1 share @ 137.5511
• ABT – Sold 3 shares @ 87.68
• PG – Sold 1 share @ 115.26

This is the SECOND round of profit taking we have done this year after a similar action was taken back on April 30th.

July 19, 2019

in yesterday’s commentary we noted that we were adding to our Long-Short portfolio:

• A small 2x S&P 500 short position to hedge our core long positions against a retracement over the next few weeks. We will remove the short if the market is able to regain its footing and move higher, or the market sells off and reaches oversold conditions.
• We sold EFA and EEM at the open and closed out our international positions.
• We are also adding two trading positions from our Long-Short list –  CRM and GOOG for a trade heading into earnings.

The Equity Long-Short portfolio positions have now all been updated with cost basis.

We are reviewing the 60/40 Equity Portfolio today and will begin taking profits out of our biggest gainers.

We did this back at the beginning of May, and now with many of these positions up 20% or more since the beginning of the year, we are going to lock in more of gains and wait for a correction to add back exposure at cheaper levels.

We will keep you apprised as we take actions.

July 18, 2019

This morning we are adding a small 2x S&P 500 short position to the trading portfolio to hedge our core long positions against a retracement over the next few weeks. We will remove the short if the market is able to regain its footing and move higher, or the market sells off and reaches oversold conditions.

We are also selling EFA and EEM at the open and closing out our international positions which have failed to gain any traction following the G-20 meeting and more “dovish” positioning by the ECB.

We are also adding two trading positions from our Long-Short list today –  CRM and GOOG for a trade heading into earnings. Both are on the cusp of either a breakout or a breakdown, so we are running with very tight stops.

I will update the portfolio model later today once trades have settled.

July 3, 2019

Yesterday, we added a full position (1.50%) of WELL to the RIA Equity Portfolio.  We also added a full position (2.92%) of REM to the ETF portfolio. REM is an ETF similar in nature to NLY and AGNC, which we purchased last week.

June 28, 2019

In our Long-Short Idea List yesterday we discussed CVS Health as a long trade.

We have held this position previously and were stopped out. However, after a long basing period, and better than expected results from Walgreens (WBA) there is a reasonable trade set up for our longer-term Equity Portfolio.

Yesterday, we added a full position of CVS to the RIA Equity Portfolio at $54.365.  However, we are also carrying a very tight trailing stop at the recent lows at $51.00.

June 18, 2019

We just published Profiting From a Steepening Yield Curve which further explains our rationale for buying AGNC and NLY in the equity portfolios. To read the article click the link below.

June 12, 2019

Portfolio Update.

EQUITY and EQUITY LONG-SHORT Model Portfolios

After taking profits at the beginning of May in a majority of our equity holdings and shifting to more defensive positioning in the ETF portfolio there hasn’t been much to do.

Today, we took some actions.

In our weekly MAJOR MARKET REVIEW we recommended taking a position in SPY with a sell target of 290. With that target hit on Monday we sold half of our positioning in the LONG-SHORT portfolio of RSP, IVV and VYM.

We will look to add back to those positions on the next opportunity.

In today’s SELECTED PORTFOLIO POSITION REVIEW, we stated:

• MU continues to be our “problem child” in our portfolio. It simply isn’t performing and while it recently held support the risk/reward simply doesn’t work right now.
• With a P/E of 3x, the company is simply CHEAP.
• We are giving MU a bit of room, but not much, and we are very close to selling the position for now and putting it back on our watch list.
• Stop-loss is set at 32.50.

The breakdown in MU today was enough to trigger our sell, so we closed out the position.

BUT, we also added 1/2 of two new positions in the mortgage sector: NLY and AGNC.

We have a specific report on this trade coming out next week.

However, our belief is that as the recession approaches we will see the yield curve steepen markedly as the short-end of the curve collapses faster than the long-end. A “bullish steepner” is beneficial for these companies so we are beginning to take on positioning to plan for that eventuality.

In the mean time, both NLY and AGNC yield healthy dividends of 13.3 pct and 12.9 pct respectively.

We will update this positioning and the reasoning for it in the upcoming report. Stay tuned.

May 28, 2019

Portfolio Update.

EQUITY and EQUITY LONG-SHORT Model Portfolios

When we originally launched the Equity Trading Portfolio we launched it as a pure Equity/Fixed Portfolio. However, within our client accounts at RIA Advisors, our equity portfolios carry a core holding of the S&P 500 which is the base we build the rest of the portfolio off of. This “core” provides a base relative to the market which then allows us to select specific equities to overweight and underweight specific areas of the market to create “alpha” over the market.

We had been looking for a correction to add the core to the equity portfolio and the recent pullback, while early, is providing the entry point. The core is comprised of 1/3 S&P 500, 1/3 S&P Equal Weight, and 1/3 Dividend Yield. This blend gives us relative performance to the S&P 500 with a bit of a defensive tilt with higher yield.

We added 1/3rd of each position on May 22nd and added again to those positions on the recent weakness.

• 1.5% RSP @103.62
• 1.5% VYM @ 85.39
• 1.5% IVV @ 285.02

We will continue this process into the summer until the core is complete. Looking forward, this core can both be added to, and shorted against, as needed to hedge performance.

We also added the beginnings of the core position to the Long/Short portfolio as well which, now that we can track short positions at RIA PRO, we will begin fully building out this summer from our weekly Long/Short Idea List.

May 23, 2019

Portfolio Update.

ETF Model Portfolio

We recently reduced equity exposure in the ETF portfolio by selling EEM, and cutting our XLB, XLI, and XLY exposures in half. This took our target equity weighting below our model allocation levels currently.

As noted in our newsletter over the last couple of weeks, we are seeing the early signs of a defensive rotation in equities due to the resurgence of the trade war. Therefore, we are moving our allocations accordingly to participate with the rotation.

We are adding:

• 1.5% to XLRE
• 1% to XLU
• 1% to XLP

After recently lengthening duration in our bond portfolios, we will look for a short-term reversal in rates, which will coincide with a counter-trend market bounce, to add further to our position in IEF.

May 22, 2014

Portfolio Update.

EQUITY and EQUITY TRADING Portfolios

When we originally launched the Equity Trading Portfolio we launched it as a pure Equity/Fixed Portfolio. However, within our client accounts at RIA Advisors, our equity portfolios carry a core holding of the S&P 500 which is the base we build the rest of the portfolio off of. This “core” provides a base relative to the market which then allows us to select specific equities to overweight and underweight specific areas of the market to create “alpha” over the market.

We had been looking for a correction to add the core to the equity portfolio and the recent pullback, while early, is providing the entry point. The core is comprised of 1/3 S&P 500, 1/3 S&P Equal Weight, and 1/3 Dividend Yield. This blend gives us relative performance to the S&P 500 with a bit of a defensive tilt with higher yield.

We added 1/3rd of each position today and will build into the core on further weakness throughout the summer. Looking forward, this core can both be added to, and shorted against, as needed to hedge performance.

We also added the beginnings of the core position to the Long/Short portfolio as well which, now that we can track short positions at RIA PRO, we will begin fully building out this summer from our weekly Long/Short Idea List.

May 14, 2014

Portfolio Update.

ETF Portfolio

Continuing from yesterday’s discussion on the impact of “trade wars” on various sectors has us beginning to reposition out of some the areas most susceptible to tariffs. Yesterday, we close out our position in Emerging Markets, and sold 1/2 of our position in Basic Materials.

Today, on the bounce as laid out yesterday, we sold half of our position in XLI (industrials) and XLY (consumer discretionary) and added one-half position in XLRE (real estate) which should be defensive with lower interest rates.

 

May 13, 2019

Portfolio update:

Equity Long-Short:

On Friday, we put on a small 2x S&P 500 trade for a market bounce. However, over the weekend President Trump and Xi went to war with each other completely tripping up expectations of the market. As a consequence, we closed the position out at the open for a small loss.

ETF Portfolio

Trade wars don’t play well with Emerging Markets, Basic Materials, and Industrials. We are moving a little slowly here after already taking profits a couple of weeks ago, however, we closed out our small position in EEM and half of our position in XLB. On a bounce in the market, we will close out half of our position in XLI and look to add to IAU and/or GDX.

May 10 2019

After 5-days of selling the market is short-term oversold. I put on a 5% SPY trading position in the trading account this morning for a bounce.

Buy 5% position in SSO – filled at open at 119.63.

May 9 2019

As noted in Wednesday’s portfolio position review, the majority of our positions have held up fine this week, although we do have a couple on the “high alert” list.

We have been talking about taking profits a good bit lately due to the overly extended nature of the market. When a market becomes over bought, extended and bullish there is always some issue which leads to a reversion of that positioning. This week it was the return of “Tariff Man.” 

Because of the uncertainty coming out of Washington, we have remained on hold this week. The problem when dealing with the White House is the volatility caused by his “tweets.” The current sell off was sparked by his tweet on Sunday threatening additional tariffs on Friday. However, this weekend you could well see a tweet saying he and President Xi had a very good meeting and tariffs are being postponed for now. Such would lead to a market surge on Monday.

As such, we are sitting on our hands at the moment and closely watching our positioning. We are still overweight cash, bonds and gold, relative to equities, so our guard is up. Once we have a resolution on Friday, we will get back to work whichever way it goes.

This is also the reason there is NO LONG-SHORT LIST today. No matter what longs or shorts I pick, the decision from “Tariff Man” on Friday could change everything with a tweet.

May 5, 2019

Happy Cinco De Mayo.

REAL INVESTMENT REPORT IS OUT!

It Never Hurts To Ring The Cash Register

A review of the reasoning behind our profit taking last week and what we are looking out for next.

April 30, 2019

PORTFOLIO UPDATE

Over the last couple of weeks, we have been discussing the incessant rise in the market and the need to trim profits and rebalance risk in some of our holdings particularly after such large gains in some of the positions since the beginning of the year. Some of the proceeds we took we then added to Health care due to the valuation opportunity that exists currently.

• Sold 20% of AAPL @ 200.5446
• Added to ABT @ 78.6536
• Sold 10% of CMCSA @ 43.378
• Sold 10% of COST @ 244.3952
• Sold 10% of DOV @ 97.254
• Sold 10% of YUM @ 103.97
• Added to HCA @ 128.49
• Sold 10% of MDLZ @ 50.545
• Sold 10% of PG @ 105.635
• Sold 10% of MSFT @ 130.205
• Sold 10% of NSC @ 201.4858
• Added to UNH @ 236.6287
• Sold 10% of UTX @ 141.755
• Sold 10% of V @ 165.4572
• Sold 10% of VMC @ 125.3312

April 26, 2019

PORTFOLIO UPDATE

• Following both disappointing earnings from Exxon Mobil and President Trump’s tweet that he called OPEC and demanded lower gas prices, how that isn’t a minipulation of markets mind you, we made the following sells:
  • Sold 1/2 of our position of Exxon Mobil (XOM) in the EQUITY Model
  • Sold 100% of Valero Energy (VLO) in the EQUITY LONG-SHORT Model

---

Yesterday we released Value Your Wealth – Part One  Introduction.  This series of RIA Pro articles will deeply explore value and growth strategies. Some of our ideas for future articles are included in this introduction article.

Over the last ten years a performance gap between growth and value has occurred on a scale only seen leading up to the 2001 tech wreck and the Great Depression. We believe this historic anomaly has important implications for investors when this market and economic cycle finally turn.  This series of articles will provide you a road map to investing and preserving wealth in what we believe will be a difficult environment for most investors in the future.

April 25, 2019

This morning 3M (MMM) reported earnings which missed markedly. Outlook was poor and they cut 2000 jobs. This, combined with Caterpillars (CAT) yesterday continues to suggest economic growth may be weaker than currently reported. Combined with a strong dollar, the knock off effects in the coming quarters may be persistent.

We closed out MMM at the open this morning at a cost of $ 195.6401

The Equity Portfolio has been updated for the sale.

 

April 24, 2019

*** Update: We got lucky and sold GS this morning at the open at 203 which protected our gains in the EQUITY TRADING account. VLO is not working well, and we will likely trim it out in the next day or so if it doesn’t perk up. Currently, this account is mostly cash as a majority of positions are grossly extended to the upside. However, we do not have a good setup to short the market either with bullish sentiment running to extremes. So, we will hold cash until an opportunity presents itself.

As noted yesterday, we took profits in XLK and added to our holdings in XLV. This is something we discussed in our weekly sector updates. With the Healthcare sector beaten down by political rhetoric, and with strong earnings, there is some value in the sector. Technology is extremely extended, so simply just taking some profits for now.

We are going to be taking some similar actions in the EQUITY model as well.  Review the Position Review for some of the areas we are looking at specifically.

 

April 23, 2019

We are working on taking profits in XLP, XLK, and XLY in the ETF Model and adding to XLV as we continue to roll into earnings season. No changes needed at the moment in the EQUITY Model.

In the meantime, catch up on your reading: (Click Image To Read)

April 18, 2019

I have been traveling this week, so I was unable to post the Portfolio Position Review yesterday. Since tomorrow is “Good Friday,” and the markets are closed, I am going to postpone the Long-Short Idea List until next week as “crazy” stuff can happen over a long holiday weekend.

SELECTED PORTFOLIO POSITION REVIEW

REALITY VS FANTASY: WHAT TO WATCH OUT FOR THIS EARNINGS SEASON

April 12, 2019

**Trading Update: With the market opening higher this morning on the back of JPM’s earnings (which we own long in the Equity Model) and surge in China Bank Credit, we are closing out our short hedge. We are looking for additional trading longs to add to the Equity Trading Long/Short account but most positions are egregiously extended at the moment.

If you are holding junk/high yield corporate bonds (rated below BBB-) or associated ETFs (HYG or JNK for example) we suggest reading our latest article on what to expect from junk bonds if the current economic cycle is coming to a conclusion. Click below for the article.

April 11, 2019

LONG-SHORT IDEA LIST

NEW TRADES FOR EQUITY LONG/SHORT PORTFOLIO

Bought 2-positions from the LONG analysis is today’s Long-Short Idea List

• Goldman Sachs (GS)
• Valero Energy (VLO)

Both J. Brett Freeze from Global Technical Analysis and Erik Lytikainen from Viking Analytics are both predicting a large move in the S&P 500 over the next week. This move could be UP or DOWN, but the bias is most likely to the downside.

Therefore we have hedged our portfolio with a Short S&P 500 position (SDS). 

If the market breaks to the upside we will close it out and add to our longs positions.

April 9, 2019

No trades for today as we await a very heavy Wednesday of Fed speak and FOMC minutes.

New Posts This Morning

Sector Buy/Sell Review

 

Fundamentally Speaking: Earnings Season Review & Outlook

April 8, 2019

Website Updates:

1. Asset sector pie charts in user portfolio and model portfolio
2. Profit & Loss calculations in user portfolios.
3. Model portfolio tabs changed to new tabs layout.

Catch Up On Your Reading

Major Market Buy/Sell Review

Real Investment Report: Experience Is The Only Cure

April 4, 2019

Rebalance Of Equity Portfolio Is Complete

As I noted on Tuesday, we were working on the rebalance of the Equity 60/40 portfolio. That process is now complete and the complete list of transactions is listed below.  We reduced positions that had grown well beyond portfolio weights and added to underweight positions. We did NOT add to Boeing (BA) at this time as we are waiting for both earnings announcements and further reports on ongoing investigations.

Click To Enlarge For Readability

We are also reviewing the ETF 60/40 Model for rebalancing as well and will likely have an announcement on that by next week.

We have recently added the ability to include SHORT POSITIONS in the RIA PRO Equity Long-Short portfolio. We are rebuilding our model currently to start implementing the trades we discuss on Thursday’s Long-Short Idea List 

(Note: The Long-Short Idea List is on hiatus today as we work through this process.

Note 2: We will be rolling out the ability to add short-positions in all user portfolios in the next couple of weeks along with a “live” version of the 401k Plan Manager.)

April 2, 2019

Slow News Day – Catch Up On Your Reading

 

April 1, 2019

All dividends and interest for March have been added to the cash balances of all three portfolios.

We are working on doing a system wide rebalance on all accounts this week for the quarter and ahead of the start of earnings season.

We will provide an update on all activity when the rebalance process is complete.

March 27, 2019

SELECTED PORTFOLIO POSITION REVIEW is now available.

TECHNICALLY SPEAKING: ARE WE GOING TO NEW HIGHS?

March 26, 2019

SECTOR BUY/SELL REVIEW is now available.

Transports violated their stop loss and need to be sold. Watch Financials as they are close to their stop-loss as well.
Market being driven by a narrowing participation.

TECHNICALLY SPEAKING: ARE WE GOING TO NEW HIGHS?

March 25, 2019

NEW MENU LAYOUT

We have reorganized the menu items to make them more intuitive in the research and portfolio construction process.

1. START – Catch up on daily portfolio alerts, commentary and blogs.
2. MACRO – An high level overview of what’s moving in markets and sectors.
3. IDEAS – Drilling down into markets and sectors to find out whats working and what’s not. 
4. RESEARCH – Found an idea – research it with charts, analyst reviews, etc. 
5. PORTFOLIO – Add it to your portfolio or watch list. 

NEW PORTFOLIO FEATURE: SELL SHORT

In our Equity Long-Short portfolio we have only been able to buy ETF’s which short the market as the mechanics in the portfolio tool did not allow for entering SHORT positions.

That has now been resolved.

In your portfolio, you can now SELL SHORT to open a new position and BUY TO COVER to close it out.

MAJOR MARKET BUY/SELL REVIEW is now available

ICYMI – REAL INVESTMENT REPORT

March 22, 2019

Equity Long-Short Portfolio

** Update:  Sold remaining 1/2 of 2x Short S&P 500 position today at $ 33.6728

March 20, 2019

Equity Long-Short Portfolio

** Update:  Sold 1/2 of 2x Short S&P 500 position pre-Fed announcement at $ 33.685

Equity Portfolio

** Update: FDX sold at $ 172

** Update: Bought 1/2 position of Micron Technologies (MU) at $ 40.49 before earnings.  Stop-loss is any downside break due to missed/poor earnings.

Selling Federal Express (FDX)

As noted in today’s PORTFOLIO POSITION REVIEW, below, we are selling Federal Express after a second dismal quarterly earnings report and forecast. In our management process, we can forgive a one quarter miss, but two quarters tends to represent a bigger issue for the company. We will come back to FDX later when things begin to show signs of improvement.

Snapshot:

• FedEx Corp. (FDX) reported fiscal third-quarter earnings of $739 million. 
• On a per-share basis, profit was $2.80. Earnings, adjusted for non-recurring costs, were $ 3.03 per share.
• The results missed Wall Street expectations. The average estimate was for earnings of $ 3.10 per share.
• Revenue was $ 17.01 billion in the period, short of forecasts for $ 17.64 billion.
• The short-fall in EPS was despite continued share count reduction which is problematic.

Click To Enlarge

SELECTED PORTFOLIO POSITION REVIEW is now available

 

March 19, 2019

SECTOR BUY SELL REVIEW is now available

ICYMI: MAJOR MARKET BUY/SELL REVIEW from yesterday.

March 18, 2019

With the market entering into the quarterly “blackout period” for stock buybacks, and with options expiration behind us, there is a decent probability of a short-term pullback to support given the short-term overbought conditions.

Given that setup, we bought a 2X S&P 500 inverse position (SDS) in the EQUITY LONG/SHORT portfolio to both hedge our Boeing (BA) trade and take advantage of a short-term correction through the end of the month.

REAL INVESTMENT REPORT is now available

March 16, 2019

REAL INVESTMENT REPORT is now available

March 15, 2019

LONG-SHORT IDEA LIST is now available

RIA PRO Sentiment Gauge is reaching the highest level seen in the last year.

March 14, 2019

EQUITY LONG-SHORT PORTFOLIO UPDATE

Tomorrow is QUADRUPLE witching as all options contracts for March expire simultaneously. This always creates volatility in the market and some of the recent runup in equities may be linked to impending option rolls.

Therefore, we have closed our recent 2X S&P 500 position until we get through tomorrow because leveraged funds are impacted by optionality. We will add the position back on a retest of support.

Also, as noted in today’s commentary, Erik Lytikainen has been nailing the oil market for the last 6-months. His analysis suggests a roughly 2 dollar drop in oil prices tomorrow during options rolls. We added a ONE DAY short trade on oil prices (SCO) which will be closed out tomorrow by the end of the day.

_____________

Note: I got waylaid on a couple of big projects yesterday and was unable to get the LONG-SHORT IDEA LIST generated. I will try and get that published later today.  My apologies for the delay.

EQUITY PORTFOLIO UPDATE

With the pullback and successful test of the 200-dma we add some exposures to our portfolio.

We have been light on financials so we added a starter position in JP Morgan (JPM) which compliments our current holding in Visa (V)

We also added a fundamental cheap utility company PPL Corporation (PPL) which trades at 12x earnings and a 23% profit margin.

After a series of negative reports and a vast majority of Wall Street analysts now negative on Apple (AAPL) we added 1/2 position as a trade and will look to build that out heading into their earnings report which will likely surprise to the upside. Risk/reward decent in the position currently.

We also add to our holdings of United Health Care (UNH) and HCA Healthcare (HCA) bringing those positions to full model weights as the pullback to support held.

GLITCH IN INDICES OVERVIEW FIXED

Yesterday, one of our users discovered a glitch in the indices overview sector where the commentary was not updating for each market. That has now been corrected.

March 12, 2019

ETF PORTFOLIO

As detailed in the SECTOR BUY SELL REVIEW below we added the following to our ETF Portfolio yesterday.

• XLV – full position
• XLE – 1/2 position
• IAU – second 1/2 position bringing it to a full position weighting.

EQUITY PORTFOLIO

Like our long/short portfolio discussed in yesterday’s trade notes we also closed our a small short S&P 500 position and added 1/2 position in Boeing (BA)

MAJOR SECTOR BUY/SELL REVIEW is now available

NEW CHARTING TOOLS

We have added two new charting tools to the chart menu.

If you click on the PITCHFORK you will now see the addition of Fibonacci Retracement tools.

Also, you can now take a snapshot of your chart and Tweet it out or share it as you wish.

March 11, 2019

EQUITY LONG/SHORT TRADING PORTFOLIO

This morning we bought a position in Boeing (BA) following the sell off on news of the crash over the weekend. Even if the two crashes of the 737 MAX are related to a structural design issue it will take years for a settlement to be reached and even longer to be paid out. (We can look at BP following the Gulf well blowout as an example.)

Therefore, in the short-term we thing there is a good trading opportunity as well as a long-term play as we added 1/2 of a position to our Equity Model as well. We will allow for weakness in the position as news works its way through the stock to add our second 1/2 position in the future.

Also, with the market short-term oversold as of the end of last week, we closed our our short S&P 500 (SH) position and added 1/2 position in 2x S&P 500 (SSO).

MAJOR MARKET BUY/SELL REVIEW is now available

ICYMI: REAL INVESTMENT REPORT

March 9, 2019

REAL INVESTMENT REPORT is out!

DID YOU KNOW – You can quickly look at the best performing sectors and see the top players in that sector. It’s a great way to come up with investment ideas if you are overweight or underweight sectors in your portfolio.

Click On MARKET DATA tab and scroll down to the S&P SECTORS link.  Then select the SECTORS RELATIVE STRENGTH sub-menu tab.

March 7, 2019

Portfolio Update:

No actions have been needed over the last couple of days. Given that we are carrying an overweight position in cash and many of our positions are at 1/2 weights, we are looking for a buying opportunity to add exposure during the correction/consolidation phase. Importantly, the market must hold the 200-dma which we will evaluate in the this coming weekend’s newsletter.

Long-Short Idea List has been posted.

Selected Portfolio Position Review is available.

DID YOU KNOW – You can compare all the FUNDAMENTAL STATS of your stock to its peers? Simply click on CHARTS and go to the FUNDAMENTALS STATS TAB

March 5, 2019

Portfolio Update:

We were stopped out of Walgreen’s Boots Alliance (WBA) on Monday and the equity portfolio has been updated. As we stated previously, we like the corner drug store model for a lot of reasons, but the market doesn’t agree with our assessment currently. We will come back to either CVS or WBA in the future when prospects improve.

Sector Buy/Sell Review has been posted.

DID YOU KNOW – We post our proprietary market internals for you to use in your analysis. Head over to the MARKET DATA tab and click on MARKET INTERNALS on the drop down menu.

March 4, 2019

Major Market Buy/Sell Review has been posted.

ICYMI: The Real Investment Report is out.

NEED SOME INVESTING IDEAS?  Head over to ACTIVE TRADER under the MARKET DATA tab.

March 2, 2019

Portfolio Update:

Dividends and Interest for February have been added to all accounts.

The Real Investment Report is now available

DID YOU KNOW…

If you click on ANALYST and input your favorite stock you can get all the current analyst ratings to help you with your homework.

February 28, 2019

LONG-SHORT IDEA LIST is now available!

DID YOU KNOW…

If you click on HEAT MAP and then select GRID option you can sort Stocks, ETF’s and Funds by a variety of measures to find great long and short candidates.

February 27, 2019

PORTFOLIO POSITION REVIEW is now available!

DID YOU KNOW…

That you can scan for the top 20 strongest RSI stocks to find investment ideas?

 

February 26, 2019 – Trade Alert

As we discussed in this mornings TECHNICALLY TRADING report, the odds of an unabated continued rally from this point is becoming much less likely.

Based on this analysis we are closing out our long-positions in the EQUITY TRADING LONG/SHORT portfolio and taking our profits. (Note: These transactions are ONLY in the trading account and are not applicable to the Equity portfolio which has a longer-term investment horizon.)

Today, we sold:

• RTN
• UTX
• HCA
• VMC
• MSFT 
• LLY
• YUM

We are maintaining our long/short hedge of SH and XLU at the moment as we await a better opportunity for the next set of trades.

February 26, 2019

SECTOR BUY/SELL REVIEW is now available!

Portfolio Update

As noted in this past weekend’s newsletter, yesterday we added starter positions in both Gold and Emerging Markets.

• Equity Portfolio – 1/2 position in IAU
• ETF Portfolio – 1/2 position in IAU and EEM

Gold and Emerging markets have been performing much more bullishly as of late but both are extremely overbought short-term. As always, we start with a “trading” position which limits our portfolio risk currently, and if the trade begins to work as we expect, we then add to the position for a longer-term investment.

We are still worried about the global economic weakness which will likely wind up negatively impacting emerging market stocks, but the recent break above the 200-dma, and retest, is a bullish trading setup short-term.

IAU is a hedge against rising inflationary pressures and global weakness. Again, as with our exposure in our Equity Portfolio to GDX, it is a hedge against equity risk in the short-term.

February 25, 2019

MAJOR MARKET BUY/SELL REVIEW is online.

Also, don’t forget to catch up on the weekend newsletter in case you missed it!

REAL INVESTMENT REPORT is now available!

February 23, 2019

REAL INVESTMENT REPORT is now available!

February 21, 2019

As I noted in this morning’s LONG-SHORT IDEA list, candidates are getting much harder to come by which is symptomatic of a market reaching more extreme overbought conditions.

Also, be sure and check out our new tools on the site:

This week we used our NEW HEAT MAP TOOL (Click on HEAT MAP in the menu bar above) to screen for our candidates. Change the layout to GRID and then short by a fundamental or momentum ranking.

As noted last week, the new SCAN TOOL also has several new screening parameters to include both fundamental factors (Piotroski Score) and momentum factors (Mohanram Score) along with Zack’s rankings.

More innovations are on the way…stay tuned.

February 20, 2019

This morning I posted our Selected Portfolio Position Review in which I discussed our holding of CVS Health Corp. (CVS).

To wit:

• CVS has been a laggard in the portfolio and was very close to being stopped out.
• The recent rally above short-term resistance is postive, but needs to rally above the long-term moving average to build momentum.
• The sell-signal is improving but we are likely going to sell the position here soon when we find a suitable swap to replace it with.
• Stops are moved up to $66

This morning, on rather disappointing earnings, CVS sold off and triggered our stop loss.

As discussed, since we like the “Corner Drug Store” business, we swapped into Walgreens Boots Alliance (WBA) with only a minor difference in cost basis.

Fundamentals for WBA are also comparable to CVS.

• P/E: 14x
• Fwd P/E: 10.56x
• Income: $5.20 Billion
• Sales: $134.59B
• Yield: 2.36%
• LT Debt/Equity: 0.45
• Price/Book: 2.76
• Price/Sales: 0.51

February 18, 2019

Markets are closed today, so it’s a great day to catch up on your reading.

February 16, 2019

Real Investment Report Is Now Available

February 14, 2019

**UPDATE – we closed out SSO this morning with break back below the 200-dma on pretty dismal economic data. We are leaving our hedge in place in the Long-Short portfolio. 

Long-Short Idea List is available

Today’s list was created using our newly UPDATED SCAN TOOL which now includes Zack’s ranking, Piotroski Fundamental Scores, and Mohanram Momentum Scores. You use the screen to reduce the potential universe of stocks quickly to improve you stock selections.  Give it a try by clicking SCAN in the menu bar above.

Yesterday, the market broke above the 200-dma which effectively now resolves the more bearish backdrop of the market from 2018. The next major resistance is at 2800 where the October and November highs reside.

If the market can clear that hurdle, then all-time highs are the next target.

Click To Enlarge

What is important, is where the market CLOSES ON FRIDAY. The breakout of the market above the 200-dma will be invalidated if it closes below that level on Friday.

If that happens the 200-dma will be reinforced as resistance for the market and it will be considered a failed test of that level.

For this reason, we have not closed out our short position in either of the equity portfolios. However, in the Equity Long-Short Portfolio we did neutralize the short position with 2x leveraged S&P 500 fund (SSO).  If the market rises and confirms the breakout, we will close the short-hedge.

There are still plenty of risks to markets over the intermediate term, but the momentum behind the equity rally remains bullish for now.

February 13, 2019

Selected Portfolio Position Review is available

Yesterday, the market ran into the 200-dma. As I noted in this past weekend’s missive, another test of the 200-dma was likely. However, what is important is whether the market can close solidly above the 200-dma by Friday’s close.

Click To Enlarge

If that happens then much of the bearish case for the markets will have been absolved, so any further weakness that maintains support at the 200-dma should be bought.

There are still plenty of risks to markets over the intermediate term, but the momentum behind the equity rally remains bullish for now.

Our equity portfolio remains somewhat defensive in nature with 17% cash currently, but we will deploy that cash opportunistically in the weeks ahead as as the market progresses.

February 12, 2019

Sector Buy/Sell Review Is Now Available

February 11, 2019

Major Market Technical Review

Equity Portfolio Update:

We added 1/2 position of UNH (United Health) to the portfolio. With support close by, we will watch and wait for a an opportunity to fill out the other half of the position.

February 9, 2019

Weekend Newsletter Is Out!

• Over view of market technicals and backdrop.
• Sector and Market analysis.
• Portfolio positioning
• 401k Plan Manager.

February 8, 2019

Yesterday, we added a small short-position to the Equity Portfolio as a hedge (we used SH) as the market is currently tracing out the pathway we laid out a couple of weeks ago.

Right now, the hedge is small relative to the size of the portfolio, but the composition of the portfolio is already very defensive plus we have an outsized holding of cash.

Support for this pullback is at the confluence of the Oct-Nov bottoms and the rising 50-dma. If that support holds we will add to our existing equity holdings and remove all hedges. If it fails, we will continue to build the hedge to protect capital.

Importantly, the risk IS elevated. As noted in the chart below, the rising wedge from the lows has been violated. The market MUST close in the green today otherwise the 100-dma and the 350-dma will be violated as well.

 

February 7, 2019

Long-Short Idea List Is Now Available:

As noted yesterday, the market is looking to pull back here a bit after running into the 200-dma which is in line with our path prediction described a couple of weeks ago. (Click To Enlarge)

We have a hedge ready to introduce to portfolios if the market closes below 2710 by Friday. Such a close would reflect a further decline back to a minimum of 2625-2675, but lower levels are certainly viable.

February 6, 2019

Selected Portfolio Position Review Is Now Available:

After the State Of The Union address we will sit back and wait for some type of corrective action before taking any further actions within portfolios.

I am looking to sell COST and CVS opportunistically and am looking for positions to swap into.

Two weeks ago I produced the following chart with a Green projection line for the market. The rally has exactly traced that projection since that time and hit our targets which is why we reduced some of our overweight core positions yesterday.

The ideal pullback target will be a retracement back to 2625 that holds. (Click to enlarge)

February 5, 2019

Sector Buy/Sell Review Is Now Available:

Also Read: Technically Speaking – Too Fast, Too Furious

ETF Portfolio Actions:  Reducing RSP, VYM adding XLB

Ahead of tonights “State Of The Union” address, we are adding Basic Materials to our ETF portfolio in anticipation of proposal for an infrastructure program.

We are offsetting that purchase with a reduction in both RSP and VYM as the market has come too far, too quickly and has hit our near term targets of the 200-dma.

Equity Portfolio Actions: Reducing DOV adding VMC

In the Equity model we are taking some profits in DOV which has had an enormous run following their earnings announcement and we are picking up VMC (Vulcan Materials) which should benefit from any talk about infrastructure spending plans. They also announce earnings next week which could be a positive catalyst for the company.

Equity Long/Short – Adding VMC and increasing SH

We are also adding VMC to the long/short portfolio for the same strategy as the Equity model, but given the extreme run of the markets in recent weeks we are also adding to our S&P 500 short position as a hedge.

January 31, 2019

Long-Short Idea List Is Now Available:

ETF Portfolio Additions:  XLK, XLI, XLF, XLY

As we have discussed previously, the market has been consolidating along the 50-dma and the Oct/Nov lows within a very tight range as shown in the chart below. (Click to Enlarge)

Yesterday, the Fed announced that not only would they be patient with further rate hikes, but also is open to moderate balance sheet reductions as need. In short, Jerome Powell admitted he was the “market’s b*tch.”

With that the S&P 500 broke out of its consolidation and above the running downtrend line from the 2018 highs. This  sets up a run to the 200-dma as the most likely outcome over the next couple of weeks.

We had launched the ETF model at the first of January at 1/2 weight. Yesterday, we added the positions as noted above and brought the model to full target weights of 75% exposure. This still leaves 20% in cash, 35% in fixed income and 45% in equities.

When the weekly “buy” signals are triggered we will bring the model up to full target weight on the equity side of the allocation.

January 30, 2019

Update: Market is rallying today and is running into the bottom of its downtrend from the 2018 highs. We are just going to wait to see what the Fed says and how the market interprets it. We have some trades on deck that we are looking to institute in both the Equity and ETF portfolios.

Also, make sure and read today’s portfolio position update.

Much as been made about the bullish ratio of price to forward earnings. In today’s article, Price To Forecasted Hope, we help make sense of the valuation model and explain why it might be sending the same false buy signal it sent in November of 2007.

“NEW MENU ITEM” – ANALYST RECOMMENDATIONS

Check out the new “tab” on the menu bar above labeled “ANALYST.” This page allows you to scan Wall Street and media buy/sell/hold recommendations for your favorite stocks. We also made updates to the portfolio page to make the Transactions table sortable and added a Closed Positions tab. Below is a screen shot of the new Analyst tab.

These changes started as requests from subscribers. Please keep them coming.

January 29, 2019

Sector BUY/SELL Review is available:

“NEW MENU ITEM” – ANALYST RECOMMENDATIONS

Check out the new “tab” on the menu bar above labeled “ANALYST.” This page allows you to scan Wall Street and media buy/sell/hold recommendations for your favorite stocks. We also made updates to the portfolio page to make the Transactions table sortable and added a Closed Positions tab. Below is a screen shot of the new Analyst tab.

These changes started as requests from subscribers. Please keep them coming.

January 28, 2019

Markets are set to open lower this morning as concerns over global growth are seeping into corporate earnings. While CAT beat estimates this morning, their outlook for global growth was weaker than expected.

The Fed is on deck this week, so all eyes will be focused on their statement with respect to any guidance on potential ceasing rate hikes and balance sheet reductions.

We will likely hold off on any portfolio changes until after the announcement.

Be sure and read today’s recommendations for the major markets.

Also, catch up on all of our sector and market analysis from this weekend’s newsletter.

January 25, 2019

** UPDATE #2 **

In the Equity Account we sold ABBV and PFE.  Both positions broke down out of consolidation patterns suggesting lower price levels for now. ABBV had a poor earnings announcement and performance of both PFE and MRK has been extremely weak.  We BOUGHT 1/2 position in HCA as we need Health Care exposure and added to our position in GDX.

** UPDATE #1 **

In the Equity Trading Account we sold AAP and AZO.  Both positions broke down out of consolidation patterns suggesting lower price levels for now. 

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As noted yesterday, we made added some equity to both the trading and equity model.

This morning, futures are pointing sharply higher on reports from the WSJ that the Fed is considering ending their Quantitative Tightening (QT) process much sooner than expected. To wit:

“Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight.

Officials are still resolving details of their strategy and how to communicate it to the public, according to their recent public comments and interviews. With interest rate increases on hold for now, planning for the bond portfolio could take center stage at a two-day policy meeting of the central bank’s Federal Open Market Committee next week.“

Given the weakening economy, pressure from the Administration, and the recent market correction, it is not surprising to see the Fed buckle to pressure from their member banks.

Despite a 10-year economic recovery, the Fed, the markets, and the economy are still reliant on “emergency measures” for support.  What could possibly go wrong?

However, for now, the markets are moving back into a much more “bullish mode.” With February fast approaching, which tends to be a weaker month, look for pullbacks to support to begin increasing equity exposure.

January 24, 2019

We made several portfolio changes today. (All portfolio models have been updated)

Equity Model

We added 3 new positions at 1/2 weight. (With the market very overbought we are looking for a pull back to add to our holdings at a better cost basis and with better risk/reward measures)

MSFT – Microsoft Corp.

UTX – United Technologies

YUM – Yum Brands (From our long-short idea list)

Given that we are only about 1/2 weighted within our equity model currently, we have temporarily swept our excess cash into an ultra-short Treasury bond ETF:

BIL – 1 to 3 Month Treasury

ETF Model

We are currently weighted only at our core holdings (RSP, VYM, IVV)

We have swept excess cash into BIL as a temporary place holder until we get a better risk/reward entry point for increasing exposure to equity risk.

January 23, 2019

Markets sold off yesterday and bounced off of the first level of support as I laid out in this past weekend’s RIA Report.

Pathway #2: Given the extreme overbought condition of the market, a pullback is likely. The most bullish would be a retest of the Oct/November lows that works off the short-term overbought condition. This would provide the best opportunity for a push above the 200-dma. Given the overbought short-term condition of the market, the compressed rise in prices, and extension from the lows, a correction is likely to entail a bigger draw down. (Probability 20%)

As shown, the market pulled back to that first level of support.

(Click to Enlarge)

The good news is the market did hold on to both the 50-dma and previous support line running back to January of 2018.

That wasn’t going to be the case until Larry Kudlow came out late yesterday to say the meeting China’s delegation had NOT been called off. I am pretty sure this will likely turn out to be a fallacy as we have seen both the Fed and the White House panicking over the recent decline. As such, we have moved into an environment where every pullback has to be met with reassurance.

Importantly, the overall downtrend is intact and there is a fairly high probability that current support will fail in fairly short order. Remain defensive for now.

January 22, 2019

Markets are set to open lower this morning as trade tensions and global growth concerns return to the forefront.

While earnings have been “okay” so far, as I noted in today’s “Fundamentally Speaking” the majority of the beats are coming in against sharply lowered estimates. In fact, despite all of the media “hype” about exploding earnings, both revenue and earnings are slated to have a negative growth rate for the quarter.

For now we are watching the markets carefully. We remain underweight equity and over-weight cash and fixed income as this rally has run into important resistance and most of the short-covering, which has fueled the rally from the December lows, appears to be completed.

The chart below lays out potential retracement ranges for a pullback with the most bullish in “green” and moving to the most bearish in “red.”  My suspicion currently is we see a 5% pullback from current levels which would pull the S&P 500 back to the 50% retracement level wiping out half of the gains from the December 24th low. (This is an important point not to be overlooked. While the media often dismisses pullbacks by saying “yes, the market pulled back 5% after advancing 12%, the reality is that decline wiped out 50% of the previous gains.

(Click to Enlarge)

With markets extremely overbought short-term, remain cautious for a better opportunity to increase exposure.

January 21, 2019

On Friday, bonds provided the pullback that we had been looking for to add to our fixed income holdings. As shown in the chart below, the long-term trend in bond indicators are all signaling the next leg of the “bond bull” market.

While this doesn’t mean that interest rates can bounce up back toward 3.0%, the overall trend of rates is going lower over the next couple of years. Given the rising risk of a recession in the next 24-months,  it is highly likely that rates will ultimately fall below 2%.

In the models we added to our existing bond holdings:

• DBLTX – Doubleline Total Return Fund for GNMA exposure.
• GSY – Short-duration bonds which will protect against rate volatility.
• SHY – Same as GSY but with a U.S. Treasury based structure for increased credit quality.
• TFLO  – Treasury floating rate fund for increase credit quality. 

In a recession, corporate bonds are at the most risk of declines in prices which is why our focus currently is on duration and credit quality. When bullish trends are firmly established we will begin to add positions to add to duration to participate in the rate decline.

NOTE: In our actual client portfolios we use individual bonds but in order to get consistent and stable pricing across models we are using the above holdings as a “proxy” for our client portfolios. 

January 18, 2019

In our Equity Trading (Long-Short) Account we added the following positions this morning:

This adds additional long-exposure to the portfolio while we still carry our short hedges.

We currently have 3-4 equity positions we are looking to short as well and are just waiting for the right positioning within the overall market to increase our short-book further.

January 16, 2019

Yesterday, we added to our existing XLU trade in the equity trading portfolio and add 1/2 of a position to the ETF model.

As discussed in this past weekend’s newsletter, the Utilities sector continues in a very bullish trend currently and is also a defensive position against potential market weakness.

The chart below shows the market rally from the December lows. Most importantly note the rather dramatic plunge in volume on the rally at a point where the market is very overbought short-term and the advance-decline remains in a substantial downtrend.

(Click to enlarge for readability)

As stated yesterday:

“I continue to believe, currently, that at a minimum we will retest lows over the next couple of months. This is why we remain very underweight equities across all models currently.

However, if the market is able to rally above resistance and begin to reverse the negative trend of the market currently in place, then we will adjust accordingly and increase equity risk. However, such is not the case currently.”

We remain cautious for now and will look for a better opportunity to add equity exposure tactically.

January 15, 2019

I wanted to draw your attention to the NEW DAILY posts we are producing for you each day. Today, we are covering the major sectors of the market with technical entry and exit points for traders.

SECTOR BUY/SELL REVIEW

As I discussed in today’s technically speaking post, the recent rally in the market has been nice but has done little more than retrace most of the breakdown from the October/November lows.

With a lot of overhead resistance, the market back to short-term overbought conditions, and volume on the decline, as shown below, there is not a lot of reward currently relative to the potential risk of a retest of December lows.

I continue to believe, currently, that at a minimum we will retest lows over the next couple of months. This is why we remain very underweight equities across all models currently.

However, if the market is able to rally above resistance and begin to reverse the negative trend of the market currently in place, then we will adjust accordingly and increase equity risk. However, such is not the case currently.

January 10, 2019

Trade Update: In the Equity Portfolio we sold the following stocks:

• AXP
• CDW
• MDT
• MSFT
• UNH

As we have mentioned on numerous occasions, we have been looking for the market to bounce from extreme oversold conditions to reduce our equity exposure. Given overhead resistance and the unwind of oversold conditions we reduced our equity exposure. At noon, we sold the shares listed above accounting for approximately 6% of the portfolio.

January 9, 2019

Trade Update:

In our newly created Equity L/S Trading Portfolio, located in the Portfolios tab – RIA PRO we made our first trade.

We purchased:

• 50 Shares of XLU (SPDR Utility ETF) at 52.875 representing 2.6% of the portfolio
• 170 Shares of SH (Proshares short S&P 500) at 30.275 representing 5.1% of the portfolio

These trades are part of the first leg into a larger trade. Currently, and subject to change, we expect to own 5% XLU, 10% TLT (iShares 20yr+ Bond ETF), and 15% SH. This combination of positions should do well if the market resumes its bearish trend. The S&P 500 is currently hitting the underbelly of many resistance levels which provided us the rationale to put on these opening trades. We do believe there is a decent chance the market can rally further so we will wait to add to the trade.

We will monitor the trade and the market closely and add to the position or close it if necessary.

 Equity L/S Trading Portfolio Description

This portfolio is completely flexible and will take on trades which are both long or short. The portfolio can buy stocks, ETF’s, or mutual funds OR can be fully invested in cash.

There is no defined holding period for any position bought which means it can be opened and closed within the same trading day.

When trades are placed in the trading account we will report those trades after the close of business.

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As noted yesterday, the rebound from the December lows is set to continue today as hopes for a resolution of the “Trade War” with China is close.

Given that this whole situation was started by the current Administration, we expect the announcement to be little more than a “cease fire” for some period of time and talks to resume later. The goal of both the U.S. and China delegations is to remove the “trade war” off of the headlines and relieve the economic pressures on both countries.

In the meantime, the markets are approaching our initial resistance point at 2600-2650. There is a potential that if the markets can break above that resistance we could see a retest of the the previous November/December highs. However, that is likely the extent of the rally before we ultimately see a retest of recent lows.

However, if you are looking for long and/or short candidates for your portfolio, RIA PRO shows you the best and worst performing stocks each day under the “Active Trader” tab. As always, momentum tends to run in one direction for a while, so strong players tend to remain strong, and the weak can be shorted.

There are a tremendous number of hidden gems on the site so explore and feel free to ask us questions if need help.

Have a profitable day.

January 8, 2019

NOTE: We have launched 4-new reports that will be produced regularly:

• Monday – Major Market Buy/Sell Analysis
• Tuesday – Major Sector Buy/Sell Analysis
• Wednesday – Portfolio Position Technical Review
• Thursday – Watch List Review

If you have any suggestions to improve these reports, please let us know.

Market Update

The market continues to rally following the deeply oversold condition seen Christmas Eve. As noted by the “Technical Measures” gauge on the right, that gauge fell to 6 during the recent sell off. To understand the importance of that oversold condition I have overlaid the technical measure with the S&P 500 index.

While technical measures have rebounded over recent days, the previous low read of 6.47 was on of the lowest seen during previous corrections and bear markets.

IMPORTANTLY: Note that during real bear markets, the indicator tends to reach lows as seen recently. However, during previous bull market the lows tend to remain around a reading of 50. During the last decade, when lows below 20 were reached, which would normally indicate the onset of a bear market, either the Fed or Central Banks stepped in with liquidity. This time, Central Banks are extracting liquidity which may suggest we see a retest of recent lows before the current corrective cycle is complete.

Our target for this rally remains 2550-2600.

January 6, 2019

As we noted previously, the models we built on RIA PRO were replicas of the models we run internally at RIA Advisors for our clients. However, the models were NOT total return as they did not include the dividends, interest, and distributions from the underlying holdings.

Therefore, as we have been noting over the last couple of months, we have launched THREE new LIVE portfolios with each tracking a LIVE account we manage at TD Ameritrade.

The 3-models are:

1. 60/40 Equity Portfolio
2. 60/40 ETF Portfolio
3. Trading Portfolio

Equity Portfolio – Start Date 1/4/2019

The portfolio was bought into the same holdings which are currently owned by our equity only clients. These holdings will be managed according to the same technical and fundamental processes that we employ at RIA Advisors.

We are using ETF’s and Mutual Funds for the fixed income portion of the model.

Trades will be reported AFTER the close of business when they are made.

ETF Portfolio – Start Date 1/4/2019

This portfolio is comprised of all ETF’s and trades will be reported AFTER the close of business when they are made.

We have currently bought 1/4th of our CORE Equity and BOND sleeve so far. We will continue to build out the model opportunistically until we get to full weightings.

Trading Portfolio – Start Date 1/4/2019

This portfolio is completely flexible and will take on trades which are both long or short. The portfolio can buy stocks, ETF’s, or mutual funds OR can be fully invested in cash.

There is no defined holding period for any position bought which means it can be open and closed within the same trading day.

When trades are placed in the trading account we will report those trades after the close of business.

________________

At the end of each month all dividends, interest, and distributions will be added to the CASH balance of the portfolio as they are reported on the account statements.

Furthermore, in the next couple of months we will add performance tracking of the portfolio over different time frames for comparison purposes.

Thank you for your patience.

December 26, 2018

As I noted yesterday, the market is sitting on very important long-term support and needs to defend current levels. To wit:

“Currently, the market has started a mean reversion process back to the 200-week (4-year) moving average. As you will notice, with only a couple of exceptions, the 200-week moving average has acted as a long-term support line for the market. When the market has previously confirmed a break below the long-term average, more protracted mean-reverting events were already in process.”

“While, the bulls remain in charge for the moment with the market sitting just a few points above the long-term average. A weekly close below 2346 on the S&P 500 would suggest a deeper decline is in process.”

After a brutal sell off over the last 8-trading days, US equity futures are rebounding from overnight trading which saw the E-mini initially tumble 1% early in the overnight session, then rise as much as 0.6% in yet another illiquid session boosted by Trump’s latest attempt to talk up markets after an apparent de-escalation in tensions between the president and the Fed chair and Treasury Secretary. Earlier, Asian stocks outside of Japan dropped 0.2% to a two-month lows catching down to Monday’s US market rout, while Europe was mostly closed for trading.

S&P 500 contracts gained 0.6% as of 7am ET after falling as much as 1.1 percent earlier. Futures on the Nasdaq 100 Index and the Dow Jones Industrial Average advanced 0.4 percent and 0.5 percent, respectively. With the S&P closing on the edge of a bear market, traders will be looking for confirmation of more liquidation selling or else an attempt at lifting stocks from massively oversold levels.

Top Overnight News

• U.S. stock-index futures whipsawed between losses and gains, as investors assessed comments from President Donald Trump that he was confident in Treasury Secretary Steve Mnuchin and the American economy while the benchmark index sat at the edge of plunging into bear market territory
• President Trump’s frustration with Mnuchin is ratcheting up after his attempts to calm Wall Street failed, CNN reported, citing a source close to the White House.
• Japanese stocks rose for the first time in six days as electronics makers staged a rebound after the Nikkei 225 Stock Average tumbled into a bear market on Tuesday
• Bank of Japan Governor Haruhiko Kuroda said growing overseas economic risks and recent market volatility are precisely the kind of circumstances that call for sticking with powerful and sustainable stimulus
• Oil in London fell below $50 a barrel for the first time since July 2017 as broader financial market turmoil and worries over U.S. supply countered signals from the OPEC+ coalition that it may extend or deepen output cuts
• Gold is rallying into the end of 2018 as turmoil in global equities, the partial U.S. government shutdown and concerns about the outlook for next year stoke demand, lifting prices to the highest in six months

December 24, 2018

As noted in this past weekend’s newsletter, the market is EXTREMELY oversold and a bounce is likely in the near term as portfolio, pension, and hedge fund managers rebalance for end-of-quarter reporting.

Our composite technical indicator, as shown below, is at 6.85 (on a 0-100 basis) which is one of the more severe oversold readings seen historically. It is suggestive of a fairly strong reflexive rally in the month or so ahead particularly as we flip the calendar. However, this is a trading bounce only and longer-term investors should look to use the bounce to reduce equity exposure further. It is unlikely we are going to resume the bull market in 2019 based on the current economic and fundamental backdrop.

REMINDER!

RIA PRO Model Changes

The current RIA PRO portfolios were built during the BETA Testing phase of our development. As such, the portfolios are CAPITAL APPRECIATION only and do not reflect the interest income from the bond holdings or the dividends from the equity holdings.

Starting in January, we will discontinue the three current portfolios and will swap to 3-portfolios tied to live accounts which gives you three important advantages:

1. Trades will be able to reported “real time” instead of a 3-day delay. 
2. Interest and dividends will be credited the the portfolios on a monthly basis
3. Total returns, including all costs, will be reported.

We apologize for any inconvenience but we feel this will be a much better way to align the RIA PRO models to actual results for tracking purposes. We will keep you apprised of progress over the next month before we make the final changes.

Thank you.

December 20, 2018

Trade Alert

We sold IVV from all three portfolios. In the 60/40 ETF Model we reduced the position by 5 percent from 14.50 to 9.50. In the other two portfolio we sold the entire position.

We sold the entire position of XLV in the 60/40 ETF Model.

We are increasingly convinced a bear market has begun. We will not get concrete evidence until month end. Given the sloppy price action and the tone from the Federal Reserve and Jerome Powell, we thought it appropriate to reduce our exposure further.

It is possible the market bounces as it is extremely oversold. However, we maintain that these bounces are opportunities to sell and should not be mistaken for a resumption of the bull market. If the technical outlook changes we will reverse that stance but for the time being we believe conservatism is the best course of action.

Changes in the portfolios as shown will occur shortly.

 

REMINDER!

RIA PRO Model Changes

The current RIA PRO portfolios were built during the BETA Testing phase of our development. As such, the portfolios are CAPITAL APPRECIATION only and do not reflect the interest income from the bond holdings or the dividends from the equity holdings.

Starting in January, we will discontinue the three current portfolios and will swap to 3-portfolios tied to live accounts which gives you three important advantages:

1. Trades will be able to reported “real time” instead of a 3-day delay. 
2. Interest and dividends will be credited the the portfolios on a monthly basis
3. Total returns, including all costs, will be reported.

We apologize for any inconvenience but we feel this will be a much better way to align the RIA PRO models to actual results for tracking purposes. We will keep you apprised of progress over the next month before we make the final changes.

Thank you.

December 18, 2018

Be sure and read today’s post on the market as I walk through some of the longer-term underpinnings of the market.

We have been giving the market a little room here due to deeply oversold conditions, but that has proved problematic as the markets have been unable to muster a rally. However, with the Fed on deck today and tomorrow, it is likely the market will rally on “dovish” comments from the Fed.

We will be using that rally to raise more cash heading into the end of the year as the markets have now changed their overall trend from bullish to bearish.

This morning futures are higher following better than expected housing data (less bad than expected.)

• Dow: +128
• S&P 500: +14.25
• Nasdaq 100: +39.75
• Crude Oil: -1.39
• Gold: -0.20

The target for the rally is 2600 which is likely all we are going to get for now. Be a scale up seller.

Top Overnight News from Bloomberg

• European Union will rule out doing mini deals with the U.K. to ease the chaos of Britain crashing out without a divorce agreement, and instead take unilateral steps to protect its interests, a person familiar said
• U.K. said to prepare migration policy favoring high earners, after months of arguments over which applicants should be given preference
• Chinese President Xi Jinping said his government will continue a multi-year effort against pollution, poverty and financial sector risks, while underlining commitment to the multilateral global trading system
• China Daily reports individual income tax reduction will be on top of Chinese government’s task list next year, citing an unidentified official
• President Trump slammed the Fed on the eve of its policy meeting for “even considering” another rate increase, and suggested the central bank has no reason to move because inflation is low
• Fed rate hikes are extremely rare when stocks are this beaten up
• Reserve Bank of Australia struck a slightly dovish tone in minutes of its last policy meeting of the year
• Bank of Canada Governor Stephen Poloz says he isn’t expecting a recession in 2019. The economy is operating near capacity and inflation on target means rates should be more normal and move toward a neutral range of 2.5% to 3.5%
• China’s holdings of notes, bills and bonds dropped for a fifth month to $1.14t in October, from $1.15t in September, according to Treasury Department data
• Crude settled below $50 a barrel in New York for the first time in more than a year and continued falling in after-hours trading
• The EU will rule out doing mini deals with the U.K. to ease the chaos of Britain crashing out without a divorce agreement, and instead take unilateral steps to protect its interests, a person familiar with the bloc’s plans said
• M&G Investments is building up its war chest of U.S. Treasuries on wagers that yields in the world’s most liquid bonds are likely near their peak
• This week, Sweden’s central bank may be facing its most difficult meeting since 2011. That’s the last time the bank raised interest rates and, in so doing, set in motion a cycle that ultimately ended in the deployment of crisis measures
• Germany’s federal government plans to increase gross borrowing by around 15 percent to 199 billion euros next year to accommodate refinancing of the nation’s “bad bank” fund that was set up during the height of the financial crisis

December 17, 2018

As I noted in this past weekend’s newsletter:

“Given the Fed meets next (this) week, we are going to give our trade just the smallest margin of movement currently for three reasons:

1. The market is deeply oversold which will contribute to a bounce on any bit of good news.
2. The index closed lower than where it opened for 4-consecutive days. Such selling is often met with a one or two day bounce.
3. Lastly, as noted previously, distributions for mutual funds are now mostly complete and they have to rebalance portfolios before the end of the reporting year. With next week having the highest historical probability for a rally, a more ‘dovish’ than expected Fed could spark a bit of buying frenzy. 

While we are expecting an oversold rally, remember after having reduced exposure in portfolios previously, and carrying a much heavier weighting in cash, we are giving the market time to figure out what it wants to do. Given the consolidation range over the last couple of months, it is too risky to be either overly short, or aggressively long, currently. Cash remains the best hedge currently.

But let me repeat the most important point:

‘The expected rally IS NOT the next version of the ‘bull market.’ Nor does a rally mean the ‘bear market’ is over. It will be a counter-trend rally to sell into.’”

This morning futures are pointing lower at the open after Europe’s rally fizzled follow extremely poor retail sales data.

• Dow: -76
• S&P 500: -6
• Nasdaq 100: -15.75
• Crude Oil: +0.62
• Gold: +2.40

Top Overnight News from Bloomberg

• The dollar’s gains over the past three months have spurred hedge funds to cut bullish bets to the lowest since June. Leveraged funds trimmed positions wagering on gains in the greenback by the most since September, according to the latest data from the U.S. CFTC based on eight currency pairs
• Donald Trump won’t be sitting down with Special Counsel Robert Mueller to answer more questions in his investigation into election interference, Rudy Giuliani, the president’s attorney, vowed on Sunday
• U.K. Prime Minister Theresa May will attack supporters of a second Brexit referendum on Monday as she explains to Parliament why European Union leaders rebuffed her attempt to make her divorce deal more attractive to lawmakers
• Australia is on track to return to the black for the first time since the global financial crisis, almost doubling the size of its projected surplus in fiscal 2020, according to projections from the Treasury
• The Italian government will trim its deficit target for next year in its latest proposal that seeks to avoid EU sanctions for violating the bloc’s budget rules, the Ansa news agency reported
• The toll Brexit is taking on the U.K. housing market was laid bare in surveys published Monday

December 14, 2018

Another disappointing rally attempt yesterday which started out to the upside once again, but failed.

While the market did close “flattish” for the day, the price action this entire week has been dismal. As shown, every day has been sold off after the open.

The failure of the market to maintain a rally is not a good sign, however, with mutual fund distributions now behind us for the year, next week provides the best opportunity for a rally as portfolio managers need to rebalance their holdings for the end of year reporting period.

Nonetheless, our trade is simply not working at this point. Stops remain tight while we are still looking for a rally into the Fed meeting next week.

Economic data continues to come in weak, not only domestically, but globally as China reported weak economic data this morning. Retail sales were not exciting at the headline, but core sells were up 0.9% for the month which was not surprising given we are in the Christmas holiday shopping season. Overall, retail sales have been disappointing for so far and suggests the consumer is slowing down.

This morning looks to open weak with futures down -22.00 on the S&P 500.

Let’s see if buyers show up after the open.

December 13, 2018

It was a disappointing rally yesterday which started out strongly to the upside with a more than 40-point advance on the S&P 500 to only end up 14-points by the end of the day.

It continues to be a struggle for the market to find footing as each step forward (positive news on trade) is offset by another shock from the White House (immunity given to publisher of National Enquirer.)

Yesterday, was an exact clone of both Monday and Tuesday of this week and the failure to maintain an advance in the market is becoming markedly more concerning particular as we continue to “eat up” the oversold condition that previously existed.

Futures are higher again this morning with the S&P up +10.25, however, Oil is fading back to 50.61/barrel.

Interest rates bounced up a bit yesterday from an extremely overbought condition, look to add to fixed income holdings if rates approach 3% on the expected rally in the market.

This morning the economic data continues to worsen suggesting a much weaker economic environment:

Export Prices:  -0.9%

Export Prices Ex-Ag: -1.0%

Import Prices: -1.6%

Import Prices Ex-Oil: -0.3%

(These data points, as we have stated previously, continue to show there is no real “risk” of inflation. This puts the Fed in a much tighter spot on continuing to hike rates into 2019.)

Stops remain tight on our trading position in IVV.

Let’s see how the day goes.

December 12, 2018

As noted in yesterday’s update:

“We added 5% of IVV as a trade at 267.32 per share. I will update the model portfolios later today.”

Yesterday, the market opened up about 30 points. We waited for the mid-day fade to add our trading position, however, we were a bit early as White House antics drug the market into negative territory late yesterday. Fortunately, the market recovered back above our stop-loss level of 2633 before the close.

Today, the market looks to open higher as news of progress with China on trade hit the wires last night. Also, President Trump also stated he could intervene into the Huawei case if needed to keep “trade talks” moving forward.

Given that President Trump has staked his entire record of success as a President on the direction of the stock market, it is not surprising to see him react to the market in terms of policy. This is not the way to successfully govern, but for now it helps our trading positions so we will take it.

At 6:50am futures are solidly higher.

Crude Oil +1.10
Gold +2.40
Dow +237.00
S&P 500 +24.75
Nasdaq 100 +75.75

Of course, this is an exact clone of yesterday’s open so we need to see it maintain during the day.

We are moving our stops down to yesterday’s lows of 2620 (on a closing basis) for now, but will begin raising stops if the expected rally forms.  Target is 2730-2740.

December 11, 2018

**UPDATE 1: We added 5% of IVV as a trade at 267.32 per share. I will update the model portfolios later today.

Be sure and read today’s TECHNICALLY SPEAKING on the “Santa Rally.”

Yesterday,  the market did indeed break the “neckline” and successfully tested the 2018 lows. However, since the market rallied back, and closed, above that support level the “break” is not valid. This keeps the current consolidation range intact for now.

With the market very oversold, a reflexive rally is likely over the next few days.

We are looking to add a “trade” to portfolios for a potential rally back towards the 2750 level by Christmas. We will maintain a tight stop at 2633 for now. If the trade works we will move the stop up daily.

December 10, 2018

As I noted on Friday, be sure and read this week’s market report as I cover the short, intermediate, and long-term technicals.

This morning, futures are pointing lower suggesting a break of the neckline as I laid out previously.

With the market very oversold on a short-term basis, and sentiment much more negative, don’t make any hasty decisions today. What will matter is where we finish the week.

• If the market finishes the week BELOW the neckline, then look for a failed rally back to the neckline to institute “short market” positions.
• If the market finishes the week ABOVE the neckline, then the break will be negated and we are back within the consolidation band looking for a resolution.

As I noted on Friday, a rally is highly likely. We continue to suggest using any rally to reduce risk and rebalance accordingly.

December 8, 2018

Be sure and read this week’s market report as I cover the short, intermediate, and long-term technicals. A couple of important notes, however.

• The market is testing the important neckline support of the current “head and shoulders” formation as noted earlier this week.

• The market is very oversold on a short-term basis and sentiment has gotten much more negative. The market is looking for ANY good news to rally on which could come over the next two weeks for various Fed officials dropping “trial balloons” before the December 18-19 meeting. 
• Given President Trump has staked his entire Presidency on the “market” as a measure of his “success or failure,” look for tweets, comments, or actions which will be lofted out there to try and support the markets. 

As noted, with the market very oversold, a rally is highly likely. Use any rally to reduce risk and rebalance accordingly. Being overweight cash remains the optimal hedge in an uncertain market.

REMINDER!

RIA PRO Model Changes

The current RIA PRO portfolios were built during the BETA Testing phase of our development. As such, the portfolios are CAPITAL APPRECIATION only and do not reflect the interest income from the bond holdings or the dividends from the equity holdings.

Starting in January, we will discontinue the three current portfolios and will swap to 3-portfolios tied to live accounts which gives you three important advantages:

1. Trades will be able to reported “real time” instead of a 3-day delay. 
2. Interest and dividends will be credited the the portfolios on a monthly basis
3. Total returns, including all costs, will be reported.

We apologize for any inconvenience but we feel this will be a much better way to align the RIA PRO models to actual results for tracking purposes. We will keep you apprised of progress over the next month before we make the final changes.

Thank you.

December 6, 2018

Comments Wednesday morning from the Chinese that progress was indeed made on a trade truce at the G-20 meeting, had futures rallying very mildly. Unfortunately, the markets were closed for President Bush’s funeral. There was hope of some carry through into today until news broke last night of the arrest of Chinese national in Vancouver.

Ms. Meng Wanzhou , the CFO of Shenzhen-based Huawei, the world’s second-largest maker of telecommunications equipment,  was arrested in Vancouver on December 1. She is sought for extradition by the United States for an attempted sell of embargoed Hewlett-Packard equipment to Iran’s mobile-phone operator. A bail hearing has been set for Friday for violation of U.S. sanctions against Iran. 

To understand the magnitude of the arrest, just imagine if China had just arrested the child of Tim Cook or Jeff Bezos.

Importantly, Chinese officials stated this morning:

“The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim. The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou.

We will closely follow the development of the issue and take all measures to resolutely protect the legitimate rights and interests of Chinese citizens.“

With that also went any hope of a “trade truce” or “trade negotiations” which is a fight President Trump continues to lose, and can’t win, with China.

As such, futures are down sharply this morning and the markets are threatening to break critical support levels. As I discussed yesterday:

“Most importantly, the most recent failure at key resistance levels has set the market up to complete the formation of a ‘head and shoulder’ process. This is a topping pattern that would suggest substantially lower asset prices going into 2019 ‘IF,’ and this is a key point, ‘IF’ it completes by breaking the lower ‘neckline.'” 

The neckline currently resides at 2630ish and support of the closing October lows at 2640. A confirmed break of those levels will suggest a further decline in the market of the same distance as the previous decline, which in this case, would equate to roughly 300 points of downside.

We will continue holding higher levels of cash and fixed income and any confirmed break will increase our cash holdings considerably.

December 5, 2018

The “sell off” yesterday was much different than what we have seen previously. As I noted in recent missives, during the previous declines volatility, bond prices, and gold didn’t confirm any “panic” in the market. Yesterday, that changed as 10-year Treasury bond yields plunged below 3% as money sought the safety of Treasuries.

As I noted in yesterday’s Technical Update, which was posted before the opening bell:

“We did add some equity exposure to portfolios on Friday, but are still holding a higher level of cash than normal. As shown below, the 61.8% Fibonacci retracement level, and the 2016 bullish trend line, have remained formidable adversaries to the previous rally attempts. However, if the lower “sell signal” is reversed, such would likely coincide with a breakout above resistance and confirm a new uptrend is underway.”

“IMPORTANT: It is the success or failure of this rally attempt will dictate what happens next.

1. If the market remains above the 50-dma AND breaks above resistance at 2820, then another attempt at all time highs is likely. (Probability Guess =40%)
2. However, if this rally fails such will result in a continuation of the correction back to recent lows. (Probability Guess = 60%)

So, why did I give Option #2 a greater weighting?

This is because, despite the recent oversold surge from lows, the primary backdrop of the markets has not changed markedly.

• The “trade truce” was nothing more than that. China is not going to back off its position on “Technology Transfers” as that is the key to their long-term economic future. This means that either Trump caves into China or we will be back to a full on “trade war” in 2019.
• The Federal Reserve is still reducing their balance sheet by $50 billion per month which has removed a primary buyer of U.S. Treasuries at a time when the Government has gone on an unfettered spending spree.
• With the Democrats in control of the House, there will likely be “no” constructive legislative action to note in the next year. However, there is almost an absolute guarantee of more anti-Trump actions being lofted from the “Pelosi House.”
• Valuation remains extremely elevated despite the recent correction. 
• Most importantly, year-over-year earnings growth rates are set to deteriorate markedly in 2019 as both the effect of the 2018-tax cuts vanishes and end-of-year estimates still remain way too high.
• The deterioration in credit is accelerating
• Economic growth has likely peaked.”

Most importantly, the most recent failure at key resistance levels has set the market up to complete the formation of a “head and shoulder” process. This is a topping pattern that would suggest substantially lower asset prices going into 2019 “IF,” and this is a key point, “IF” it completes by breaking the lower “neckline.” 

For now, we are going to continue holding higher levels of cash and allow our fixed income holdings to pick up the slack.

December 2, 2018

After Fed Powell’s reversal on rate policy last week, the market finally got the catalyst for a bounce. On Friday morning, we anticipated the Trump would also soften his “hardline” stance on China which occurred over the weekend as Trump agreed to a “truce” with China for another 90-days. While this “truce” doesn’t change anything at all with respect to “tariffs,” or China, it does remove a short-term headwind which will allow the bulls to rally the market into the end of the year.

The sell-off in October and November violated many of our stop levels which led to a larger cash position than we would like heading into the end of the year. Friday morning we added some equity back into portfolios by starting with 1/2 positions in:

• AEP – AMER ELECTRIC POWER
• AXP  – AMERICAN EXPRESS CO
• CMCSA – COMCAST CORP  A
• MDLZ – MONDELEZ INTL
• MDT – MEDTRONIC
• MMM – 3M CO
• CHCT – COMMUNITY HEALTHCARE TRUST
• CDW – CDW CORP

We will also be rebalancing our current holdings and reviewing positions we were stopped out of for re-entry.

With the markets retesting the 200-dma, we are not supremely confident we are out of the woods just yet and the main issues plaguing the markets over the last couple of months have not been resolved – namely, the Fed reducing their balance sheet.

This is why we are scaling into equities with 1/2 positions which we will add to as things improve but offer little risk currently if the market breaks down.

RIA PRO Model Changes

The current RIA PRO portfolios were built during the BETA Testing phase of our development. As such, the portfolios are CAPITAL APPRECIATION only and do not reflect the interest income from the bond holdings or the dividends from the equity holdings.

Starting in January, we will discontinue the three current portfolios and will swap to 3-portfolios tied to live accounts which gives you three important advantages:

1. Trades will be able to reported “real time” instead of a 3-day delay. 
2. Interest and dividends will be credited the the portfolios on a monthly basis
3. Total returns, including all costs, will be reported.

We apologize for any inconvenience but we feel this will be a much better way to align the RIA PRO models to actual results for tracking purposes. We will keep you apprised of progress over the next month before we make the final changes.

Thank you.

November 21, 2018

As noted in today’s commentary section, we were stopped out of multiple positions yesterday which also provided the opportunity to do so tax-loss harvesting in portfolios for year-end.

Currently, the market is oversold and is set up for a short-term bounce. In the next few days, we will look to add a trading position to portfolios for a potential year-end rally. As we have stated previously, we are moving into the “seasonally strong” period of the year combined with a post-midterm election period which have historically equated to a positive push in the market.

However, nothing is guaranteed so the recent changes to portfolios to raise cash, shore up risk, shorten-durations, and increase credit quality all remain prudent actions.

Most importantly, while the market will indeed garner a rally over the next couple of months, such will not change the fact that we are in the midst of a substantially more important topping process. The chart below lays out the potential range for a bounce before a continuation of the current decline ensues.

November 20, 2018

This morning, the market opened lower triggering stops all across the portfolio pushing sells of:

• MSFT
• AAPL
• MU
• BA
• NVDA
• UTX
• WMT
• NKE
• EW
• TGT
• HRL 
• V
• XLY

I will update the portfolios once the trades settle for our clients and I have final execution values for each position.

The market is EXTREMELY OVESOLD on a short-term basis and will likely bounce tomorrow or early next week. We will be using that bounce to potentially lift further positions and add further hedges to portfolios.

The breakdown this morning confirms we have most likely started a bear market and a retest of the April lows at 2575 is highly likely. Also, watch the reversion in oil prices, interest rates, and a potential spike in the VIX to confirm the breakdown.

The recent addition of Treasury bond positions and rebalancing of risk in the bond side of the portfolio has continued to mitigate risk in the short-term.

We will look to rebuild equity holdings after the market stabilizes.

November 14, 2018

As I noted in this weekend’s newsletter, the daily, weekly, and monthly charts have now all registered “sell” signals. However, as I stated:

“I want to caution you that by the time longer-term sell signals are issued, the market tends to be more extremely oversold and due for a reflexive bounce.”

This is currently the case, with many of our short-term indicators very oversold. However, on a bounce that fails to get above the 200-dma we will look to raise some additional cash and continue to rebalance risk in portfolios.

This past week, we made some changes to the Fixed Income side of the portfolio to shorter overall duration and increase credit quality:

REDUCED:

• SPDR Barclay’s Investment Grade Floating Rate Fund (FLRN)
• Invesco Ultra-Short Duration Bond (GSY)

ADDED:

• I-Shares Treasury Floating Rate Bond (TFLO)
• I-Shares 1-3 Year Treasury Bond (SHY)

We have been repeatedly warning about the risk to investment-grade and corporate bond funds when the next recession comes. More importantly, during the reversion process, money will seek out the safest of investments which will be U.S. Treasuries.

These initial moves on the bond side of the equation was to shore up both current duration risk and credit-quality. The next move will be to add a significant chuck of 10-year Treasury exposure to the portfolio on confirmation the bear market has indeed started. 

On the equity side of the portfolios we have also made some changes:

Last week we sold in the ETF and Equity-ETF Models

• Technology Select Sector SPDR (XLK)

Sometimes Lessons Must Be Relearned

My mistake last week was NOT selling Nvidia (NVDA) as I had planned.

I very much like the company as they are on the cutting-edge of the chips and video-cards required for everything from video-game graphics to virtual reality.

The price appeared to be making a short-term bottom and looked as if most of the “bad news” from the inventory build in processors had been built into the stock price. I opted to wait for their earnings announcement.

That was a mistake.

While the “bitcoin mining” bust was apparent, the negative revisions to their estimates and revenues was larger than I anticipated. The stock was down sharply on Friday violating our absolute stop-loss on the position.

It will be sold next week.

And the lesson I relearned painfully this past week was to “sell losers short.”

Apple (AAPL) and Micron (MU) are also on the “Naughty” list.

November 8, 2018

Now that we have cleared the mid-term elections, we are looking for the market to firm support back above the important longer-term support line as shown below.

Yesterday, the market was able to push above both previous support and the longer-term moving average which is bullish.

However, this is a WEEKLY chart, so the only thing that will matter with respect to this analysis is where we end the week.

If the market pulls back to support, holds, and turns up then we will be able to add some trading opportunities to the portfolio. After recent sells we have cash available to add some exposure as needed.

If the market fails to hold support, then we are likely going to see a retest of recent lows and the additional cash we have currently will hedge downside risk.

With the market on a more severe weekly sell signal, don’t be overly aggressive at this juncture. Much of the oversold condition that was generated during the recent decline has been erased and the market is back to more extreme overbought conditions on a short-term basis.

Read today’s post on “The Tailwinds Have Shifted”

November 2, 2018

In Tuesday’s technical commentary, “A Sellable Rally,” we discussed the potential for a rally that had some follow through and would potentially push the markets back to overhead resistance. The rally ran right into previous support, now resistance, and failed.

With that failure, we have executed “sells” within our portfolios.

Equity and Equity/ETF Portfolios:

Selling KLAC, JPM, HD, and SU

ETF Portfolio

Selling XLF

As is our discipline, we look to sell positions that have not been performing as expected. The sells will increase our cash balance for now and give us opportunity react to other opportunities that become available.

It is to soon to tell if the recent October decline is just another “buy the dip” opportunity, as is currently believed by a vast majority of Wall Street and the mainstream media, or is this the beginning of a deeper correction to come.

We don’t know. As such this is why we are raising cash until the market determines what it is going to do next. If the market begins to resume its bull market trajectory we will add exposure back to portfolios. If not, the additional cash will hedge risk while we make further adjustments.

Allocation Gauges and Portfolio Models will be updated over the weekend once the weekly data and final settlement data becomes available.

October 31, 2018

The market finally mustered a bounce to close out a brutal month of October which saw almost exactly the same percentage decline as February of this year. However, the main difference between the two declines is that previously the 200-dma acted as support for the market. Now, the 200-dma is applying resistance to market rallies back to the 2750-2760 area.

The good news is the market did bounce and is pushing up into previous resistance levels. Furthermore, there is a potential for a “buy signal” from currently still oversold conditions. Both of these indications SHOULD theoretically provide some lift to the markets over the next couple of weeks.

However, we suggest not being complacent about this rally as the technical backdrop has changed to more bearish with the break of the running trend line from the 2016 lows.

As we have been discussing, we will continue to use these rallies to:

• Rebalance portfolio risks,
• Reduce/remove positions that aren’t working at better prices, and;
• Re-evaluate remaining positions for additions or reductions.

We are looking to raise roughly 20% cash for the time being to hedge portfolios UNTIL such time as a more bullish backdrop emerges.

October 28, 2018

As stated in this past weekend’s newsletter, I stated:

“With the market exceeding 3-standard deviations below the 50-dma currently, the extreme oversold condition still sets the market up for a fairly strong bounce. That bounce SHOULD be sold into.”

On any bounce next week we will continue to sell positions and raise cash to 25-30% of the portfolios in total. 

For now, the market has changed from “buying dips” to “selling rallies” which we will honor until such time that the bull market reasserts itself.

October 26, 2018

Sold VO and IJR in the ETF and Equity/ETF models yesterday.

The failure to get “follow through days” on rallies is troubling to say the least. While this mornings opening is set to be very weak, I would not be surprised to see some buying later on this morning and into the afternoon.

With the markets DEEPLY oversold on both a short and intermediate-term basis, we are looking for a rally to 2750 on the S&P 500 to raise cash levels in all models to 25-30%. 

October 23, 2018

With the market confirming a break of weekly support and failing at the recent retest of the 2016 bullish trend line, we are now on alert to use any rally back towards 2740-2750 to liquidate or reduce positions in our models.

This morning we sold RAVN at 42.93.

We will be selling on any bounce KLAC, MU, JPM, and HD.

The recent adds of NKE and FDX are dangerously close to being stopped out as well.

Overall, we are looking to reduce portfolio risk by 25-30% on a rally and raise some cash heading into the end of the year.

We have been trying to give the markets a bit of room given that it is October, a historically volatile month. Also, stock buybacks will return towards the end of the month and there will likely be some performance chasing heading into the year-end which could be supportive of higher asset prices in the near term.

We are trying to balance the current extreme oversold condition, which should provide a sellable rally, against the risk of a bigger short-term correction.

However, the bigger issue is that we may have witnessed a more important trend change that will be determined by the strength and magnitude of any reflexive rally this week.

October 13, 2018

Lot’s of analysis in this weekend’s missive on the market and what we expect to happen next.

Here is the checklist of actions we will be looking to take on any rally:

1. Re-evaluating overall portfolio exposures. It is highly likely that equity allocations have gotten out of tolerance from the original allocation models. We will also look to reduce overall allocation models from 60/40 to 50/50 or less.
2. Look to add bond exposure to mitigate volatility risk. (Read:  The Upcoming Bond Bull Market)
3. Use rallies to raise cash as needed. (Cash is a risk-free portfolio hedge)
4. Review all positions (Sell losers/trim winners)
5. Look for opportunities in other markets (Gold may finally shine)
6. Add hedges to portfolios (If the market begins to show a negative trend we will add short positions)
7. Trade opportunistically (There are always rotations that can be taken advantage of)
8. Drastically tighten up stop losses. (We  had previously given stop losses a bit of leeway as long as the bull market trend was intact. Such is no longer the case.)

If I am right, the conservative stance and hedges in portfolios will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a “panic selling” situation.)

If I am wrong, and the bull market resumes, we simply remove hedges, and reallocate equity exposure.

“There is little risk, in managing risk.” 

The end of bull markets can only be verified well after the fact, but therein lies the biggest problem. Waiting for verification requires a greater destruction of capital than we are willing to endure.

“It’s probably wiser to assume [that God] exists because infinite damnation is much worse than a finite cost.” – Blaise Pascal

October 12, 2018

We have been closely watching this rout and, as noted, have several stop loss violations on various positions. While fundamentally these companies are very sound, the technical price action just isn’t strong enough to warrant the related opportunity cost.

As with all stop-loss violations, by the time the stop is triggered the position is typically already deeply oversold. Therefore, selling the immediate stop violation tends to result in an apparent “whip saw” as the stock bounces before resuming its decline. This is also the case is there is secondary near-term support for the position as well.

Therefore, we will be using this oversold bounce in the market, as noted in our daily commentary today, to lift positions which are under-performing and have broken down technically.

It is unlikely the current rout is over and we will very likely have a retest of recent lows before the next bottom is found. Having some cash on hand will both hedge portfolio risk and provide opportunity to reallocate to equity when the selling pressure is resolved.

 

October 5, 2018

As noted previously, KLAC, MU, and SU had triggered sell alerts. While we very much like the fundamentals of these companies, the technical backdrop remains challenging. We have moved stops up to recent support levels and it is highly likely we will be stopped out of several positions if the sell-off that started yesterday continues.

Other stocks also threatening stop loss supports are HD, FDX, NKE, PEP, COST, TGT, EW, PG, and RAVN.

There are a couple of important points to understand from this deterioration in the markets. The recent rise in rates is beginning to significantly impact the stocks most impacted by consumer spending. Should rates remain at current levels, or more higher, the impact to economic growth will be noticeable as we move further into Q4.

Secondly, we are trying to give these companies a bit of room here as October tends to be a volatile month but moving into the last two months of the year we would expect to see a bit of a “chase” for performance. This doesn’t mean we are “betting on it,” but rather it is a seasonal tendency and we don’t want to be too underweight equities moving into it.

We are definitely on “high alert” currently, particularly with rates rising, and will take action quickly if needed to protect capital.

 

September 15, 2018

In the last update we noted that we would be adding exposure to portfolios provide the market held its previous breakout levels. It did, and on September 11th we added seven new holdings the Equity and Equity/ETF portfolios.

The additions of JNJ, CVS, NKE, WMT, DUK, PEP, and FDX bring our portfolios up to almost full weightings as we head into the expected end of year rally. We particularly like FDX for the increase in seasonal year-end activity with Thanksgiving and Christmas “binge” shopping just around the corner.

While NKE has been in a bit of a media war over recent messaging, the fundamentals of the company remain sold and we used the pullback in price to long-term trend support to add the position to the portfolio. Like TGT, which had a similar media-driven push back due to their stance on bathrooms, the public has a short memory and fundamentals rule out over time.

KLAC, MU, and SU are all on SELL ALERTS with stop-loss levels being flirted with. We are trying to give MU and KLAC some room here as the fundamentals of these companies are very strong and valuations are cheap. However, our investment discipline and strategy requires us to act when necessary so both of these positions are on very short leashes.

SU will likely be sold on a break of support or a rally back to previous highs. The energy sector remains challenging and oil prices are at risk potentially as we move into winter. While we like the company fundamentally, it simply hasn’t performed as expected so “opportunity cost” is something we are highly aware of. If we find a better candidate, we will likely execute a swap sooner rather than later.

 

September 9, 2018

After a rough week for semiconductors, following several reports of slowing DRAM prices, both Micron (MU) and KLA Tencor (KLAC) are very close to triggering stop loss levels. (Read “It’s Make Or Break” for the signal semi’s are potentially sending about the broader market.)

Next week, the market will either hold support and allow us to add new holdings (which will be reported here AFTER we buy them for client accounts) OR the market will start pushing back towards three levels of lower support at 2850, 2825 and lastly 2800.

There are currently plenty of relative risks, think tariffs, which could push the market lower next week. So waiting for confirmation before adding further exposure will likely prove prudent. However, it is important to watch semiconductors as they are an economically sensitive sector and some of the messaging suggests the recent bump in economic growth may be ending.

While we like the fundamentals of KLAC and MU very much, technically they simply aren’t performing currently and a break of stop loss levels requires us to take action. Stay tuned.

 

August 26, 2018

On August 22nd, we were stopped out of three equity positions in our equity model portfolio.

Chevron (CVX) was sold at 119.26 / share

Constellation Brands (STZ) was sold at 203.12 / share

Eastman Chemical (EMN) was sold at 99.95 / share.

While we still very much like the fundamentals of these businesses, they all violated our stop levels. We waited for an oversold bounce to “sell into” which was provided last week.

We are looking to add 5-6 new equity positions over the next couple of weeks IF the breakout to new highs can hold. As noted in this past weekend’s missive:

“Over the past two weeks, the market did pull back to support at 2800 and subsequently broke out to new highs on Friday. With that, we will look to add equity exposure opportunistically over the next couple of weeks in accordance with the model allocations.”

• Equity Model: We sold three laggards last week (CVX, STZ, & EMN) and will replace with new positions opportunistically. 
• Equity/ETF blended – Same as with the equity model. 
• ETF Model: We will overweight core “domestic” indices by adding a pure S&P 500 index ETF to offset lack of international exposure. We remain overweight outperforming sectors to offset underweights in underperforming sectors. 

It is important to understand that when we add to our equity allocations, ALL purchases are initially “trades” that can, and will, be closed out quickly if they fail to work as anticipated. This is why we “step” into positions initially. Once a “trade” begins to work as anticipated, it is then brought to the appropriate portfolio weight and becomes a long-term investment. We will unwind these actions either by reducing, selling, or hedging, if the market environment changes for the worse.

August 15, 2018

As we discussed in this past weekend’s newsletter:

“Likewise, while we upgraded the “buy signal” last week, we suggested waiting for a correction back to previous support before increasing allocations further.”

Today, the market is pulling back to support at 2800. A violation of 2800 will likely see a test of the cluster of moving averages which are spread between 2740 and 2780. With the market back to short-term oversold we have a few stocks on our watch list we are looking to add.

For now, the bullish trend of the market remains intact. However, given the seasonal weakness of August and September historically, we will be cautious in adding any exposure currently.

 

August 2, 2018

Overall, the bulk of the portfolio continues to perform as expected. We are closely monitoring Eastman Chemical (EMN) and Constellation Brands (STZ) which have not performed as expected. We currently have stop losses in place which are close to being triggered. Fundamentally, we still like the companies, but the technical risk is rising.

Portfolio Management Rule: Cut losers short, let winners run.

 

July 13, 2018

Added four new holdings to the portfolio

Buying

SU – Suncor Energy

NSC – Norfolk Southern

UTX – United Technologies

RAVN – Raven Industries.

 

May 12, 2018

In the RIA Portfolio you will find 6-tabs above the portfolio itself

Open Positions – positions currently open

Closed Positions – positions that have been sold.

Transactions  – a complete listing of all transactions in the portfolio (buys and sells)

Fundamentals – a listing of our fundamental measures of each position

Buy/Sell/Hold – a listing of the technical measures of each position

Research – you will find PDF’s of a full REPORT and a one-page SNAPSHOT of each currently open position.