August 25, 2019 BDH Blog Post

NASDAQ COMPOSITE 7751.77    -1.83%

BDH Dashboard Remains on “1” SELL Signal

Market Performance

The three major market averages had another wild week with continued volatility this past week, and a very bad ending. For the week the NASDAQ Composite fell by 1.83% for the fourth consecutive week, the S&P 500 Index closed down 1.44%, and the DJIA declined the least down 0.99%, down six weeks in a row.  

For the:                 YTD       

NASDAQ            16.83%    

DJIA                    9.87%    

S&P 500              13.57%     

BDH Strategy        1.44%        

Both Indicators #2 and #5 issued BUY signals on Thursday and a SELL signals on Friday, ending the week on a BDH strategy SELL of “1”.  Subscribers were provided with an interim update during the week.  No action was recommended on this SELL signal due to the increasing number of whipsaws in the last two weeks.  The market needs to settle down to make a rational decision on the next step.

All three major averages are below their 100- and 50-dmas, while the the DJIA is just above its 200-dma by 12 points.  The other two averages are still further away from crossing that average to the downside.

Other Market Segments

Not surprisingly, GLD had a another positive but more volatile week up 0.97%, rising 11 of the past 13 weeks, and closing at the high for the year again. Interestingly, GDX did even better with a large advance of 4.81%.  Oil prices had a mixed result with USO losing 1.84%, while $Brent went the other was up 2.18%.

Not unexpectedly, on the fixed income side, TLT (iShares 20+ Year Treasury Bond ETF) had another spectacular week up a big 4.34% beating its prior week’s gain of 2.59%, and 4.04% a week before. Thus, reaching another 2019 new high.  Similarly, IEF (iShares 7-10 Year Treasury Bond ETF) gained 1.32% closing at its high for the year.  Amazingly fixed income shares, especially TLT, have done exceedingly well this year and have outperformed many stocks and stock indexes.

Market Internals Deteriorate Again

The percentage of the NYSE stocks are above their 200-dma declined again to 45.53 from 49.91% the week before and from 58.16% the 4 weeks earlier. More importantly, the percentage of NYSE stocks above their 50-dmas also declined to 29.28% from a week earlier and from 48.1% four weeks before that. Thus, the internal market has weakened dramatically during the past month.

Surprisingly, the number of new 52-week NYSE new highs actually increased to 411 from 373 the prior week, and from 603 four weeks before that. Likewise, the number of new lows decreased also to 229 from 440 the prior week.  This strange occurrence was the result of higher prices during the week before the Friday decline, and is a measure over the course of a week, not a daily number.

Dashboard Indicator Review No Change Overall

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator gave a BUY signal on Thursday August 22 and a SELL signal on Friday, August 23, thus ending on a SELL signal for the week. Note the chart blue arrow pointing out the drop below the 100-dma.

Indicator #5 NASDAQ Composite with MACD.  This indicator had a BUY signal on Thursday August 22 and a SELL signal on Friday, August 23, thus ending on a SELL signal for the week.

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest August 21, 2019 Bullish Percentage reading was 26.6% up 31.5 percentage points from the previous week. This indicator just issued another confirming BUY signal, as it when from below 25% to above 25%.  There have been numerous confirming BUY signal along the way from its last major BUY signal in December 2018.

Indicator #8 NASI Summation Index and MACD.  This indicator remains on its SELL signal of July 25. Refer to second chart below.

Dark   Liquidity

The link is as follows:

www.dark-liquidity.com/index.php/strategies

You can go to www.dark-liquidity.com first and then hit strategies.  Our strategy remains16th best out of 23. Note that sometimes the data is not updated on a timely basis or that it is different than the Top 5 ETFs table, but I use their data for my numbers when it shows accurately (as it did on Friday night, and a few times today).

BDH Decision Page – BDH Dashboard ETFs 

Copy and paste the DecisionPage link into your browser:

https://www.etfscreen.com/buydonthold/bdh-decision-page.php

On ETFscreen.com, the Decision Page indicated that 13 ETFs out of 44 have “pass” ratings compared to 10 the prior week. There were 31 “fails”.  

You can easily check the top performers for the past 5-days and one month by going to the “Additional Fund Stats” tab on the right side of the BDH Decision Page, and arraying the Rtn-5d and Rtn-3mo column, respectively heading from high to low.  If you check the performance over the past five days by hitting the down carat you will note that the three short ETFs –PSQ, SH, and DOG–are the highest in the ranking and all with “pass” ratings.  That is to be expected in a market with high volatility and downward pressure

 Chart of All BDH Signals

Here is a chart showing all Dashboard buy and sell signals, paste it in your browser.  It may take a day or two to update as that is done by a subscriber.

http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=2&mn=0&dy=0&id=p50034199149&a=250074893

Top 5 ETFs – 100% Invested – PDP, XLY, XHB, XLP, QQQ


I will not be providing a Top 5 ETF table this week, but will provide it next week to subscribers.

As mentioned last week, I decided to eliminate all the current to avoid whipsaws.  That turned out well, as all ETFs moved up earlier in the week, but cratered again on Friday. You should determine how and if you use stop LIMITs in this volatile market.  If you make the stops too tight (e.g., 5% or less), then you could get stopped out quickly, and if your stops are too wide (e.g. 10-15%), then you may be giving up too much of your principal.  With the current world situation where news can come out at any time, perhaps the use of stop LIMITs should be reconsidered in the current environment, as big whipsaws can create an untenable investing environment.

Game Plan Going Forward

Although the market has moved away from its all-time highs around July 26, 2019, the intermediate and long-term trend are still positive, the short-term trend is down. We need to stay above the resistance level of 7700 on the NASDAQ Composite, and certainly the 7592 level at the 200-dma.  If those are taken out to the downside, then we will endure more pain and losses.  On the upside we need to surpass the resistance line at 8176 and then take out the high of 8339 to have a positive trend going forward. We don’t know which way the market will go from here based on developments in the political, economic, and financial arenas.

 So, what do we do here? We watch the portfolio and wait.  We are in a weak period through September, so we may have a much deeper decline to the 200-dma (purple line on upper chart) or perhaps retest the December lows at 7292 before a market surge occurs.

Stop Limits have been removed from the current portfolio to avoid big intra-day whips which could knock us out the market just at the wrong time – a rebound and move higher.  However, you need to decide how to protect your principal and that is something you need to seriously consider.

    Interim updates are sent to subscribers during the week, as needed.     Any subscriber who has recently sent in a payment and has not received this regular blog today should email me at lesmasonson@yahoo.com so I can check my records and correct any oversight.

Remember that you are responsible for your investments and how you manage them. This website was developed for educational purposes only and is not responsible for any actions you take with your investments.  If you decide to follow the BDH strategy, then you are 100% responsible for your investment outcome.  Make sure to check the BDH indicators daily during times when the market is volatile like now.  Just bookmark the charts above and look for any signal changes.  I may not available during the week to provide interim Dashboard signal changes. It is important to be pro-active, so as not to miss any Dashboard signals. Decide on and place your stop LIMITS, if you use them, that meet your own risk profile.

Les

Leslie N. Masonson, MBA, CCM, is President of Cash Management Resources, a financial consulting firm that he founded in 1987. He is an ETF Strategist and currently actively trades ETFs on a daily basis Masonson’s 47-year working career has spanned financial advisory services, trading, investing, banking operations management, teaching, and cash/treasury management consulting. He was a Financial Advisor for six years offering investment management services to retail clients. Much earlier, he worked at three large banks for a total of 17 years as a Vice President at Citibank, an Assistant Vice President at Bank of America, and an Assistant Secretary at Irving Trust Company. He has written more than 140 articles – interviews with traders, software product and book reviews – for numerous financial publications including Technical Analysis of Stocks & Commodities (TASC), Active Trader, SFO and Futures magazine, as well as on Amazon. He has lectured on investing on several cruise lines including Crystal, Celebrity, and Norwegian. In November 2003, he spoke at the Intershow Online Investor’s Expo, on “Successfully Trading Stocks for a Living.” As of September 2016, he has been the ETF Columnist for TASC. Masonson has been researching and investing in the stock market for 60 years. He has invested in mutual funds, stocks, options, futures, ETFs, and commodities. Masonson has read more than 625 books on investing and trading, and he is proficient in technical analysis. He has used many investing and trading software programs over the years, including Telescan, OmniTrader, DTN, TradeStation, ULTRA, VectorVest, High Growth Stock Investing, TheWizard, and ETFReplay.com, as well as many brokerage charting programs including Fidelity Active Trader, Think or Swim, Interactive Brokers Trader Workstation, and Schwab’s StreetSmart Edge. He has been interviewed on business radio stations, as well as on cable TV on the Financial News Network and CNBC. The Wall Street Journal, USA Today, Institutional Investor, Bottom Line/Business, Inc., Las Vegas Review-Journal, and Advertising Age have interviewed him. His latest book Buy DON’T Hold: Investing with ETFs Using Relative Strength to Increase Returns with Less Risk was published in May 2010. He has previously authored the following books: All About Market Timing: The Easy Way to Get Started, (McGraw-Hill, November 2003 and translated into Chinese in February 2010) as well as the Second Edition published in April 2011, Day Trading On The Edge: A Look-Before-You-Leap Guide to Extreme Investing, (AMACOM, 2000), Cash Cash Cash: The Three Principles of Business Survival and Success, (Harper Business, 1990), Corporate Cash Management: Techniques and Analysis, (Dow-Jones Irwin, 1985. Co-edited with Frank Fabozzi), and the Corporate Treasury Management Manual (A.S. Pratt & Sons, 1998. Editor and Contributor). In April 2011, his first ebook was published with the title Profiting from ETF Rotation Strategies in Turbulent Markets. Masonson received a BBA in Finance and Investments from The City College of New York and an MBA in Operations Research from Bernard M. Baruch College. His master’s thesis title was “Statistical Evaluation of the Relative Strength Concept of Common Stock Selection.”

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