February 2, 2020 — Market Falls For Second Week

BDH Dashboard Remains on “2” NEUTRAL Signal

Market Performance

The three major market averages experienced their second consecutive down week with large drops on Monday and Friday. For the week, the NASDAQ Composite declined 1.76%, following a decline of 1.87% the prior week. The S&P 500 fell 2.12%, and the DJIA dropped the most at 2.53%. 

For the:                 2020 YTD       

NASDAQ             1.99%    

DJIA                     -0.99%    

S&P 500              – 0.16%     

BDH Strategy      – 0.60%        

We are now in an 80% invested position. as XHB was sold for a loss of 6.17% at the close on Friday. We will maintain a 20% cash position until the Dashboard issues a new BUY signal.

Market Internals Weaken Again This Past Week

The percentage of the NYSE stocks above their 200-dma decreased to 60.31% from 69.02% the prior week and 74.63% the week before that. More importantly, the percentage of NYSE stocks above their 50-dmas also declined precipitously to 43.69% from 63.33% the prior week and 79.19% the week before that, quite a drop in a two week period.

The number of new 52-week NYSE new highs declined to 408 from 538 the prior week and 631 the week before that. 

BDH DASHBOARD –Now on “2” NEUTRAL Signal

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator gave its last BUY signal on December 16, 2019.  This indicator needs to fall below 8560.22, as of the Friday close, to revert to a SELL signal.  That would result in a “1” SELL signal on the BDH Dashboard.  Refer to $comp chart below.

Indicator #5 NASDAQ Composite with MACD.  This indicator had a SELL signal on Friday, January 24, 2020. (See first chart below).

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest January 22, 2020 Bullish Percentage reading was 32.0% down from 46.6% a big drop from the previous week,   Remember that this survey was taken this past Friday.   Most likely, if the market does not rebound by Wednesday expect the reading to fall further.

Indicator #8 NASI Summation Index and MACD.  This indicator issued a SELL signal on Friday, January 24, 2020.  Refer to $NASI chart below.

BDH Decision Page – BDH Dashboard ETFs 

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

On ETFscreen.com, the Decision Page indicated that 20 ETFs out of 44 have “pass” ratings which is down from 27 the prior showing internal market price deterioration for the second consecutive week.

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 month by hitting the down carat you will note that the best performing ETFs in our 44 ETF universe last week were XLU, ARKW, SKYY, TLT and  FDN.  The best 5-day return was provided by TLT, DOG, SH, PSQ, IEF and XLU.  Note that DOG, SH and PSQ are inverse ETFs that excel when market’s decline.

Dark   Liquidity

The link is as follows:

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

The BDH strategy is now ranked 15th by dark-liquidity after declining from 10th the prior week, among competitors shown on this website.  Unfortunately, XLB declined 6.17% from its purchase price and was sold at the close on Friday

The Top 5 ETF table is attached to the email.  The dark-liquidity table shows the current portfolio and each ETF’s stop LIMIT.

Top 5 ETFs – 80% Invested – XLV, XLI,  XHB, and QQQ

XLB was sold at a loss of 6.17% as it closed below its stop LIMIT of $58.30 on Friday.  Moreover, XLV is now only $0.14 from its sell LIMIT of $99.00 which will trigger when the price closes below that level which could occur on Monday at the earliest.  The portfolio will not contain 20% cash until a new BUY signal is generated.

The Top 5 table was set up with the 12/31/2019 buy prices (closing) on the five ETFs and the market averages.  Therefore, this table represents the year 2020 going forward not carrying the ETF purchase prices over from 2019, so we can compare the  performance on an apples-to- apples basis with the major averages for 2020.

Changes to ETF Universe on etfscreen.com

I have made changes to our universe of 44 ETFs.  Effectively immediately the following 9 ETFs were removed: CWB, DBC, DBA, FXE, PFF, IEF, DOG, SH, PSQ, and IEF.       

The 9 ETFs added were:    XWEB, TAN, KWEB, HACK, CIBR, CLOU, FFTY, CQQQ, and XAR.  The details on these etfs can be researched on etf.com by putting in the ticker symbols.     

Game Plan Going Forward

Currently, the market has had a rapid decline the past two weeks with the BDH Dashboard holding in a NEUTRAL position.  As I mentioned last week: “This may be the beginning of a 3-5% decline or more, but no one knows what the future holds.”  That certainly has already occurred in the past weeks.  This decline may accelerate to the downside based on world events.                                                                                                                                                                      

A  Nasdaq Composite decline of 6.45% for here will result in a SELL signal on Indicator #2 based on the Nasdaq Composite price dropping below 8560 (its 100-dma) which is a long way from here.   We will have sold way before then based on    our stop LIMIT orders. Make sure that you are protecting your portfolio with appropriate stop LIMIT orders that mirror your risk tolerance.  To repeat:  If you are not sure about the definition of different stop orders, then check with Investopedia.com or other sources so that you use the type of order you prefer.  Or contact your brokerage firm customer service to explain the differences to you.

    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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