October 6 BDH Blog Post

NASDAQ COMPOSITE 7982.47 +0.54%

Market Performance

The DJIA and S&P 500 Index declined for the third consecutive week, but the NASDAQ Composite managed to gain 0.54%. The S&P 500 was down 0.33% and the DJIA fell 0.92%.  Anyone who did not look at the market all week would conclude that it was a calm week.  Nothing could be further from the truth, as there were violent swings from the decline from the open on Tuesday morning to the gap open decline on Wednesday to the further drop in the early Thursday morning to the uptrend from there to the Friday close.

The DJIA went from an early Tuesday morning high of 27046 plummeting to an intra-day low of 25743 on Thursday, before recovering to close the week at 26573.72.  This means that the DJIA fell 1303 points in total before rising 1100 from early Thursday until the Friday close. This is certainly a careening roller-coaster that was driven by economic, Fed Reserve, and political events. During the week, both the NASDAQ Composite and DJIA bounce up off their 200-dmas.  That is a very positive sign going forward.  The S&P 500 did not get close to its 200-dma.

This market activity resulted in two Dashboard changes during the week.  On October 1, Indicator #2 issued a SELL signal, as the 100-dma was breached to the  downside, and Indicator #8 also had a SELL signal, as its MACD was breached to the downside.  This put the Dashboard at a “1” SELL signal.  But by the close on October 4, Indicator #2 then reversed direction and it closed above its 100-dma resulting in an indicator BUY signal with the Dashboard closing the week at “2” Neutral reading.  There were three portfolio “sells” during the week –IWM, XLY and XLF—that are covered in the Top 5 ETF section below.

The chart below shows the multiple swings above and below the 100-dma during the week.  The NASDAQ is just below its 5-dma at 8008 and over 200 points below its red horizontal resistance line. Note the tiny crossover to the upside on the fast MACD on the lower portion of the chart. This is a positive sign going forward.

For the YTD:                       

NASDAQ 20.30%; DJIA 13.92%: S&P 500 17.76; and BDH Strategy 2.09%     

Other Market Segments

GLD experienced a gain of 0.60%, while GDX rose 1.53%. Oil prices took another hit as USO fell a big 5.32%.    As expected in this type of volatile market, on the fixed income side, TLT (iShares 20+ Year Treasury Bond ETF) jumped 2.46%.  Similarly, IEF (iShares 7-10 Year Treasury Bond ETF) gained 1.43%.

Market Internals Are Trying to Stabilize

The percentage of the NYSE stocks are above their respective 200-dma declinedto 55.80% from 65.8 % the week earlier – a drop of 10 percentage points. More importantly, the percentage of NYSE stocks above their 50-dmas also dropped to 52.44% from 68.0% a week earlier. Amazingly, this last indicator was as low as 40% on Wednesday evening, before bouncing higher the remainder of the week.

Surprisingly, the number of new 52-week highs decreased to 218 from 294the prior week, and from 603 eight weeks earlier.  Looking at the new high lists shows above 30% are preferred, REITs and income related issues instead of pure equities.  This means that the equity portion of the market is not that strong. The number of new lows rose to 144 from 69, a week earlier which was expected.

Dashboard Indicator Review – Two Changes  

Indicator #2 NASDAQ Composite Index and 100-dma. This indicator gave a SELL signal on Monday October 1 followed by a BUY signal on October 4. 

Indicator #5 NASDAQ Composite with MACD.  This indicator had a SELL signal on Thursday September 24.

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest October 2, 2019 Bullish Percentage reading was 21.4% down a huge 8.0 percentage points from the previous week. Remember that a drop below 25% and then a rise above it in a subsequent week represents a BUY signal.  However, in this case that occurrence will be a confirming BUY signal as this indicator has been on a BUY signal since 12/07/2018.

Indicator #8 NASI Summation Index and MACD.  This indicator had a new a Sell signal on October 1, as the MACD confirmed the earlier index crossing its 5-ema. Refer to chart on the next page

Dark Liquidity

The performance of the portfolio is independently tracked by dark-liquidity.com. The link is as follows:  www.darkliquidity.com/index.php/strategies.  View the Buy Don’t Hold results  and you will see all the transactions that have occurred.

When you can go to the website check “strategies.” to see the results of 23 strategies that the site tracks.  Our strategy is ranked 12th

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 15 ETFs out of 44 have “pass” ratings compared to 26 the prior week.  There were 29 “fails”. This data clearly indicates the weak underlying market.

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 the five best performers – TLT, XLU, XLP, IEF and XHB – all defensive in nature except XHB which is our portfolio. Believe it or not, TLT has gained 29.28% for the YTD clearly outpacing all the major averages, and with less volatility. A close second was XLU up 27.22% YTD. 

This illustrates the importance of tracking different segments of the market and trying to capture some of these returns, even though defensive issues typically don’t do well as well as growth stocks.  We are certainly in unique investing times.

  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 – Table Attached Separately for Subscribers Only

There were three portfolio SELLS during the week, as 5% stop Limits were hit.  Specifically, IWM was sold at $149.12 on October 1, and XLY and XLF were sold on October 2 at $117.25 and $26.84, respectively.  By weeks end, XLF was down 2.17% and was ranked 38th out of 44 over the last five days.  IWM was down 1.34% for the week, and XLY was down 0.38%.

The BDH portfolio is now 60% in cash with XHB and QQQ remaining as current positions.  There was no interim update sent after October 1 about these “sells” as the stop limits were provided to all subscribers and are shown in the dark-liquidity.com tables.  Also, subscribers may all use different stop limits based on their personal risk tolerance profiles.  The last interim update was emailed on Monday, October 1 regarding the Dashboard “1” SELL signal.

YTD, our portfolio has a current gain of 2.09% compared to 17.33% for the major averages.  Refer to attached spreadsheet for the details of performance and rankings.  The spreadsheet is only provided to subscribers.           

GOING FORWARD

The fact that both the DJIA and NASDAQ Composite both bounced intra-day off their respective moving averages (refer to upper chart for NASDAQ bounce) to the upside is very positive.  However, the market is at a tipping point and can go either way from here.  October is typically a month where the market may initially fall (as it already has mid-week) before it rises into the end of the year, but that certainly was not the case last year as we all learned as the market took a dive that ended on Christmas Eve, before its vertical ascent began into 2019. 

October has been a month where the market has bottomed during corrections and then proceeded higher for months.  It is some times referred to as “the bear killer”.  Of course, we are in a bull market that has pulled back, but as we saw last October, there are no guarantees.

Make sure your existing stop LIMITs are in place in case the situation deteriorates.  We can always get back in after the dust settles. Retain the existing 2 ETF portfolio. We are still in a volatile market that is trying to reach new highs.

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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