Month: February 2014

One of the most interesting events of the month from an ETF point of view was the announcement from PowerShares. They decided to change 10 of their ETFs to be momentum driven run by Dorsey Wright Associates (DWA). DWA previously managed 4 PowerShares ETFs: PDP – DWA Momentum Portfolio(MP), PIE – DWA Emerging Markets MP, PIZ – DWA Developed Markets MP, and DWAS – DWA SmallCap MP. They all use the same type of selection criteria. PDP, for example, looks at a the performance of the 3000 largest US-listed companies and selects the 100 which have the best relative performance. Each quarter they rebalance and reconstitute the portfolio from the best performing of their 3000 universe. Each of the ETFs are managed a similar fashion.  The 10 ETFS are DWA NASDAQ MP, DWA Basic Material MP, DWA Consumer Cyclicals MP, DQP Consumer Staples MP, DWA Energy MP, DWA Financial MP, DWA Healthcare MP, DWA Industrials MP, DWA Technology MP, and DWA Utilities MP. These portfolios are managed on what is performing, not what some manager thinks looks good.
last year I set up a small portfolio to invest in PDP, PIE, PIS, DWAS, and cash with approximately 50% invested in the best performing, 33% in the second best, and 17% invested in the third best on a last 13 week performance basis. Any time cash is one of the top three, none of the lower ranking investments are held. I re-evaluate weekly and use a weekly 8% stop loss order based on the most recent high close. In January I lost 2.7%. Obviously one month does not make a market and I hope to do better.

The Feb24th Chuck Jaffee MoneyLive show featured Martin Pring – you can listen to it online at www.moneylifeshow.com. At about 10 minutes into the program Pring talkes about his long term indicator consisting the S&P500 to GDP ratio as a momentum indicator and taking a moving average of that ratio. That indicator has turned negative 6 times over the last 100 years each times was followed by a bear market. We are now in high risk territory based on that indicator. He likes any commodity based ETFs or resource based stocks.

IBD TBP’s Current Outlook is “Confirmed Uptrend” – time to invest.

My current investments:
Nordic has a price of 46.15, a sell price 43.84, a relative rank of 10, and is a hold.
SSoftware&ComputerServices has a price of 130.69, a sell price 124.16, a relative rank of 03, and is a hold.
SAirTransportation has a price of 61.02, a sell price 58.74, a relative rank of 18, and is a hold.
SBiotechnology has a price of 221.48, a sell price 212.71, a relative rank of 01, and is a hold.
OTCPortfolio has a price of 83.63, a sell price 79.45, a relative rank of 07, and is a hold.

My portfolio changes this weekend:
IRA #1 – None
IRA #2 – None

My portfolio market exposure after this weekend’s changes:
IRA #1 – 100% invested
IRA #2 – 100% invested

“Those who cannot remember the past are condemned to repeat it.” from The Life of Reason, Volume One – Reason in Common Sense, by George Santayana written in 1905-1906.
http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11 is an interesting graph.
http://www.marketwatch.com/story/crash-of-2014-like-1929-youll-never-hear-it-coming-2014-02-19 is an intereting article.

Leo Leydon was a guest on Chuck Jaffe’s Moneylife show, www.moneylifeshow.com, on 21Feb13. You can listen to it online. Leydon starts talking about 6 minutes into the show. He says up, up and away. Follow the trend until it changes.

IBD TBP’s Current Outlook is “Confirmed Uptrend” – time to invest.

My current investments:
Nordic has a price of 45.06, a sell price 42.81, a relative rank of 13, and is a hold.
SSoftware&ComputerServices has a price of 122.45, a sell price 116.33, a relative rank of 06, and is a hold.
SAirTransportation has a price of 60.50, a sell price 58.74, a relative rank of 17, and is a hold.
SBiotechnology has a price of 223.90, a sell price 212.71, a relative rank of 01, and is a hold.
OTCPortfolio has a price of 83.33, a sell price 79.16, a relative rank of 05, and is a hold.

My portfolio changes this weekend:
IRA #1 – None
IRA #2 – None

My portfolio market exposure after this weekend’s changes
IRA #1 – 100% invested
IRA #2 – 100% invested

The S&P500 is a capitalization weighted average. Thus the largest capitalization stock (price * shares) has a much higher influence on the average then the smallest. Apple, Exxon, Google, and Microsoft produce just under 10% of the S&P500 results. The top 10 holdings account for 17.75% of the S&P500 gains and losses. I do not know what the weighting is for the lowest weighted stock, but I’m sure if it moved 10% it would make very little change in the S&P500. One of the intereting things to watch is the SPY (an ETF which mimmics the S&P500) compared to the RSP (an ETF which mimmics the S&P500 if each stock were equal weighted). Currently the SPY is up 3.21% over the last 13 weeks while the RSP is up 3.51%. To me that indicates the smaller weighted stocks are producing more gains than the larger weighted stocks. Thus the market seems to be ok. It is when the largest weighted stocks produce better results than the smaller weighted stocks when there is a problem. That presents a picture where the S&P500 index says everything is great, but in reality most stocks are not going up.

So I was wrong for a week. The Fed came out this week, not last week, and caused a market gain. In the long run just remember that Niall Ferguson and Larry Kotlikoff, two of the best economists in the world, both indicate the total US federal debt is really greater the 210 TRILLION dollars when all programs are counted. That is three times greater than to total gross national product of the world. This cannot end well. Be ready to sell. BTW SGold is the best performing fund on my 13 relative rank list but still #96 on my 39 relative rank list. Some feel that is an indication of a lack of confidence governments, government debt, and paper money.

IBD TBP’s Current Outlook is “Confirmed Uptrend” – time to invest.

My current investments:
SAutomotive has a price of $55.62, a sell price $53.51, a relative rank of 56, and is a sell since it is time to invest.
Nordic has a price of 44.71, a sell price 42.75, a relative rank of 13, and is a hold in my IRA #2.
SSoftware&ComputerServices has a price of 121.61, a sell price 115.72, a relative rank of 06, and is a hold.
SAirTransportation has a price of 59.96, a sell price 58.74, a relative rank of 20, and is a hold.
SBiotechnology has a price of 214.43, a sell price 203.71, a relative rank of 01, and is a hold.

SBiotechnology is my #1 fund (and I own it), but it and SHealthCare my #2 fund, do not have increasing deviations from their 39 week averages so are not buys.
Nordic should have been sold last week in my IRA #1 but I missed it. Nordic will be sold this week even though I have not held it for 90 days and will pay a 1.5% fee.
OTCPortfolio has a price of 82.91, a sell price TBD, a relative rank of 03, and is a buy in both IRA #1 and IRA #2.

My portfolio changes this weekend:
IRA #1 – Exchange Nordic for OTCPortfolio
IRA #2 – Exchange SAutomotive for OTCPortfolio

My portfolio market exposure after this weekend’s changes
IRA #1 – 100% invested
IRA #2 – 100% invested

I really thought the Fed would come out and make some statements to cause the market to go up, they did not, but perhaps they are working behind the scene. I am surprised how well the market did this week. I still think the market is due for a greater decline but I’ve been wrong before.
I am a little pressed for time this weekend, the tax business is keeping me busy all Sat. and Disney all Sun.

IBD TBP’s Current Outlook is “Market in Correction” – not a time to invest.

My current investments:
SAutomotive has a price of $54.03, a sell price $53.51, a relative rank of 75, and will be sold when I need to exchange it for another fund or it passes the sell price.
Nordic has a price of 44.00, a sell price 42.75, a relative rank of 11, and is a hold.
SSoftware&ComputerServices has a price of 118.66, a sell price 114.22, a relative rank of 05, and is a hold.
SAirTransportation has a price of 59.43, a sell price 58.74, a relative rank of 12, and is a hold.
SBiotechnology has a price of 205.51, a sell price 197.07, a relative rank of 01, and is a hold.

My portfolio changes this weekend:
IRA #1 – None
IRA #2 – None

My portfolio market exposure after this weekend’s changes
IRA #1 – 100% invested
IRA #2 – 100% invested

Based on a study by Ned Davis, since 1928 the market the S&P 500 has fallen 5% or more 294 times, 10% or more 94 times, 20% or more 24 times. That says about 3+ times a year, it falls 5% or more, one time a year 10% or more, and every 4 years 20%+. Perhaps this is the time, but since the high in January to the low in January, the S&P500 has only fallen 4.2%. Not very exciting yet. However, the 10Jan14 MoneyLife show, which Chuck Jaffe produces daily, featured Brad Lamensdorf, Co-Portfolio Manger of the Ranger Equity Bear ETF (HDGE). He points out that the sentiment measures are at 30 year extremes, the bear survey is the lowest it has been for the last 30 year, the bull sentiment is the at 73% after which the market averages a 16% fall, and he thinks it is time to cash out. The next correction is going to be “very brutal.”

IBD TBP’s Current Outlook is “Market in Correction” – not a time to invest.

My current investments:
SAutomotive has a price of $53.73, a sell price $53.51, a relative rank of 70, and will be sold when I need to exchange it for another fund or it passes the sell price.
Nordic has a price of 42.88, a sell price 42.75, a relative rank of 18, and is a hold.
SSoftware&ComputerServices has a price of 118.53, a sell price 114.22, a relative rank of 03, and is a hold.
SAirTransportation has a price of 59.51, a sell price 58.74, a relative rank of 07, and is a hold.
SBiotechnology has a price of 205.55, a sell price 197.07, a relative rank of 01, and is a hold.
Every fund is close to selling, but not there yet.

My portfolio changes this weekend:
IRA #1 – None
IRA #2 – None

My portfolio market exposure after this weekend’s changes
IRA #1 – 100% invested
IRA #2 – 100% invested