November 2021 Observations

November was a month where the S&P dropped less than 1% but there were frequent swings in both the index and in the underlying market exuberance.

It is worth mentioning that December is usually a good month for the market.  It is worth mentioning that initial concerns about a COVID variant may be overblown.  It is worth mentioning that inflation may just be transient.

It is also worth mentioning that everyone knows that certain sectors and stocks (technology particularly) are disproportionately propping up the broad market averages.  It is also worth mentioning that forward PEs are quite high, nearing all time highs.  It is worth mentioning that when the people start heading for the doors it will come far and fast.

Going directly to the technical data for the ETF Retirement Fund:

• Hold:  VCLT, XLY, EDV, XLK
• Out and continue to stay out: BNDX, MUB, GLD, EMB, HYEM
• New BUY:  none
• New (potential) SELL:
  • XLP (Consumer Staples) $70.115 at close end of today December 1
    • It has fallen below the long term moving average, so for the risk sensitive it is a SELL
    • It is at the bottom of the support channel.  If it falls further to $68.74 it will pick up longer term support.  Past that point it is a lost cause. 
  • XLV (Healthcare) $129.75 
    • It has fallen below the long term moving average.  Sell if risk sensitive.
    • Channel support at $129.75 (it is at bottom of channel)
    • Longer term support at $125.47.  
    • Consider selling based on your current basis and risk tolerance
  • XLU (Utilities) $66.02
    • It has fallen below the long term moving average.  Sell if risk sensitive.
    • Channel support ends at $65.43.
    • Obvious support ends at $63.40
    • Consider selling based on your current basis and risk tolerance
  • FDL (Morningstar Dividend Leaders) $33.23
    • It has fallen below the long term moving average.  Sell if risk sensitive.
    • Channel support ends at $32.73.
    • Consider selling based on your current basis and risk tolerance
  • VNQ (Vanguard Real Estate) $105.585
    • It has fallen below the long term moving average.  Sell if risk sensitive.
    • Support at $101.70.
    • Consider selling based on your current basis and risk tolerance
  • SCHP (US TIPS) $62.97
    • It has fallen below the long term moving average.  Sell if risk sensitive.
    • Support likely at $62.73
    • Consider selling based on your current basis and risk tolerance.

What should you do?  Nothing extreme.  You can’t predict a big one-day drop and shouldn’t try to.  That being said:

1. Figure out your target ratio of Equity to Fixed.  If you are above that, and your tax situation warrants, sell down to at least that target level.  You may even want to take the equity portion down 500 or more additional basis points (5%).  1Q2022 could be rough.
2. Watch those above support levels.  Don’t sell the entire position.  But a drop below the channel, or below longer term support, is material.  Long term it could be a buying opportunity.  But conversely it is also a signal to take some profits on your way to a target equity / fixed ratio.