Conservative. Smart. Investing.
I’m back! Last weekend I was in Indianapolis for the 500. I had a great time with some old friends at the track. The race and the spectacle are something to behold and you should see it at least once in your lifetime. It is an experience like no other in the US.
The S&P closed flat for May, rising slightly from 4190 at April end to 4200 at May close.
For the ETFs in our Retirement Strategy, those that remain LONG:
ETFs transactions for end of May:
No Activity:
This week has shown some signs of market nervousness on inflation, with the S&P 500 recovering on Thursday and Friday after steep losses on Wednesday. The CPI leapt 4.2%, the sharpest rise since 2008. So as I have been warning, I think we are probably in for more bad news on the inflation front. Workers are staying home as a form of a “strike”, not only as a result of government largesse, but as a method to force employers to raise wages. This “wage push” inflation will eventually force companies to raise prices, thus causing workers to ask for more money – you can see the pattern. So I am worried that this will happen this year. So, how do you protect yourself? First, don’t panic, as panic is never a good strategy. Own stocks for the long term and hopefully collect some yield while you wait. Second, as Mark Twain famously said, “buy land, they stopped making that”. Hold on to your real estate holdings and perhaps buy a REIT like Simon Property Group (SPG) or National Health Investors (NHI). Third, invest in energy companies like Chevron (CVX) or Exxon (XOM). Also, consider a natural resource like water (again, they stopped making that!). Good choices for this include Invesco Water Resources ETF (PHO) or Invesco S&P Global Water Index ETF (CGW). Finally, consider investing directly in commodities like gold, copper or even collectibles. But be careful here, collectible values are in the “eye of the beholder”, and you could get burned. And then there is bitcoin, but as recent events have proven, it is not for the faint of heart as it is very volatile.
I am working on a system that will help guide us as the market tops and corrects. See the chart below.
Consider the following settings:
Slider=1000: looks back for the last 1000 trading days
shortperiod=20: uses a 20dma as the short term average
Economic Phase: Continues 5-3 in favor of continued Expansion. Specifically indicating Phase 2 (late Expansion). No change from last month end.
Retirement ETF Portfolio: No additional BUY signals. No SELL signals
Economic Phase: 5-3 in favor of continued Expansion. Specifically indicating Phase 2 (late Expansion). No change from last month end.
Retirement ETF Portfolio: BUY signal for XLU (SPDR Utilities). No SELL signals
This strategy is based on a straightforward price vs 200 day moving average, plus a confirmation using FRED economic data.
The model sold three ETFs at month end February:
There were no new BUYs in the period.
I am pleased with the performance of both the Growth Fund and the Income Fund. Note that there is no need for me to post weekly gains or losses as the performance of the funds is tracked on a separate page. But I will say that I was actually surprised by the performance of VIPS being as good as it is. They announce earnings on February 25th, so it may be case of “buy on the rumor, sell on the news”, so don’t be upset if the stock underperforms on that day. I would still hold on the stock as well as all of the others in the portfolio. As for the Income Fund, several of the stocks have underperformed, but remember that the primary purpose of this fund in income via dividends, so again, just sit back and enjoy receiving dividend payouts in excess of the S&P average.
I have added a check on Breadth to the base algorithm. This is looking at the number of stocks reaching new highs versus new lows, the number of stocks advancing versus declining, and the number of stocks above or below their 21dma. It looks at this data across the S&P100 (very large caps), S&P500, S&P400 (midcaps), and S&P600 (small caps). Version 54 performs with a higher RAR and higher Win Percentage than V53.
As you know the Retirement ETF algorithm is rather simple, looking for a monthly cross of the 200dMA. The picture below is an XY plot of the ETFs that are in the Retirement portfolio.
On the X Axis is the Percent Variance of the Price to the 50dMA.