February 3, 2018
Welcome to the Bollinger Bands Letter Weekly Update for Saturday, the 3rd of February 2018.
Looking at our stock-market timing chart pack what we see so far is an ordinary pullback (a correction) in the context of a very overbought market. There are some reasons for concern, new lows did expand dramatically and we have had four Titanic and five Hindenburg signals. Since the immediately prior high was well confirmed, that suggests a correction within the context of an uptrend.
The US stock market was off better than three percent on the week, with the losses evenly distributed across the size spectrum, and a little greater for value than for growth. Apple and Google were the hardest hit of the FAANG stocks, but even so our FAANG index portrays no more than a normal pullback from an oversold region.
I can't recall a time when the stock market made a confirmed high and then descended directly into a bear market. Most likely we'll get a bounce. We will be better able to judge the future when we see the dynamics of that bounce. The real question will be whether the demand for stocks comes surging back.
I have repeatedly warned that interest rates were going to be a problem and this is the first time the market has noticed. However, I think that the real interest-rate problems will come later and that this is a sort of awakening to the idea that we are in a bear market for bonds.
Our strategy here is to wait a bit, gather some information and then put some more money work in stocks when the market justifies that action.
Above all, do not panic.
All open Ice Breaker positions were closed last week. On Friday one new long position was opened for each of the tracked ETFs (DIA, IJR, MDY, QQQ, SPY).
The Value Line Geometric Average fell to 564.28 exiting the market and setting a Friday buy stop for reentry at 573.59. The Plan was in the market for 22 weeks during which SPY scored a gain of 13.8% and QQQ gained 16.4%
The current allocations are:
50% US stocks, 10% International, 10% Yield and 30% Cash.
There are no changes to the ETF portfolios this week.
The ETF Program portfolio holdings:
Style (21): IUSG, 2, IWF, 3, IWB, 4.
Country (21): EWO, 2, EWJ, 5, EWN, 8.
Sector (27): XLK, 9, IXG, 1, XLY, 2.
Details on our Allocations, Ice Breaker positions and ETF portfolios along with our Market Timing Chart Package can be found here:
Until next time, I wish you well.
John Bollinger, CFA, CMT
Copyright 2018 by Bollinger Capital Management, Inc.