February 7, 2018
Welcome to the Bollinger Bands Letter Special Update for Wednesday February 7, 2018.
Time to bite the bullet and acknowledge that our trade in XIV has been made hopeless by Credit Suisse's decision to terminate the fund after an after-hours raid on Monday night February 5th crushed the net asset value of the fund. ProShares, which runs a similar fund, has decided not to terminate their fund, SVXY. The XIV position was marked as a speculation due to its inherent riskiness and we were up 435% on the position as of the January letter. We had cut it back once, and in more recent months marked it as an add. The event that crushed the fund occurred after hours in savage dark-pool trading as reported by CNBC. XIV's price was driven as low as 16 (it had been over 140 in January) and the fund was forced to absorb the selling and transact in a futures market that was priced to force huge losses. We are certain that this matter will be litigated, but in the meanwhile the termination value looks to be NAV on February 15, with the last day of trading February 20, 2018.
As for stocks, we think that the correction in stocks may have been completed. We think that there is a good possibility of the retest of the lows to form some sort of W bottom in stocks. The quality of the ensuing rally will tell us a lot about the health of the market. We are examining opportunities created by the correction with an eye on adding positions and reducing cash.
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.