June 24, 2018
Welcome to the Bollinger Bands Letter Weekly Update for Sunday June 24, 2018.
History, of a sort, was made last week when it was announced that General Electric, GE, would be dropped from the Dow Jones Industrial Average in favor of Walgreens Boots Alliance, WBA. The change will occur after the close on Monday. GE was the last of the original Dow Jones Industrial Average components. The original list of 12 industrial concerns was first published on May 26th 1896, see below. The DJIA stood at 40.94, the sum of the closing prices of the 12 stocks divided by a divisor of 12. Today the Dow Jones Industrial Average includes 30 stocks, few of them industrial, and stands at 24,461.70 with a divisor of 0.14523396877348.
American Cotton Oil
Distilling Cattle Feeding
Tenn. Coal & Iron
U.S. Leather Pfd.
It may be of historical interest to trace those original 12 stocks over time, I have, and found the exercise quite interesting. However, our interest here is of a contrarian nature. We recommend the purchase of GE for a long-term hold—no stop loss. Since GE qualifies for inclusion in our Dividend Portfolio we will add it there to track it. There is a long history of stocks being shoved out of the DJ averages after long-term declines in favor of more "fashionable" issues. Generally the stocks going into the DJIA under-perform and the stocks coming out over-perform. We feel that those trends are reinforced by all the indexing going on. A good example is the ETF DIA, which must now sell off GE and purchase WBA. I'll have a lot more on this in the July Bollinger Bands Letter, including the story of an average that I ran, the Financial News Composite, FNCI.
On the international front the Shanghai Composite is being crushed setting up the possibility of an important long-term buy from a contrarian perspective in the future.
We remain bullish on US equities with an emphasis on mid-cap stocks and a strong emphasis on small cap stocks. Market internals are strong and there is no sign of the sort of deterioration we would expect to see if a top were forming.
We are long eight Ice Breaker positions as follows: DIA, 1, IJR, 2, MDY, 2, QQQ, 0, SPY, 3.
There are no changes to the ETF portfolios this week.
There are no changes to the portfolios this week.
The Value Line Program is in the market. With the Value Line Geometric at 579.04, the Friday sell stop is 568.35.
The ETF Program portfolio holdings:
Style (21): IJT, 1, IWF, 7, IWO, 3.
Country (21): EWQ, 11, EWU, 3, EWH, 9.
Sector (27): XLK, 7, PSJ, 3, XLY, 2.
Our allocations are 50% US stocks, 10% international, 10% gold, 10% yield and 20% cash.
Aggressive accounts should be 60% stocks, 10% cash.
Details on our Allocations, Ice Breaker positions and ETF portfolios along with our weekly 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.