July 21, 2018
Welcome to the Bollinger Bands Letter Weekly Update for Saturday July 21, 2018.
I will be out of the office Monday and most of Tuesday.
The technical condition of the marker remains solid. While it is not as strong as it had been, primarily due to a lot of group and sector rotation as managers search for advantage, it is still quite strong. From a Bollinger Bands perspective we are experiencing BandWidth expansion on the upside, a positive factor. We recorded new highs in the large-cap advance-decline lines as the smaller stocks digest their recent gains.
As for group rotation, the two things that strike me are the laggard transports trying to improve and for some reason that I cannot fathom, utilities are nearly the strongest sector. Speaking of the transportation sector, we could easily get a Dow Theory bull market confirmation signal. A close above 25,320 (+1.0%) for the industrial average and 11,088 (+3.1%) for the transports.
On the interest rate front three month T-bill rates hit two percent, the highest level in in ten years. We had hoped that this Fed chair would be a bit more market guided but he seems to exhibit the same paternalistic tendencies as prior Fed chairs.
Gold stocks are down testing support; burgeoning inflation should lend them a hand.
That double top in our FAANG index we commented on is indeed a double top with Netflix confirming. I think that the FAANG thing is over for now. Will we come back to it? Almost certainly, but for now small-cap growth looks more interesting. I am not expecting a FAANG bear market, more likely consolidation/correction.
In the energy sector, the stocks failed to confirm the last new high in crude, never a good sign. Of course weakness in natural gas isn't helping.
Our outlook for US stocks, our primary asset class remains positive. We continue to think that emerging markets could be a big play. There are no changes to the portfolios this week.
Keep calm and carry on.
The Value Line Program is in the market, with the Value Line Geometric at 581.58, the Friday sell stop is 568.35.
The ETF Program portfolio holdings:
Style (21): IJT, 1, IWF, 2, IWO, 6.
Country (21): EWQ, 7, EWU, 8, EWA, 1.
Sector (27): XLK, 5, PSJ, 1, XLY, 3.
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 Pack can be found here:
Until next time, I wish you well.
John Bollinger, CFA, CMT
Copyright 2018 by Bollinger Capital Management, Inc.