July 28. 2018
Welcome to the Bollinger Bands Letter Weekly Update for Saturday July 28, 2018.
We had discussed the double top in our FAANG Index in the newsletter and are now seeing the result. They are taking the big high-tech growth names out one-by-one and shooting them, but the market is resisting the siren's song and seems to be able to absorb the bad news without breaking stride. Facebook, FB, missed earnings and experienced the largest single day destruction of market cap in history. Netflix, NFLX, had its pratfall six days earlier and Twitter, TWTR, followed the next day in similar style. Google, Apple and Amazon are holding in there, which is why you don't see a bigger decline in the index. I suspect that the FAANG Index will consolidate for a bit and then try for a new high. We'll need to watch that rally carefully to get a better handle on the outlook for this important market sector.
Meanwhile, the market as a whole is doing fine. It is not as strong as it once was, but there is no sign of impending weakness. Frankly, the ability to shrug off bad news, such as Facebook's, is a strong positive indication for stocks. Our outlook remains constructive.
If there is a worry, it is starting to be interest rates. Friday saw a knee jerk sell-off after a strong GDP report which was seen as reinforcing the Fed's tightening stance. This is becoming another critical relationship to watch; sooner or later rising interest rates will be a problem for stocks.
There is one change to the ETF portfolios this week, sell IWO and buy IVW, which is a switch from the Russell 2000 to large-cap growth.
Be careful out there. The craters in the large cap growth stocks are going to reinforce the ETFs are safer mantra and help create even greater opportunity for those focusing on individual stocks.
The Value Line Program is in the market, with the Value Line Geometric at 577.18, the Friday sell stop is 568.35.
The ETF Program portfolio holdings:
Style (21): IJT, 2, IWF, 6, IVW, 1.
Country (21): EWQ, 7, EWU, 11, EWA, 4.
Sector (27): XLK, 7, PSJ, 5, XLY, 4.
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.