August 4, 2018
Welcome to the Bollinger Bands Letter Weekly Update for Saturday August 4, 2018.
Our FAANG Index recorded a 17% correction in price over 27 trading days, or a bit more than five weeks. It found support at a logical place and the odds look high that the correction is behind us. Amazon, AMZN, and Apple, AAPL, were the stars.
On the group and sector front, we have seen a broad rotation toward defensive groups while the correction in the leadership went on, which is exactly what we would expect to see. We had worried that the correction would lead to a deterioration of the internal condition of the market, but that has not proved to be the case. We remain constructive on stocks and are pondering the idea of a strong fall season, which would be highly unusual. We note the impressive strength in the real-estate sector, which is clearly a sign of a strong economy despite the fear of rising rates, which suggests that it will be some time yet before rising rates have a real negative impact on stocks.
There is one change to the ETF portfolios this week, sell EWU and buy EWL, which is a switch from Britain to Switzerland.
Bitcoin is pulling back into a logical area of support, its prior breakout level. If the alt coins/tokens can't hold support and start making new lows expect more weakness in Bitcoin.
We recommend an initial position in emerging markets via Vanguard's ETF, VWO.
Our outlook for US stocks remains constructive.
The Value Line Program is in the market, with the Value Line Geometric at 579.92, the Friday sell stop is 568.83.
The ETF Program portfolio holdings:
Style (21): IJT, 1, IWF, 7, IVW, 4.
Country (21): EWQ, 7, EWL, 1, EWA, 5.
Sector (27): XLK, 6, PSJ, 8, 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.