October 20, 2018
Welcome to the Bollinger Bands Letter Update for Saturday October 20, 2018.
On Tuesday many people thought the correction had ended and the VIX fell confirming the sentiment gushing out of CNBC. By the end of the week most people realized that it hadn't ended and the bears were getting vociferous with one pundit publicly calling for a crash. In the absence of any contrary evidence we are sticking to our scenario, a continuing correction leading to a late fall/early winter buying opportunity. It is possible that a bottom could form here, but there is no confirmation of that yet. An ideal scenario would be for a panic low under 2,700 for the S&P that is reversed quickly. In Bollinger Band terms that would setup a near classic W bottom.
Value and large-cap defensive stocks are the leadership here, you can bet that won't persist when the market turns. Our FAANG index is driving down towards a retest of the Wyckoff Spring low we pointed out on the FAANG chart in the newsletter.
You can observe the correction in progress pretty clearly via our Market Timing Chart Pack.
I'll be on the road for a couple of weeks attending the IFTA conference. We are completely portable so there should be no interruption of service; we'll just be working remotely. We'll be back in the office November 6th.
Be careful out there!
There are three changes to the ETF portfolios this week. Sell EWQ. Sell PSJ and buy XLU. Sell XLY and buy XLP. We are holding the proceeds of the sale of EWQ in cash as there is no positively ranked replacement. That is a switch from France to cash, from software to utilities and from consumer discretionary to consumer staples.
The Value Line Program is out of the market for the third week; with the Value Line Geometric Average at 540.25 the Friday buy stop stands at 548.39.
The ETF Program portfolio holdings:
Style (21): IVV, 2, IWF, 6, IVW, 1.
Country (21): CASH, EWL, 5, EWZ, 1.
Sector (27): XLK, 10, XLU, 1, XLP, 2.
Our allocations are 50% US stocks, 10% international, 10% yield and 30% 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.