October 28, 2018
Welcome to the Bollinger Band Letter Update for Sunday the 28th of October.
We are in the midst of a traditional autumn stock market correction. Our FAANG Index, a good indicator of the leadership prior to the correction, is off 25% peak to trough while the most popular ETF, the SPY, an S&P 500 index fund, is off 11% and the NASDAQ 100 ETF, QQQ, is off 12%. The market as a whole is trying to put in a W bottom in Bollinger Band terms. No completion or confirmation so far, but the set-up is still in place supported by lots of broad market divergences. If Monday is strong up day we will check for an all-clear signal and update if appropriate.
The recent bankruptcy filing by Sears, the Amazon of its time, reminds us that the “one-decision” tech giants of our time may not be the eternal stocks they are hoped to be. Few could have imagined FAANG being down 25%, yet there it is. There is almost a universal urge to buy these ‘bargains’, and that idea may work out, but there may be better ways to play the rally after a sustainable bottom is in. In any case, bargain hunters should wait for evidence that the rotation out of these stocks is over. Some oversold sectors, such as real estate, are already bouncing and even gold is gathering some interest.
The IFTA conference is finished and it was a very good conference indeed. This time away from the day-to-day matters in the office is allowing me to ponder the path forward. History suggests that the leadership immediately after a correction is often just a bounce before the real new leadership kicks in. More on potential leadership in next week’s update after we get some more sector rotation data.
There are no changes to the ETF portfolios this week. There is still no positively ranked ETF to fill in the empty international slot.
The Value Line Program remains out of the market. With the Value Line Geometric Average at 518.38 the Friday buy stop is 526.35.
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.