November 10, 2018
Welcome to the Bollinger Bands Letter Update for Saturday the 10th of November.
As waves of fear hit the market smaller-cap stocks are suffering the most and value stocks are picking up interest. I think that the correction is over and the momentum low is in. However, I am not looking for an immediate rally to new highs; base building and a possible retest of the lows are still in the cards.
Several readers have asked about filling out the equity allocation in light of many items in our Core Portfolio being stopped out. You can use some combination of SPY, MDY and IJR, the S&P 500, 400 and 600 ETFs. Since larger stocks are leading SPY would currently be best. That is our standard advice for filling out the equity allocation, or for those who are not comfortable with individual stocks. Another possibility is to select from the better ranked items in our ETF portfolios.
Our FAANG Index rallied back to its breakdown point, which was also the location of prior peaks and thus a confirmed logical place, and turned down from there. We expect another leg down that may lead to a base. In any case, it looks to be too early to be jumping back into the prior leadership.
On my recent long plane rides I had a chance to work on our Market Timing Chart Pack. There is one new chart, number 16 which depicts the AAII Sentiment Survey, a short-term contrarian indicator, and lots of small improvements to the rest of the package. As usual it is available in the subscriber area. In the next couple of weeks I will add a classic intermediate-term market timing tool, the Investors Intelligence Survey of Advisory Opinion. For explanations of the indicators used in the Market Timing Chart Pack see the updated Guidelines.
There are no changes to the ETF portfolios this week.
The Value Line Program is in the market. With the Value Line Geometric Average at 538.79, the Friday sell stops stands at 527.01.
The ETF Program portfolio holdings:
Style (21): IVV 4, IWF 9, IVW 5
International (21): RSX 3, EWL 2, EWZ 1
Sector (27): XLV 4, XLU 3, XLP 1
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 always be found here:
Until next time, I wish you well.
John Bollinger, CFA, CMT
Copyright 2018 by Bollinger Capital Management, Inc.