Weekly Update

December 29, 2018

Welcome to the Bollinger Bands Letter Update for Saturday the 29th of December.

Growth is starting to pick up increased interest and smaller stocks made a minor uptick against their larger brethren.

I believe that the momentum low is in and that the most likely course of action is a rally into resistance at the bottom side of the late fall trading range where the market attempted to put in a bottom. You can call that 2,600/2,650 for the S&P 500. I suspect that the rally will fail in that range and that we will see a subsequent retest of the lows that will establish the final price low, end the correction sequence, and usher in an important leg up. In that vein, our FAANG Index bounced right back into resistance at its November lows, a logical place.

I am also convinced that there will be a meaningful bounce focused on the most battered issues and that smaller stocks will have a strong, if slow at first, recovery. In fact so much damage has been done, that it may take a meaningful amount of time to rekindle interest in stocks, at which point many people will be in the unfortunate position of having to play catch-up.

A huge amount of very high-quality merchandise has been put on sale. IBM, AAPL, BDX, SLB, AMZN, PCAR, MMM, C, BAC, F, LGIH, IWC, IJR and many, many more. Check your favorite stocks; you may be amazed at the bargains they represent.

Finally, it is time to look at dividends; some high-quality stocks are paying serious dividends. Also in the MLP (master limited partnerships) world there are some astonishing bargains being created by the decline in crude oil.

I plan to delay adding exposure until we see what the retest brings. In the meanwhile focus on what you'd like to own for the longer term.

Aggressive accounts can play the recovery rally, but must be facile enough to deal with a decline into the retest.

In an effort to better picture the dynamics of the market I have added several charts to the Market Timing Chart Pack over the past couple of weeks. It now stands at 30 charts, which is where I think it will stay for a while. In the coming weeks I plan to do some infilling with signals, enhancements and fine tuning. Comments and requests most welcome. bbands@bollingerbands.com

I wish you and yours a happy, healthy, and prosperous 2019!

The Value Line Program reentered the market Friday. With the Value Line Geometric Average at 469.02, the Friday buy stop stands at 457.11.

There are no changes to the ETF portfolios this week.

The ETF Program portfolio holdings:

Style (21): IVV 4, IWD 9, IVE 10

International (21): RSX 5, EWL 12, EWZ 2

Sector (27): XLV 4, XLU 2, XLP 8

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 your weekly Market Timing Chart Pack can always be found here:

https://www.bollingerbands.com/bb-letter/

Until next time, I wish you well.

John Bollinger, CFA, CMT