January 11, 2019
Welcome to the Bollinger Bands Letter Update for Friday the 11th of January 2019.
In the wake of the Xmas massacre, which was in-and-of-itself a selling climax, there have been many intermediate- to long-term buy signals. A Zweig Breadth Thrust and a Breakaway Momentum signal, both based on NYSE advance & decline data, an Alternation signal which consists of a ten to one down day followed shortly by a ten to one up day, a Colby signal based on a dearth of bulls in the Investors Intelligence numbers, a High Low Index signal based on new 52-week highs and lows, a surge in put option volume, the early version of January Barometer, an adjusted Haller new lows signal, and so on. The bullish evidence just keeps on mounting. We are now in the best part of the year to own stocks and are entering best part of the four-year cycle. Our FAANG Index continues its recovery, overcoming the first area of potential resistance with ease. To top it all off, with the ten-year Treasury yield and the Fed Funds target rate nearly the same levels, the Fed has indicated that it'll back off its tightening project. I suspect that you are getting the drift; I am bullish on the US stock market.
In the shorter term I am still expecting a pullback and a retest of some sort and this looks like a logical place for it to start, just under the prior breakdown point. I would like to wait for a pullback to add on to existing positions, but one can never be sure of a retest so up goes the allocation of US stocks to 60% with another 10% in the wings. Remember that advice about putting together a list of stocks you wanted to own, now is the time to start executing it. ETFs to fill in in the meanwhile? IJR, XLI and SPY. For more ideas do not forget the list of bounce candidates we posted earlier. Smaller and middle-sized stocks are trying to move back into leadership roles, while there is no clear trend to the growth versus value relationship.
Next week's update will be a day or two late as I will be traveling over the weekend.
The Value Line Program is in the market. With the Value Line Geometric Average at 504.33, the Friday sell stop stands at 491.98.
There are two changes to the ETF portfolios this week. Buy IWP and sell IVE, a switch from large-cap value to mid-cap growth. Buy PSJ and sell XLP, a switch from consumer staples to software.
The ETF Program portfolio holdings:
Style (21): IVV 6, IWD 11, IWP 1
International (21): RSX 5, EWL 7, EWZ 1
Sector (27): XLV 11, XLU 2, PSJ 2
Our allocations are 60% US stocks, 10% international, 10% yield and 20% cash.
Details on our Allocations, Ice Breaker positions and ETF portfolios along with your weekly Market Timing Chart Pack can always be found here:
Until next time, I wish you well.
John Bollinger, CFA, CMT
Copyright 2019 by Bollinger Capital Management, Inc.