The market’s powerful advance today pushed Indicator #5 to a BUY signal, as the NASDAQ closed on the high of the year above 3700 (refer to horizontal line on top chart). The S&P 500 Index crossed and closed above its 50-dma today which is another positive sign.
Indicator #8 is also close to a BUY signal, as the index crossed above the 5 day ema, although the MACD has not yet crossed to the upside (second chart). Therefore, the Dashboard moves from a “2″ Neutral reading to a “3″ BUY reading.
This is not an ideal place to buy as the market is not at a double top which could act as resistance and result in either a continued advance higher or another decline to lower levels.
Since the Dashboard is now on a BUY signal, ETFs will be purchased at the opening price tomorrow morning. Only three of the top 5 ETFs have a “pass” rating (refer to www.etfscreen.combuydonthold Decision Table tab). Those are IBB, PBW and QQQ. The next ETFs with a BUY rating are #8 VGT and #11 SMH which are both technology related which duplicate the QQQ’s universe to some extent. Therefore, I recommend that XRT (#3) and XLV (#4) be also added to the portfolio for a total of 5. Although the latter two ETFs have a “fail” rating, they are both highly ranked for the 6 month RS period, have had a positive MACD crossover as well, and add diversification to the portfolio. They are slightly down for the one-month period. The other choice is to wait for two more ETFs to join the Top 5 and just invest in the three mentioned previously with 60% of the cash or invest in them with 100% of the cash and not wait for others to rank higher.
Of course, you should make your own decisions on the ETFs you invest in. It is your money and your risk tolerance which should drive the investing decision. This BUY signal may be occurring right near the market top and may or may not work out. We’ll have to wait and see what happens. I would recommend 3% stop LIMIT orders to protect principal during this critical market period.
In summary, the Dashboard is on a “3″ BUY signal and will invest it the Top 5 ETFs, even though XRT and XLV do not have “pass” ratings. Also, we will use a 3% stop LIMIT order to protect profits.