A blog post

Dashboard Remains in Neutral Position

Posted on the 08 February, 2013 at 5:10 pm Written by in Blog

Market Review

The stock market had a choppy up and down week marching in place without much headway. The bulls are still exerting control as daily closes are nearer the highs of each day rather than the lows. The DJIA meandered around the critical 14,000 level all week, but was unable to close above it by the Friday close, as it flat-lined for the week with a small loss.  This week the S&P 500 Index and the DJIA were the two strongest of the three major market averages based on a more speculative take on the market by its participants.  Both the NASDAQ Composite and S&P 500 closed at their respective highs for the year. (Refer to horizontal red line on NASDAQ chart to see high points for the year).

For the week the NASDAQ Composite was the leader up 0.46% closing at 3193.87, after being the leader the prior week as well. The DJIA declined 0.12% to close at 13992.97 and S&P 500 Index closed at 1517.93 up 0.34%.  Both the DJIA and S&P 500 are still within a few percentage points away from their October 9, 2007 highs.  The NASDAQ Composite still has a ways to go, as it has lagged on a year-to-date basis.

Indicator Review

Indicator #2 NASDAQ Composite and 100-dma.  This indicator remains on its January 3 BUY signal with the index price well above its 100-dma.   (Refer to first chart).

Indicator #5 NASDAQ Composite with MACD.  Although, this indicator is on a January 30, 2013 SELL signal, it is close to an upward crossover which could occur with a continued market rally. (Refer to first chart). A further decline would keep this indicator on its current SELL signal.

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest February 7 bullish reading was 42.8% which was a decline from the January 31stbullish reading of 48.0%.  So bulls are becoming a bit less bullish.  This indicator remains on last week’s SELL signal (January 31st)

Indicator #8 NASI Summation Index and MACD.  The indicator remains on its BUY signal, although the MACD had a negative crossover the week of January 28th.   Remember that the Index needs to crossover its 5 day-ema, as well for this indicator to issue a SELL signal.  So watch this indicator this week for a possible downward crossover. (Refer to second chart)

Dashboard Still on a “2”Neutral signal

A chart of the Dashboard BUY and SELL signals is presented here:

Dashboard-V2-February 8 2013

A chart of the BDH Dashboard signals is presented below, copy and paste it into your browser:

http://tinyurl.com/cth7plq

 Top 5 ETFs          

The Top 5 ETFs had a negative week overall. So far this portfolio has gained 5.58% since the November 28th BUY signal compared to the average benchmark’s gain of 7.39%.  EWA was sold on the open on Thursday, as its rank dropped below 10.  It provided a positive return of 3.5% while in the ETF portfolio.  There are now four remaining ETFs in the portfolio, as no replacement was added since the Dashboard is not on a BUY signal.  EFA, currently ranked 9th, may be the next ETF to be sold if it falls further in the ranking. EPI closed the week at rank 14 and will therefore be sold at the open on Monday, leaving three ETFs in the portfolio.

Here are the current ETF rankings:

Top-5-ETF-Tracking-February 8, 2013

Remember that Pass/Fail readings are used solely when an ETF is to be purchased not when they are already in the portfolio.  Only if an ETF drops below rank 10 or it is stopped out 9(based on your stop LIMIT price) should it be sold.  Note that the remaining four ETFs have a “fail” rating since their MACD reading is ever so slightly below 0 (meaning a cross-over to the downside). So these ETFs are mirroring the negative MACD crossover of Indicator #2.  This is a cautionary sign that an overall market decline may have begun, ever so slightly so far.

Please note that I do not post changes to the ETF Top 5 portfolio during the week.  It is your responsibility to check the Decision Page daily to see if any ETFs should be sold and replaced if they fall below rank 10.  Any changes will be reported in the weekend blog. Additionally, make sure a Stop Limit order is placed on each position according to your risk tolerance.

Dark Liquidity

www.dark-liquidity.com/BDH2new.php independently tracks the BDH performance.  The ETFs declined 1.67% for the week which was well below that of the major indexes as reported earlier.

Year-to-date the DJIA is leading the race up 6.79%, followed by the S&P 500 up 6.44%, and the NASDAQ Composite up 5.75%.  As a comparison, the BDH ETF portfolio is up only 2.92% in 2013 according to the calculations of www.dark-liquidity.com.   This portfolio has been mostly invested in international ETFs which have underperformed the U.S. domestic ETFs.

Conclusion

The markets advance stalled this week with minimal price change, but at yearly highs in two cases.  The DJIA is now the laggard as it valiantly tries to again overtake the 14,000 level and remain above that level on a consistent basis.  This week the market experienced greater volatility, but still held up well.

Whether the DJIA and S&P 500 are able to reach their 2007 peaks this week remains to be seen.  If it does reach those levels, then the question is whether or not it can exceed those levels or retreat a bit.  We’ll have to wait and see what happens. 

Action Plan — Repeated from Last Week’s Blog

Be alert to a possible Dashboard SELL signal at any time.  Make sure to look at the $NASI chart which you should have as a bookmark to determine if a SELL signal has occurred end-of-day.  Also check the NASDAQ Composite chart to see if the MACD crossover has changed direction from its current SELL signal.

[Added this week.] You will note that the ETFs in the Top 5 are being sold as they decline below rank 10 and not replaced as no BUY signal is in place.  This results in having only three ETFs left after Monday’s sale of EPI.  This approach automatically prevents against any large losses and locks in gains as well.

You may want to tighten your stop LIMITs to 3% or less, so that any you retain as much of your profits as possible before a possible decline sets in.  You can use trailing stops at a level you feel appropriate.  The other option is to sell a portion (25-50%) of your portfolio, if we reach the 2007 price peak to lock in some profits, even if there not a Dashboard SELL signal.  That is not part of the BDH methodology, but that is something you may want to personally consider.  Remember that no one knows how the market will perform going forward.  You are solely responsible for managing your own portfolio.

 

some comments

There are currently 9 of them
  1. cario lam 9 February 2013 at 9:37 pm permalink

    Hi Les,

    Only two.ETFs left for me after open on Monday. XHB sold on a stop limit trigger this past week. Have a great weekend.

    Cario

    • Les Masonson 11 February 2013 at 12:17 pm permalink

      Cario,

      That is the way a rule-based investing approach works.

  2. Ken 11 February 2013 at 7:42 am permalink

    date wrong http://www.buydonthold.com/wp-content/uploads/2013/02/Dashboard-V2-February-8-2013.xls

    • Les Masonson 11 February 2013 at 12:18 pm permalink

      Ken,

      I looked that over and don’t see a date problem.

  3. cario lam 11 February 2013 at 5:36 pm permalink

    Hi Les,

    The rule based investing approach is doing wonders for my blood pressure. Have a great week.

    Cario

  4. cario lam 13 February 2013 at 4:49 pm permalink

    Hi Les,

    Do my eyes deceive me or did the Dashboard register “3” buy signal today due to a MACD plus crossover for the NASDAQ composite?

    Cario

    • Les Masonson 13 February 2013 at 5:10 pm permalink

      Cario,

      There was a positive crossover of the MACD of only 0.03 which is miniscule. So as in the past I will wait for a crossover that is more prominent. If you look at a daily chart of 30 days you can see the MACD is almost a straight line for about a week.

  5. cario lam 13 February 2013 at 5:03 pm permalink

    Wow is this a first? Dashboard reads a “3” but none of the top five ETFs meet the trading above the 100 and 200 day SMA and positive MACD crossover requirements.

    • Les Masonson 13 February 2013 at 5:11 pm permalink

      Yes, and the top 20 ETFs have a fail because their MACD is 0 or negative (a tiny crossover as well). So even with a new buy no ETFs would be bought. How about that!