Buy—Don’t Hold:

Note:  This post will be in place of the one this coming weekend, as there is only one more day in this week and the Dashboard signal will most likely not change again on Friday

Market Review

This week the DJIA blasted to continuous new all-time highs.  This is the tenth straight day of market advances for that index. Yet the broader-based S&P 500 Index still has not exceed its all-time high reached in 2007 of 1564, but at today’s close of 1563.23 it should easily exceed its previous high on Friday or Monday.  All in all the market had another positive week but the percentage increases from the prior week were much more subdued. The Dashboard registered a “3” BUY signal as Indicator #8 had a positive MACD crossover to accompany the Summation Index crossover of its 5 day-ema from a while ago that results in a BUY signal on this indicator.

For the week through Thursday the DJIA was the leader up 0.99% closing at 14539.14. The S&P 500 advanced 0.78% closing at 1563.23, and the NASDAQ Composite was in last place up 0.45%.

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.  This indicator is still on its earlier BUY signal. (Refer to first chart).  

Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest March 14^th bullish reading of 45.4% was well above the March 7th bullish reading of 31.1%. This was a very large increase from the prior week which is not unexpected in light of the market’s performance over the past week. This indicator remains on its SELL signal from January 31^st.

Indicator #8 NASI Summation Index and MACD.  The indicator now on a BUY signal as of today’s market close, as the MACD had a positive crossover today, while the Summation Index has already crossed above its 5 day-ema over a week ago. (Refer to second chart)

Dashboard Now on a “3”BUY signal

The latest Dashboard data is presented in the link below:

Dashboard-V2-March 14 2013

 Top 5 ETFs – Fully Invested as of Friday AM March 15, 2013

Since the Dashboard is on a BUY signal the Top 5 ranked ETFs with a “PASS” are placed in the portfolio with Friday’s opening price.  The ticker symbols in order are: IYT,XHB,XLF,PHO,XLI

Next week’s blog will again present the Top 5 ETF table with performance figures vs. benchmarks.

The Decision Page link is as follows: http://www.etfscreen.com/buydonthold/bdh-decision-page.php.

Dark Liquidity

www.dark-liquidity.com/BDH2new.php independently tracks the BDH performance.  The Dashboard ETF portfolio year-to-date is 1.97% which is well below that of the major indexes which are up over 10%.  The recent market rally has added to the market gains while the BDH strategy has been in cash.  Dark-Liquidity will show the Top 5 when it is updated based upon Friday’s opening price.

Conclusion – Extreme Caution Regarding Buying ETFs Now

The markets continue to push higher unabated and are giving no signs of giving up this upward trend.   The BDH Dashboard has registered a BUY signal as of today’s market close.  This is the first time that the Dashboard has issued a BUY signal when the market is making new highs.  Normally, the Dashboard signals a BUY when the market is coming off of a correction.  Therefore, we are now in uncharted waters.  That means that I urge extreme caution in taking this BUY signal at this time.  The market is overdue for a correction, so buying ETFs now could be a big mistake.  However, the market could go higher and higher without even a 5% correction going forward.

So here are a few options to consider:

1.  Do not take this BUY signal and remain in cash and short-term bond ETFs until the market finally corrects and another buy signal is given.
2. Invest 100% by placing 20% in the Top 5 ETFs,  but making sure to use tight stops, such as 3% to protect capital in case of an expected decline.
3. Invest 25% at this time with 5% in each of the Top 5 ETFs keeping the remainder in cash or short-term bond ETFs.

This market is bound to correct sooner or later and when it does it could be nasty and deep or shallow and short-lived.  This is not a time to be a hero.  Prudence is called for at this time.  You are responsible for your investments so be careful.  I am following option 1 and will remain in cash, as I believe the risk is too high for me to invest at these levels.  I may be wrong, but I am satisfied with my decision.