“Have a Happy, Healthy and Wealthy End of Year Celebration”
The stock market meandered around all week, but was able to end with modest gains: NASDAQ Composite was up 0.34%, while the DJIA rose 0.42% and the S&P 500 gained 0.28%. For the YTD: DJIA + 25.26%; S&P + 19.85%; and NASDAQ +29.29% compared to 10.45% for the BDH strategy which has been in cash since the end of September.
Maximum BDH BUY signal and Market Re-entry
There was one BDH signal change during the past week. Indicator #5 experienced a MACD positive crossover on December 18 resulting in a maximum BDH signal of “4”. Therefore, on Tuesday December 26 morning, we will re-enter the market by buying five ETFs: XOP, PBW, SMH,XLF, and XHB in equal amounts. My hesitation in not investing (even when there was a BDH BUY signal in place) since the end of September has resulted in a major under performance of the BDH strategy. This was too cautious a stance, and I should have just reentered the market on earlier Fall buy signals. Note that there have been no BDH SELL signals since our late November 2016.
There are still many stocks not participating in this rally. The number of new 52-week NYSE highs is now at 471 up slightly from 418 the two weeks earlier, but still weak in comparison to other market highs of years ago. Also, the number of new lows was 104 , but hanging around 100 for the past three weeks, but still surprising given the market’s strength. Normally, a market near its highs has 700 to 800 stocks or more participating. The percentage of NYSE stocks above their 50-dmas is currently at 66.40% compared to 66.30% five weeks ago, and down from a reading of 79% on October 18. The percentage of stocks above their longer-term 200-dma is currently at 69.44% declining from 71% on October 18. Clearly, the market is weakening internally, but certain groups of stocks with their best performers is making it appear that most stocks are participating in the rally. This is NOT the case. These market conditions caused me to be too cautious in following the BDH strategy rules to the letter.
Oil and energy stocks were up about 2%, while gold and gold miners were up 1.48% and 4.93% respectively . Fixed income took a hit and was down between 1 to 2.6% depending on the maturity. In the above chart, please type in ETF ticker symbols IEF, TLT, BOND, SHY or AGG or others one at a time to see their current bond weekly performance, or GLD, GDX and USO and $BRENT for the other averages.
Indicator #2 NASDAQ Composite Index and 100-dma. This indicator issued a SELL signal on November 8, 2016. (see first chart above). This buy signal is now over one year old and has stayed with the trend.
Indicator #5 NASDAQ Composite with MACD. This indicator issued a MACD BUY signal on December 18 cancelling the previous SELL signal on December (refer to upper chart’s MACD indicator). Note the Index has taken out the red resistance line twice in the past few weeks by moving higher, and continues to accelerate higher.
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest December 6, 2017 Bullish Percentage reading was 50.5% up a big 5.5 percentage points from the prior week. This indicator remains on its long term buy signal with numerous confirmations along the way since May 27, 2015. Remember that a reading above 50% as we had this week, followed by any subsequent weekly decline below that level is a SELL signal on this indicator.
Indicator #8 NASI Summation Index and MACD. This indicator flashed a BUY signal on November 28 as the MACD had a negative crossover (see green circle in the nearby chart). This confirms the earlier Summation Index negative on the same day (see upper portion of that chart). Note the positive Index crossover in the upper chart and the MACD nearing a crossover in bottom of chart. This indicator is poised to issue a BUY signal this week if the market moves higher.
Here is a chart showing all Dashboard buy and sell signals (it may take a day or two for the new signal to be posted):
Dashboard on “4” BUY signal
Here is the latest Dashboard. Click on the line below:
Note that I could not provide a spreadsheet type link due to a software issue with this WordPress software. Go back to January 2017 to see the last spreadsheet and all prior data.
Dark Liquidity BDH Performance Statistics
www.dark-liquidity.com/BDHV2new.php independently tracks the BDH performance. For the year-to-date 2017, BDH is up 10.45%. It is in 14th place out of a 22 strategies followed by that website. See the “Strategies Summary” link on the top of their page.
Top 5 ETFs – 100% Cash Position Will Be Reversed on December 26, 2017
We are still in a 100% cash position, so no ETFs are currently held. On Tuesday 100% of the cash will be invested in five ETFs: XOP, PBW, SMH, XLF and XHB. There was some duplication in the top 10 ETFs so I chose the most appropriate ETF to have diversification.
BDH Decision Page – BDH Dashboard ETFs — Note Change Below
Here is the link to the Decision Page. Copy and paste it into your browser:
Change in ETF Indicator Logic
Effective October 25, 2017, the “pass” criteria was changed from requiring that all three conditions (Initial Tests) be met to requiring that any 2 of the 3 conditions be met. This will make it quicker to purchase ETFs after a BDH Dashboard BUY signal is given. In the past, when a BUY signal was given many ETFs in the top 20 did not have pass ratings, so they could not be bought at that time. This delayed the purchase date and gave up some upside. This change is aimed at entering the market as soon as possible after a BDH Dashboard buy signal
Currently, there are 36 “passes” out of 52 ETFs, and 19 of top 20 ETFs “passes” with the new criteria.
To get a feel where the best performing ETFs are by asset class, I suggest that you pull up the seven asset classes on the right side of the Decision Page (in blue ink) to see which ETFs have been doing the best — e.g., sector ETFs. You can click on the down arrow in the three month and one month columns of the each grouping to see short-term performance. Currently, gasoline (UGA), international (BRF, EEM, EPI) and sectors ( PBW, XLF, VGT, and DIA are performing the best).
Conclusion — Market Advance Stays Intact
The stock market continues to move higher and it is time to get back in the market, as our caution has cost us performance over the past three months.. If you are still invested keep your stop LIMITs in place, and ride the market until the next BDH sell signal occurs or you are stopped out of any position beforehand.
Remember that you are responsible for your investments and how you manage them. If you decide to follow the BDH strategy, then you are responsible for checking the BDH indicators daily during times when the market is volatile. Just bookmark the two charts above and look for any signal changes. I may not available during the week to provide interim Dashboard signal changes. It is important to be pro-active, so as not to miss any Dashboard signals. Decide on and place your stop LIMITS that meet your risk profile.