SET Portfolio Update November 2015

| November 3, 2015

portfolio update

US stocks enjoyed an impressive rally over the last month.

The S&P 500 shot up 12.5% from the low on September 29th to the close on November 2nd.  That’s an impressive gain to say the least.

S&P 500

Along the way, the S&P 500 cut through multiple resistance levels like a hot knife through butter.  Now the large cap index is back above all critical moving averages like the 50-day moving average, 200-day moving average, and the 50-week moving average.

The impressive move was fueled by a combination of better than expected third quarter earnings and central bank actions that are beneficial to stocks.

Amazingly, the S&P 500 is back near the all-time high.  Needless to say, the rally has shot holes in the theories that stocks were entering into a bear market.

But don’t forget that the correction did break the uptrend.  And there’s still lots of uncertainty about the next market move.

We could be at the beginning of a new uptrend.  Or we could enter another period of stagnant stock returns and range bound trading.  Or the recent rally could be a counter-trend rally at the beginning of a downtrend.

All three are very real possibilities right now.  Only time and price action will tell us what the next phase holds for stocks.

We do know that the recent rally was fueled by an influx of money that flooded out of short term treasuries after the latest Fed announcement.  In short, the Fed put the possibility of a December rate hike back on the table… if the economic data supports it.

However, there are still headwinds for stocks. 

The US Dollar is strengthening again.  That puts pressure on commodity prices and corporate earnings made in foreign currencies.

And slowing economic growth in China is hurting as well.  Companies that made a big push into China in recent years aren’t seeing the growth they expected for everything from basic materials to consumer items.

Those concerns aside, there’s no doubt that the recent rally has flipped investor sentiment.  According to the AAII Investor Sentiment Survey, 40.4% of investors are now bullish on stocks over the next six months.  That’s an increase of 5.6% from last week.

What’s more, the beginning of November marks the return of the Sell-In-May-And-Go-Away crowd.  So, there are certainly signs that the market is setting up for a strong rally to end the year.

Now, onto the updates…

. . . . Vanguard Energy ETF $VDE – Buy

The recent price action of VDE has been extremely bullish.  Our energy ETF is up 3% and it has broken out above resistance of the downtrend.  The ETF is now at its best level since July.  We’re seeing the best performance by stocks that were hit the hardest during the correction… and energy stocks certainly fit that bill.  Buy up to $97.50.  The price target is $110.00.

. . . . Utilities Select Sector SPDR $XLU – Hold

XLU has given back a portion of its gains recently.  This is primarily due to the Fed putting the possibility of a December rate hike back on the table and the increase in investor risk appetite pushing money into riskier sectors.  But, we still have a solid 6.9% gain on XLU.  Continue holding.  The price target is $50.00.

. . . . PureFunds ISE Cyber Security $HACK – Buy

HACK is regaining the bullish momentum that made it one of the best performing ETFs prior to the August correction.  There’s no doubt that the fundamentals are in place to fuel this industry higher.  Now, investor sentiment toward these stocks is moving back in the right direction as well.  Buy HACK up to $32.00. The price target is $50.00.

. . . . ALPS Medical Breakthroughs $SBIO – Buy

SBIO is moving higher in a hurry.  This volatile ETF is up more than 20% from the recent lows.  This type of volatility is to be expected with developmental stage biotech stocks.  Those of you that followed my advice to build your position in this ETF over time are now in position to reap the rewards.  Buy SBIO up to $45.00.  The price target is $80.00.

. . . . US Global Jets ETF $JETS – Hold

JETS is up nearly 16% from our initial recommendation.  Obviously, airline stocks are doing well.  This is thanks to strong consumer demand, lower fuel costs, and better management than we’ve seen in the past.  Continue holding.  The price target is $30.00.

. . . . iShares Medical Devices ETF $IHI – Hold

IHI is rallying as investors pour money into stocks.  Our medical device maker ETF is up 12% over the last month.  I expect IHI to lead the healthcare industry higher now that investor sentiment has turned bullish.  Continue holding.  The price target is $140.00.

Action to Take

  • None at this time.

Category: SET Portfolio Updates

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