SET Portfolio Update October 2015

| October 6, 2015

portfolio update

Some of you know that I grew up on a large family farm in Nebraska.  They have a saying about the weather in Nebraska… if you don’t like it, just wait a few hours and it’s bound to change.

Over the last few weeks, the stock market has been behaving in much the same way as the weather in Nebraska.  It has been up one hour and down the next.  Then up and down again…

The S&P 500 is now in a volatile new trading range with multiple levels of support and resistance above and below the current price.

S&P 500

But the most troubling aspect of the recent price action is the moving averages.  You can see on the chart that the S&P is now below the 50-week moving average.

The only other times the S&P has been below the 50-week MA in the last decade was a few weeks in 2011 and in 2008 right before the stock market plummeted in financial crisis.

And it’s the same story for other moving averages like the 200-day moving average.  These are significant long-term moving averages that many investors look to for clues about investor sentiment.

The longer the large cap index remains below these levels, the more it reinforces the belief that the bull market off the 2009 lows has come to an end.

Now, onto the updates…

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

XLU is the latest recommendation.  This safe haven ETF is coveted by income investors for its solid dividend yield.  The Fed’s decision to hold off on raising interest rates has given it a nice boost.  And the time frame for the first Fed rate hike continues to be pushed out further into the future.  It now seems likely that the first rate hike won’t come until late 2016 at the earliest.  XLU has already paid out a dividend payment and moved above our $42.50 buy up to price.  Continue holding.  The price target is $50.00.

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

HACK slumped lower toward our $25.00 stop loss.  This is becoming a common theme among ETFs.  ETFs with the biggest gains YTD are being sold and ETFs that had been the worst performers this year have been the top performers recently.  This seems like rebalancing by institutional investors after stocks’ poor performance in the 3rd quarter.  Nevertheless, we continue to see evidence that companies, governments, and individuals are increasing the amount of money spent on cyber security.  Use this pullback as an opportunity to buy shares of HACK at a great price.  The price target is $50.00.

. . . . ALPS Medical Breakthroughs $SBIO – Buy

SBIO and the entire biotech and pharmaceutical industry have been caught up in a public relations nightmare about the pricing of drugs.  Politicians are taking aim at drug companies that have been raising the price of existing drugs.  Even if new regulations come down, it won’t have a big impact on the developmental stage biotech companies in SBIO.  After all, most of them are still working on developing new drugs.  Positive clinical trials and newly approved drugs will still send these stocks soaring.  Buy SBIO up to $45.00.  The price target is $80.00.

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

JETS is currently up about 5% to $23.50.  It’s above our buy up to price of $23.00.  The airline industry is in a good position to generate more revenue and see fuel expenses fall.  In short, that means airline industry profitability should continue to set new records in the weeks and months ahead.  Continue holding.  The price target is $30.00.

. . . . PowerShares S&P SmallCap Consumer Discretionary Portfolio $PSCD  – Sell

PSCD fell below our $47.00 stop loss last week.  Investor appetite for small cap stocks has evaporated as concerns about economic growth have grown.  It’s time to sell PSCD.

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

IHI has been caught up in the correction that has taken the healthcare industry by surprise.  However, it’s important to note that our medical devices ETF is holding up better than pharmaceutical industry ETFs.  There’s no doubt about it, IHI and other healthcare ETFs are dealing with headwinds from negative investor sentiment.  But the fundamentals for medical device companies remain strong.  I expect IHI to lead the healthcare industry higher once the negative sentiment toward the sector subsides.  Continue holding.  The price target is $140.00.

Action to Take

PSCD hit our $47.00 stop loss.

Category: SET Portfolio Updates

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