SET Portfolio Update September 2015

| September 1, 2015

portfolio update

The calm and boring summer of range bound trading was broken in an instant.

As you can see, the S&P 500 broke through the key technical support level of the 200-day moving average on August 20th. And all hell broke loose…

S&P 500

The primary cause of the selloff was China.  As we’ve talked about many times before, economic growth in China has been slowing for years.

Their latest attempts to prop up economic growth built up a stock market bubble. The air began to come out of the stock market bubble in June.  Chinese stocks are now 40% below their peak of just a few months ago.

The Chinese government openly admitted they were buying stocks to try to stem the tide of selling.  Then China devalued their currency in a surprise move in the week before the US market selloff.

Needless to say, these aren’t normal things for the government to be doing. All of the crazy stuff China was doing caused a lot of investors to believe that another shoe was about to drop.

As a result, there wasn’t anyone that wanted to buy stocks on the morning of August 24th, 2015 as the market opened. And the market rout was on…

It’s hard to say where we go from here.  China, oil prices, earnings, and the uncertainty of the first Fed rate hike are weighing on investors.  Fear and pessimism are dominating investor decisions these days.

At the same time, US economic data is solid with pockets of strength that point to faster economic growth and better days ahead for consumers.

One thing’s for sure, the relative calm of the range bound S&P 500 has ended.

If these fears and negative sentiment are proven to be unfounded, it could be just the thing to spark the next big move higher for US stocks.

Thankfully we had been taking profits and trimming back our ETF positions ahead of the recent market selloff.  Now we can establish new positions at discounted prices and generate some big returns to close out 2015.

Now, onto the updates…

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

HACK was one of the unfortunate ETFs hit with an ETF Flash Crash on August 24th. This is a perfect example of why we use mental stops, not a physical stop loss. You never want to be forced to sell your investment at the market when things aren’t working perfectly. HACK bounced back above our $25.00 stop loss and never closed below this level. The pullback is a great opportunity to buy HACK up to $32.00. The price target is $50.00.

. . . . ALPS Medical Breakthroughs $SBIO – Buy

SBIO is a volatile ETF.  And the market volatility only amplified the move to the downside.  That’s why I gave SBIO a wider stop loss than other ETFs I recommend.  Nevertheless, there’s no disputing the upside potential for developmental stage biotech stocks.  Continue to build this position at these discounted prices.  Buy SBIO up to $45.00.  The price target is $80.00.

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

JETS was also hit with an ETF Flash Crash.  It too bounced back quickly and never closed below our $19.00 stop loss.  It is below our $23.00 buy up to price.  You can add to or establish a new position below $23.00.  The price target is $30.00.

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

PSCD pulled back as the market sold off.  But I’m not throwing in the towel on small cap consumer stocks.  In fact, these stocks are in the sweet spot to benefit from the current US centric economic growth story.   Feel free to buy shares of PSCD up to $55.00.  The price target is $66.50.

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

IHI is another ETF that suffered a flash crash on August 24th.  Needless to say, these market hiccups can create some big problems for ETFs in a very short period of time.  IHI bounced back and we’re actually still up a bit from where we recommended buying the ETF.  Healthcare is one sector that we want to have exposure to given the current market environment.  The price target is $140.00.

. . . . Market Vectors Gaming ETF $BJK – Sold

BJK succumbed to the market weakness.  That’s not surprising since the epicenter of the pullback was China and casinos have made some big bets of their own on Chinese gambling.  It triggered our stop loss on August 21st… that’s our cue to sell and move onto better opportunities.

. . . . First Trust NASDAQ-100 Technology Sector Index Fund $QTEC – Sold

QTEC closed below our $37.50 stop loss on August 25th.  That’s our cue to sell.  The losses were mitigated when it reopened at $38.27 the following day.  It’s disappointing to see tech stocks bear the brunt of the pullback.  But it’s time to move on to find better opportunities.

Action to Take

  • BJK hit stop loss at $34.00.
  • QTEC hit stop loss at $37.50.

Category: SET Portfolio Updates

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