The stock market has been on quite a roller coaster ride the last 3 months.
In August and September, our research showed widespread sell signals across the board.
All the charts and indicators flashed the typical characteristics of the early stages of a new major bear market.
Market Surprise
Because of that, for most of the month of October, we were positioned defensively to protect against a market decline.
But, instead, the market rallied with some serious velocity and magnitude.
Unfortunately, because of our position, we didn’t participate in the rally as many of our systems don’t get a new buy or sell signal until the end of each month.
False Dawn?
So, with October finished, many of our strategies got signals to buy back into the market.
We’re still a little skeptical of this rally.
Economic data haven’t been great and the rally could just be enough to squeeze out the sellers before making another move down.
Long Game
Regardless of our opinions, we follow the rules of our strategies because that’s how we seek to get an edge on the market over time.
So for the time being, we have an all clear to move back into stocks.
However, if the S&P 500 Index falls below 2030, that’s where we would start to reduce our market exposure again.
In our Multi-Strategy Sector Rotation portfolio, we recently purchased the following ETFs: the iShares North American Tech-Software fund (IGV), the Powershares Dynamic Leisure & Entertainment Portfolio (PEJ), and the iShares US Real Estate fund (IYR).
Leisure
The leisure sector is all about the holidays. PEJ invests heavily in consumer discretionary companies like Starbucks (SBUX) and Disney (DIS) as well as many airline and travel related companies.
We think that low fuel costs will continue to boost the airline and travel industry and help this sector perform well.
Real Estate
The real estate sector struggled from February through August, but now has put in a nice base of support and is showing better relative strength than most other sectors of the economy.
Software
Software stocks look a bit expensive on the fundamental side, but the sector setting new highs and many of the larger holdings are breaking out.
So, there is some risk here but hopefully the momentum will continue to carry this sector higher in the near term.
Photo Credit: Jamie McCaffrey via Flickr Creative Commons
The investments discussed are held in client accounts as of October 31, 2015. These investments may or may not be currently held in client accounts.The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or that investment decisions we make in the future will be profitable.
