After a rough start on Monday, U.S. Equities bounced strongly for the rest of the week to again close at all-time highs:
The weekly range was also a little unusual in that it was greater than the Expected Move as calculated from the Implied Volatility of Option prices.
The weekly returns of ETFs in the Rutherford quiver are shown below:
with the portfolio holding the following positions:
So, with only a small holding in GLD our portfolio should have shown reasonable performance:
and we can see from the above screenshot that this was the case.
So, we’ll move on to check the current BHS recommendations from the Kipling workbook and look for possible adjustments in Tranche 4.
We see Buy recommendations for VTI (U.S. Equities) and VNQ (U.S. Real Estate) and Hold recommendations for RWX (International Real Estate) and TLT (U.S. Treasuries). VEA, DBC and GLD are discretionary Hold?s with PCY and AGG (International and U.S. Bonds) the only suggested Sells. Since we are only holding DBC in the discretionary category we’ll take a closer look at this ETF through the eyes of the rotation graphs:
where we see a continued weakening in momentum over the longer term (but turning up a little in the short term). VTI and TLT are still looking strong (in the top right quadrant) with VNQ managing to stay relatively stable.
Let’s see what the recommendations are coming from the rotation algorithm:
where we see TLT and PCY recommended as Buys in addition to VTI and VNQ (as suggested by the BHS model). PCY looks like it might be picking up a little steam but is still relatively weaker than our benchmark AOR fund (that is held in Tranche 4) so I will ignore that recommendation for this week and just switch out between DBC (Sell) and TLT (Buy).
Thus, the adjustment in Tranche 4 for this week will look like this:
and, with 1.65 Std Dev TSLOs in place we should end up with a portfolio with less than 5% risk.