Rutherford Portfolio Review (Tranche 4): 25 November 2022

Cruise Boats along the Rhine at Rudesheim

In a trade-shortened week leading into the Thanksgiving holiday, US markets showed their seasonal bullish trend with a ~1.5% gain on the week:

This leaves US equities in a short-term bullish trend but still sitting at the top boundary of the longer-term bearish trend that has dominated performance Year-to-date. So, where we go from here is anyone’s guess – technically we have retraced 61.8% of the prior downward wave (a significant Fibonacci level) and, if we were trading these wave patterns the expectation might be a bearish reversal to the 3200 level – providing the move is strong enough to take out the prior pivot low at ~3500 (61.8% extension). All very interesting and technical – but predictions are difficult if not impossible. The best thing we can hope for might be a small statistical edge. Of course, there is always the possibility that the current bullish trend may continue – at least to the end of the year (for investors favoring seasonal tendencies, the annual Santa Claus rally period) – we will have to wait to see. It is difficult to accept a reversal to a longer-term bullish trend (that, as investors, we are looking for) until prices move above the prior pivot high at ~4300 and this is still quite a way to go at this point.

In terms of relative performance:

US equities remain in the middle of the pack relative to other asset classes with Bonds topping the list as they did last week.

Although not convinced of a full bullish reversal the Rutherford has been moving out of cash and back into the markets over the past 2 weeks:

with the following impact on portfolio performance:

Thus, we have made small profits, although not keeping up with the benchmark. I am ok with this until a longer term uptrend is confirmed as it keeps volatility low in an uncertain environment.

So, let’s take a look at this week’s rankings and recommendations – first from the BHS model:

where, again, we still see no Buy recommendations.

Moving to the rotation graphs:

we see nice movement of VEA in the top right quadrant with relative strength in the longer- and shorter-term time frames (positive horizontal and vertical movement respectively).

This is confirmed in the recommendations:

where VEA is joined by VTI, PCY and AOR as Buy recommendations – the same recommendations that we saw last week.

Following these recommendations leads me to make an adjustment something like this:

to move the Cash available in Tranche 4 (the focus of this week’s review) into shares of the recommended ETFs.

David