Rutherford Portfolio Review (Tranche 5): 1 April 2022

Brisbane, Australia

This was a mixed week for US Equities with the markets showing strength at the beginning of the week but weakening towards the end of the week:

Although the above chart is a little messy, note what I would consider a valid “Gartley” harmonic pattern. Regular readers will be aware that I have been looking for this confirmation for about 2 months – the pattern comprises a down move (red dashed line AB) followed by a 61.8% (fibonacci “golden ratio”) recovery (aqua dashed line BC) and an 88.6% retracement of the BC move to D2. At this point I was favoring a continuation down to the 400 level to complete a simple ADCD pattern. However, I was also watching for a possible bounce to the ~467 level to complete a “Gartley” harmonic pattern. Two weeks ago I noted that we had just broken out of the downtrend channel defined by the solid aqua (upper boundary) and red (lower boundary) lines and that we may be heading for D3 and completion of the pattern. Obviously, these pivot levels are difficult to see on a candle-to-candle basis but the yellow dashed lines (CD2 and D2D3) are simple regression lines through the candles within the range. Note how these lines intersect at the 88.6% price level. We have not quite hit the 467 (D3) level and we might see this point hit next week. However, we reached 462 which is close enough for me to favor a drop from here (or at least within the next 2 weeks) and to be looking for some hedge trades. We’ll see what happens.

Checking on the relative strengths of different asset classes:

we see a really mixed bag with US real Estate and Emerging Market Bonds at the top of the list and the defensive Gold and Commodity ETFs at the bottom. Equities were relatively flat globally although Emerging Markets were the strongest of the bunch. Bonds were relatively quite strong.

Taking a look at the performance plots for the Rutherford Portfolio:

we see that we remain a little ahead of the benchmark AOR fund but with moderate volatility.

Current holdings look like this:

with Tranche 5 (the focus of this week’s review) holding positions in GLD, DBC TIP and VWO.

Checking recommendations from the BHS model:

we see no Buy recommendations but Hold recommendations for GLD and DBC. There are also a lot of positive (green) short-term HA signals so we’ll check the rotation graphs:

where we see a lot of short-term weakness (downward movement) in many of the plots. DBC and GLD are still the strongest asset classes on a longer term look-back basis but this momentum may be running out.

If we take a look at recommendations from a rotation model:

we see that DBC and RWX show as recommended Buys. Although not showing as a recommended Buy (with Max Assets set to 4) VNQ also returns a maximum Score of 10 with VTI, VEA and AOR coming close with a score of 9.

Based on the above information I am going to close my positions in VWO and TIP and use the proceeds to acquire shares in RWX and VNQ (Real Estate):

We’ll see where this leads us as we move forward.

David