It was a bullish week in the US Equity markets with the S&P 500 closing the week ~2.6% higher than last week’s close and at all-time highs:
The closes on the last 2 days were also outside the Expected Move (EM) for the week and volatility has dropped. We will now wait to see whether we can test the big 4000 round number – that is within the EM range for next week – or whether we will pullback for a retest of the ~3830 level.
Checking on the performance of the Rutherford Portfolio:
we see that, despite not holding any positions in “pure” equity ETFs and 50% in Cash, we have not performed too badly over the past week:
In Tranche 5 (the focus of this week’s review) we are holding 90 shares of AOR (our benchmark fund) with ~$15,000 in Cash.
Checking our Tranche worksheet:
we see that, based on rotations:
the recommendations are to hold positions in VTI and VEA (Equity ETFs), VNQ (Real Estate) and DBC (Commodities). However, note the rotation of equity ETFs into the lower right quadrant – indicating a weakening trend.
After 6 months of watching these rotations I am sure there is valuable information contained in the numbers – but I am still having difficulty in finding an algorithm to take advantage of the data. I therefore also check our existing BHS model recommendations:
where we see recommendations to Buy or Hold positions in VEA, VWO, VNQ, RWX and DBC.
Since I am not yet convinced that I have a better system I will let the BHS model influence my decision on how to interpret the rotation data. I will add positions in DBC and VNQ – as recommended by both models and I will choose to go with a position in VEA (recommended in both systems). However, I am a little confused with VTI in that it looks stronger in the rotation graphs than VEA but ranks lower in the BHS model. Also, remembering the situation with US Equities (at all-time highs) it would seem prudent to be a little careful at the present time. I am therefore going to compromise a little and to keep my existing position in AOR (an equity/bond ETF). This will also save me a little in commissions/slippage and avoid too much churning.
My adjustments for this week will therefore look like this:
with ~8% risk with 1.65 SD stop loss orders in place.