Rutherford Portfolio Review (Tranche 5) – 12 November 2021

Defending the Palace, Budapest

A pause this week with no new highs in the US equity markets:

The SPX (S&P 500 Index) closed down ~0.25% from last week’s close after a pullback that moved it slightly outside the regression channel (heavy blue lines) but not outside the channel defined by higher highs (thin blue lines) and higher lows (thin red lines) – so we are still officially within the uptrend and are hugging the lower bounds of the regression channel. Volatility peaked on Wednesday (lower panel) as we saw the major down move.

If we compare with the performance of other asset classes:

we see that Gold (GLD) and Emerging Market equities (VWO) were in positive territory with Commodities (DBC) also positive after a rough couple of weeks (see below). All other asset classes showed weakness with Bonds faring worst.

Checking current holdings in the Rutherford Portfolio:

reveals that Tranche 5 (the subject of this week’s review) is holding ~$17,000 in Cash and 200 shares in DBC. This is the last tranche to rebuild after stop loss orders took us out of most holdings about a month ago. We have been rebuilding slowly over the past 4 weeks but performance was hurt by the TSLOs and we missed out on a significant portion of the recent uptrend in US equities:

So, we’ll check current rankings and recommendations from the BHS model:

where we see the same recommendations that we’ve see for the past few weeks – a Buy recommendation for VTI and a Hold recommendation for DBC.

As usual I’ll check the rotation graphs:

where we see the marked short-term weakness (down movement) in Commodities (DBC) over the past 2-3 weeks – yet, on a longer term basis DBC is still showing strong relative strength as compared with other asset classes.

Zooming in on the remaining assets:

we see that VTI is looking relatively strong with VNQ (US Real Estate) sending mixed signals. Hiding at the top is GLD that was last week’s strongest performer (above table).

If I look at recommendations from a rotation model I see this:

with Buy recommendation for VTI, VEA, VNQ  and AOR (our benchmark fund for this portfolio). DBC is showing as a Sell in this model so I’ll check the HA Charts:

where we see a levelling of candles over the past 2 weeks and no clear clue as to possible future direction.

Balancing the above information, this is how I plan to adjust the portfolio this week:

i.e. I will purchase proportional holdings in VTI (recommended in both models), VNQ and AOR (recommended by the rotational model) and I will hold on to the shares currently held in DBC (conflicting recommendations and no clear guidance on future direction). This will leave me with ~$1,200 that I will use to Buy a few shares of VEA (5% Tranche value) since I do not pay commissions on purchases in this account (only on sales). This will leave me with holdings in the top 5 ranked assets from the rotation model – but ignores higher relative rankings in GLD and VWO from the BHS model that places more emphasis on recent short-term strength – but not enough to override the weaker longer-term strength required to generate Buy signals.

David