InvestExplore.com InvesTrak E-Newsletter
InvestTrak
Sharp E-Newsletter for the Savvy Self-Directed Investor

June 2020 Edition Vol. 05, Issue 06

Monthly Market Roundup

Better Economic Data Help Equities Extend Rally in June

The Coronovirus exposed global equity markets continued to march higher relentlessly even as the number of people infected by the virus has been steadily climbing along with the unfortunate fatalities. Equity investors are continuing to look forward in the hope that better economic conditions will prevail over the next few months. Economic data points from US also somewhat supported this thesis.

But, toward the end of the month as virus cases suddenly started spreading more than was anticipated investors appear to be somewhat concerned if the situation is going to turn to worse. Rallies were fading toward the close in early July.

The Fed's support for the economy has continued to remain strong. As learned from the FOMC meeting in June, the Fed is continuing to support the market with extensive open market operations and purchase of Treasury securities and Mortgage securities to provide liquidity. These moves have considerably helped equities to march higher. "Fighting the Fed" is not a positive proposition for investors in these conditions.

Here is a quick look at some of the top performing non-leveraged ETFS this month across different categories.

  • Innovator IBD 50 ETF (FFTY) +7.09%
  • Invesco NADAQ 100 Tracking ETF (QQQ) +6.1%
  • Ishares MSCI Emerging Markets Small Cap Index Fund (EEMS) +7.28%
  • United States Copper Index Fund ETV (CPER) +10.06%
  • Teucrium Sugar Fund ETV (CANE) +5.12%
  • iShares MSCI Brazil Small-Cap ETF (EWZS) +12.06%
  • iShares MSCI New Zealand ETF (ENZL) +10.32%
  • VanEck Vectors Mortgage REIT Income (MORT) +14.26%
  • SPDR Series Trust SPDR S&P Biotech ETF (XBI) +8.1%
  • GlobalX The Global X Video Games and Esports ETF (HERO) +13.16%
  • US Oil Fund (USO) +8.42%
  • U.S. Global Jets ETF (JETS) +10.34%

International Single-Country ETFS outperformed US equities this month. The rise in Emerging Market Small Caps is a very interesting development to keep an eye on. Even as the airlines sector is struggling to come back to normalcy the JETS ETF which is completely exposed to this sector has gained sharply. But it has pared a lot of gains in recent weeks.


Market Breadth and Technical Review

Market Breadth

After closing very strongly at 86.42 in May, our short term breadth indicator pulled back to close at 70.41 in June. Members will recall our observation in May that there was an increasing likelihood of profit taking to hit the markets in a few weeks. That came to fruition as it clearly appeared markets needed a breather. The indicator had tumbled to a low of 53.47 before paring considerable losses to close higher than that level. Despite this, the close has been somewhat on the weaker side and our expectation is for this profit taking to continue for a little while longer, especially with the surge being seen in Coronavirus cases.

Technical Review

Here is a quick technical review of some important broader market ETFS this month.

ETFTechnical Remarks
SPYAfter shooting higher the ETF pared gains considerably at close which is a slight weakness. Long term uptrend is still intact. Near term trend is tilting higher slightly.
QQQBreached its record high in a very positive development. Powerful price action in June. ETF in solid long term uptrend and shows no sign of weakening.
DIAContinues to remain a clear laggard among majors. ETF remains in long term uptrend but recent price action not convincing.
IJRETF gave back a lot of gains in June and price action was clearly weak. ETF near term trend is weakening. A close above $76.00 will be a positve.
MDYETF gave back a lot of gains in June and price action was clearly weak. ETF near term trend is weakening. A close above $356.00 will be a positve.
FFTYA very strong +7.09% gain this month for this growth ETF. A positive technical situation is visible.
GLDA solid positive reversal in June points to further gains likely though some profit taking cannot be ruled out in the short term. ETF is still holding a solid uptrend.
SLVSilver ETF gained +2.1% in June. A respectable price performance. This month's price action has created a near term uptrend which is positive.
UUPUS Dollar Bullish ETF tumbled this month but pared a lot of losses. Uptrend in this ETF is now broken and a close above $27.36 will be needed to bring back strength.
AGGAggregate Bond ETF logged another positive month with a paltry gain of +0.48%. Uptrend is still in tact.

Growth slightly outperformed Value but in the Small Cap space Value showed some strength. But overall, the core Small and Mid Cap ETFS are showing weakness and this is a negative.

Last month we had called out the possiblity of a pullback which did materialize. We can expect to see some more profit taking unless a positive newsflow on the virus upstages everything else. Technology continues to show amazing relative strength.


US Economic Data Review

It appears just a month of a relatively opened-up US economy was enough to turn many economic data points slightly favorable from very abysmal levels seen in May. Some crucial economic data released in June were clearly encouraging and if such a trend, hopefully if it continues, can lead to an appreciable rebound of the economy in the next few months.

The Conference Board's Index of Leading Indicators, just to cite one example among the many, jumped to a reading of +2.8% in May from a -6.10% reading in April. But,despite this positive reading, the Conference Board's assessment is conditions will remain recessionary in the medium term - which we take to mean at least 2 quarters. With the Fed jumping in to buy Commercial and Mortgage Backed Securities the mortgage rates have remained attractive and this has helped the housing market to recover sharply as well.

Retail Sales, Factory Orders and Durable Goods Orders all registered solid upside. On the employment front too, a surprise positive +2.5K in Non-Farm Payrolls was cheered well by investors. Overall unemployment rate fell slightly to 13.3% from 14.7% the prior month. In an important positive, Small Business optimism also turned positive in May. Small and Mid-sized businesses are the vital cogs of the broader economy and more strength must be seen for the economy to truly climb out of this virus induced recession.

The Fed's June FOMC meeting continued to reiterate the stressful economic conditions in the US and it also expects economic activity to be severely impacted in the medium term. In keeping with this assessment, the Fed is looking to keep rates at these record low rates for the foreseeable future. The ISM Indexes for Manufacturing and Services, while registering upside in May, are still in contraction territory.

Institutional investors turned exuberant in June as their confidence levels increased sharply. But, with the recent surge in Coronavirus cases over the past few weeks, is somewhat likely to dampen this to some extent. So, we have to be careful interpretting this data point.


Action Plan Now

As we publish this edition we realize half of this unnerving year 2020 is in the history books. Equity markets over the past 3 to 4 months have been displaying enormous volatility. Technology and related stocks and ETFS have surged to unprecedented heights even surpassing the February 2020 highs.

Large Caps have performed better than Small Caps and Mid Caps overall. A V-Shaped recovery in equities has materialized for Technology but not quite for the rest of the market. For self-directed investors we believe this is a time to be watchful as markets jump into the second half of an election year. Investors are dealing with two types of uncertainties now - the Coronavirus and Elections. We believe volatility is going to continue at the same level, if not increase. Earnings from Q2 may not be rosy for many companies. But how companies guide for the next two quarters will be closely monitored.

Long Term Investors

Long Term Investors who had implemented a proper asset allocation strategy and especially did not succumb to panic selling during the March 2020 crash should find their portfolio in a better shape than it was during March or April. So, staying that same course is prudent action. Over allocation to outperforming assets in an effort to chase the markets at this time should be avoided.

Investors nearing retirement will need liquidity in their portfolios but a sizeable portion of their portfolios should remain invested with proper rebalancing strategies in place.

Short Term Investors and Traders

Short Term Investing with a time horizon of less than 12 months will continue to remain risky as major benchmarks display periodic high volatility. Investors/Traders who operate in the time frame of 1 to 15 weeks have been profitable and can continue to find attractive but selective opportunties if they are closely monitoring open positions. Locking decent profit in a position if it comes available and cutting losses quickly are very important principles to follow in this market.


ETF Watch List Linked to Strategy (MCAPETF-MOMENTUM-TACTICAL)

In this section we feature some major long diversified multi-asset class ETFS that are showing relative strength when compared against the broader market. Self-directed investors must remember relative strength alone is not a factor for success but definitely warrant further research.

These are the ETFS that make the list this month.

Symbol Description Price Accumulation
TANInvesco Solar ETF$37.34High
XLYS&P SPDR Consumer Discretionary ETF$129.51High
XRTS&P SPDR Retail ETF$43.44Above Average
ENZLiShares New Zealand ETF$57.23Above Average
EWNiShares Netherlands ETF$33.19Above Average
MILNGlobal X Millenials Thematic ETF$28.06Above Average

Self-directed investors may want to keep a close eye on these ETFS as they try to forge higher.

Entry Strategy

Moderate pullbacks and bounces off important technical support levels can provide attractive entry opportunities.

Exit Strategy

A conservative short-term exit strategy may be to exit when the ETFS gain 4% to 6% price appreciation on entry price. In the short term after such an appreciation many ETFS consolidate. If the ETF moves below 4% from the entry price without showing any price strength appreciation exiting to sidelines may be a prudent risk management approach.


Monthly Stock Ideas Linked to Strategy (MCAPEQUITY-MOMENTUM-TACTICAL)

Our Monthly Watch List features stocks that in our research appear to be fundamentally sound and reasonably valued. Investors who are interested in exposure to US stocks may want to add these names to their select list. Typically, stocks should be given some time to move especially when they are going through cyclical quarters. Our approach has always been to wait through a full year or sell if the stock hits our stop price before that. Traders have to implement a trading plan similar to what we have incorporated below as sample. Market Conditions have to be supportive for long positions to work for traders. Traders Entry/Exit may vary.

NVIDIA Corporation (NVDA) * Semiconductors & Semiconductor Equipment * $384.49

This month we are continuing to train our focus on the Semiconductor space as more attractive names are emerging. NVIDIA is an established leader in the cloud computing arena which is now gaining more ground. NVDA stock has been a strong performer lately. Since July 2019 the stock was moving higher until the Coronavirus market crash. The stock consolidated and broke out gain in early May 2020 and since then has gained over +23%. Company's fundamentals are respectable and expectations are high for a very robust earnings in 2021. Investors may want to keep a close watch on this stock. Pullbacks are likely to occur and they could create attractive entry points.

Small Trader Plan (Trading Capital * $25000 * Max Loss is 1% of Capital in One Position)

EntryExitDurationSupportSupportMax Risk/ShareMax $RiskSize
372.75+10%1 to 15 Weeks303.79264.5$108.25$2502
eBay Inc. (EBAY) * Internet Retail * $54.36

Online retail has become a major necessity during this Coronavirus pandemic driven world and EBAY appears to be well positioned to benefit from this important development. The auction model of retail and other e-commerce modes have been successful for the company. EBAY stock was an underperformer for over a year now and the Coronavirus market crash caused another big dive from which it recovered in early May and since then the stock has rocketed over +25%. The company's fundamentals are sound. Q2 earnings are scheduled to be released on 7/16 and expectations are for a strong quarter. Investors should anticipate some kind of a pullback considering the heady run prior to earnings. Pullbacks could offer attractive entry opportunities and investors should monitor this stock closely.

Small Trader Plan (Trading Capital * $25000 * Max Loss is 1% of Capital in One Position)

EntryExitDurationSupportSupportMax Risk/ShareMax $RiskSize
52.5+10%1 to 15 Weeks40.8138.1$14.4$25017

Disclosure: Active positions not held in NVDA and EBAY at time of publishing.


Our Model Portfolios Asset Class Allocation Weights as of June 30th, 2020

Asset Class WeightsGLO-BLENDUS-BLENDYOUNG-INVESTOR
US Large Caps13.8%19.8%40%
Foreign Large Caps21.6%*15%
US Mid Caps9.6%8.8%*
US US Small Caps9.6%4.4%*
Foreign Small Caps5.4%**
US Real Estate6%10%5%
Foreign Real Estate4%**
US Bonds30%35%20%
US Sectors*22%20%

If you are interested in these Model Portfolios and our asset allocation ETFS presently used for these models do not hesitate to reach out to us at custsrvc@investexplore.com.

*-not allocated


Model Portfolios Performance Linked to Strategy (MCAPETF-PASSIVE-STRATEGIC)

January 2010 - June 2020
MetricGLO-BLENDBenchmark (ACWI)
Mean Return9.35%8.90%
Compound Return8.57%7.76%
Beta0.811.00
Alpha2.06%0.00
R-Squared95.18%100%
Sharpe Ratio0.700.55
January 2010 - June 2020
MetricUS-BLENDBenchmark (SPY)
Mean Return11.71%13.45%
Compound Return11.07%12.41%
Beta0.761.00
Alpha1.46%0.00
R-Squared93.71%100%
Sharpe Ratio0.980.88
January 2010 - June 2020
MetricYOUNG-INVESTORBenchmark (ACWI)
Mean Return10.98%8.90%
Compound Return10.10%7.76%
Beta0.841.00
Alpha3.31%0.00
R-Squared91.67%100%
Sharpe Ratio0.780.55

Monthly Diversified Growth & Income Basket for June 2020 Linked to Strategy (MCAPEQUITY-GROWTHINCOME-TACTICAL)

Starting this month we are featuring a unique portfolio basket of stocks which has both a Growth and Income tilt which some self-directed investors will be looking for to add to their portfolios. Our aim is to feature solid, established companies in this list which long term investors may find attractive. These stocks have the potential to grow their earnings and revenues over the long term while also paying a respectable dividend. Important to note, The dividend yields listed below are based on current price and prior year dividend payment and this can fluctuate.

Stock SymbolNameSectorCur.Div.Yield%Remarks
TAT&TTelecom Service Provider6.92%5G Services can offer growth potential.
CM.TOCanadian Imperial Bank of CommerceLarge Foreign Bank6.41%Secular economic growth.
SYYSysco CorpFood Industry3.33%Food supplies provider.
GDGeneral Dynamics CorpAerospace/Defense2.99%Defense technology innovation and new markets.
PFEPfizer Inc.Drug Maker4.41%New life saving drugs over the long term.
UPSUnited Parcel ServiceTransportation3.53%Secular economic growth.

Self-directed investors can perform more independent research to see if these are suitable for their portfolios based on their risk tolerance and long term holding needs.


InvesTrak Strategies - Usage Guidelines

InvesTrak e-Newsletter has identified four unique strategies which can be implemented easily with a "Value for Money" annual subscription. Here we provide a quick guideline on which strategies may be attractive to the different types of investors.

StrategyShort DescriptionSuitability/Application
MCAPETF-MOMENTUM-TACTICALShort Term - 3 MonthsSuitable for short term investors and position traders who are willing to take some risk seeking returns above S&P 500.
MCAPEQUITY-MOMENTUM-TACTICALShort Term - 4 MonthsSuitable for position traders who are willing to take the higher risks in individual stocks.
MCAPETF-PASSIVE-STRATEGICLong Term - 10+ YearsSuitable for truly long term investors who believe in asset allocation with a view to seeking balanced, risk adjusted returns.
MCAPEQUITY-GROWTHINCOME-TACTICALLong Term - 1+ YearsSuitable for long term less risk averse investors willing to allocate a portion of portfolio for income and growth in strong individual stocks .

Click here to learn more about these strategies.

Self-directed investors can also perform more independent research to see if these strategies are suitable for their portfolios based on their risk tolerance.


About InvesTrak

InvesTrak is published on a monthly schedule. The information contained in this E-Newsletter is to be used for educational and informational purposes only.

InvesTrak is published by InvestExplore.com which is not a registered investment advisor.

InvestExplore.com obtains its data publicly available in the internet and cannot guarantee the accuracy of the pricing or volume data provided in InvesTrak or InvestExplore.com.

Members must consult with a professional Financial Advisor before making any investing decisions based on information contained in InvesTrak or InvestExplore.com. Principal manages own money and hence there may be times active positions will be taken in securities mentioned in InvesTrak.

InvestExplore.com, Colorado, USA. Email: custsrvc@investexplore.com.