I would like to acknowledge that this update has significant enhancements to many chartlists, as well as all 40 of the usual Fidelity Select Sector Funds due to a new collaboration. Grayson Roze is now working at StockCharts full-time since graduating from Swarthmore College in June. He has brought many new and useful ideas to the table that we’ve now built into ChartPack Version 7.5. As always, we welcome your feedback. Here are brief descriptions of some of these enhancements.
S& P Earnings: It is a fact that earnings drive the market. Therefore, we have added S&P Earnings to ChartList #10.4 – Permission to Sell Dashboard. From the chart, it’s evident that earnings reinforce and confirm an uptrend in the S&P price chart. On the reverse side, the chart shows that declining earnings historically decrease the likelihood of developing a sustainable uptrend in the S&P price chart.
New Market Breadth Indicator: We’ve added a very useful breadth indicator to ChartList #300. This enlightening chart is the “Percentage New Highs – New Lows” for the stocks in the S&P 1500, and it offers a broader perspective on market participation.
On the preformatted chart, we plotted the S&P 1500 Index behind this breadth indicator, so it is clear when divergences and confirmations occur. Note that we also plotted the top chart as a cumulative graph. The chart below is non-cumulative and plotted as an area chart.
Historical Market Tops and Bottoms: We just wanted to encourage ChartPack users to regularly revisit ChartList #10.45 which is pre-populated by charts of all the tops and bottoms going back to 1981. An exercise that I like to do is to review where we are in today’s market and then try to pinpoint the most similar corresponding spot on each of the previous historical charts. To paraphrase a cliché, markets don’t repeat exactly the same, but they clearly rhyme with previous markets.
Institutional Dividend Darlings: Based on the present top ten holdings in the four most popular dividend-yielding ETFs and four top performing mutual funds, this ChartList (#640) is populated with the 12 equities most commonly owned by these funds. We reduced the original ChartList from 22 equities down to the dozen which were clearly the true “dividend darlings” of these institutions. Thirteen equities dropped from the list and three were added. Note that without exception, ALL of these “darlings” have raised their dividends within the past 18 months.
New Industry Group Added: The Dow Jones US Specialty REIT’s Index ($DJUSSR) includes REITs that invest in self-storage properties, health care industry properties (such as hospitals, assisted living facilities, and laboratories) and other specialized properties such as auto dealerships and timber properties. The index was first calculated in June of 2008. It has been added to the other 108 Dow Jones Industries found in ChartList #450 – Dow Jones Industries.
Daily Routines We Strongly Recommend: Take three minutes each day to build your intuition. Here’s how.
a) Sort ChartList #105 by its “One Week” Performance, and then do a visual review top to bottom.
b) Sort ChartList #205 by its “One Week” Performance, and then do a visual review top to bottom.
The first ChartList (#105) is our master watch-list of the top 97 ETFs generally being traded with the highest volume. As an instructor, I’ve witnessed countless investing disasters by my students with ETFs that are labeled Ultra Short, Bear 3X, Bull 3X, Inverse, etc. We have purged those from this ChartList. ETFs based on options, futures and various derivatives should not be in the sandbox for most individual investors. We have also not included country funds here because we believe your mindset is better served to explore that arena while focusing on ChartList #205 which is exclusively country funds.
Yes, this can be achieved in three minutes – your intuition will grow and the market will reward you.
Global Opportunities of Growing Importance: There are over 40 country funds populating ChartList #205, and we did not have the best performer over the past year (Ireland EIRL was up 23.8%). This necessitated a complete review of the international equity space. We have now added a number of new country funds and replaced existing lower volume funds with similar higher trading-volume country funds and those with tighter bid-ask spreads.
The chart format has also been changed to reflect comparable relative strength to Vanguard Total Global Market (VT) versus what we had used previously which was a USA-only ETF (VTI). In reviewing these 55 country funds, we are struck by the fact that there is literally a bull market someplace in the world at nearly all times. From an asset allocation standpoint, some of these have very low correlations to the S&P 500 and thereby offer true diversification opportunities. Nevertheless, they are much more volatile than your standard USA blue chips and therefore should account for only a small percentage of your asset allocation profile.
Fidelity Sector Funds – Buys & Sells: I had the unique opportunity to ask a benchmark-beating mutual fund manager a question over a recent dinner. Did he feel frustrated that he had to disclose his best ideas (per SEC rules) to his competitors each quarter. His response was enlightening. He said actual investor behavior is counter-intuitive. Most investors have egos that get in the way. If investors see that he bought something they like or they own, they think that they’re geniuses and he’s a brilliant manager. But if those same investors see him buy something they don’t like, they then think he’s an idiot.
The fact is that Warren Buffet could talk openly about his most recent buys, and he would be judged the same. Nevertheless, this particular portfolio manager went on to insist that his shareholders are entitled to know what he owns for the fund where they’ve invested their assets.
Specific Observations Regarding Sector Funds This Quarter:
- This quarter was unusual in that 10 of the Fidelity Select funds made NO changes to their top ten holdings. Most interestingly, a large number of those funds invest in asset groups that have been really suffering recently. It's as if they're saying "the market is weak overall, and the best strategy right now is to simply ride this thing out".
- The Banking Fund dropped M&T Bank (MTB) after adding it to its top ten holdings just last quarter. It appears that the strength they saw a few months ago has deteriorated (-16%), and consequently the stock's volatility has spiked significantly since August. Let this be a lesson to individual investors. When you are wrong, exit your position and stop being wrong. Put your ego aside.
- The Consumer Discretionary Fund rotated away from multiple gambling stocks and added a large American department store to its top ten holdings. The sector on the whole was strong (within pennies from its all-time high), but within the sector, the gaming industry was falling apart.
- The Industrial Equipment Fund accumulated a significant position in Raytheon. The stock was absent from the fund's top ten holdings last quarter, but is now one of its largest positions. That stock was also added by another Fidelity fund this quarter. Review the stock’s chart and see what an accumulation campaign looks like. Note how the sell-off in August took the price below the sell-off price in July, but On Balance Volume was making higher lows.
- Multiple funds took significant positions in large container and packaging manufacturers. That institutional support may be just what these equities need to reverse their 2015 downtrend.
- Fidelity fund managers are allowed to invest a certain percentage of their fund's capital outside of its target industry group (we wrote about this in last quarter’s update). The Technology fund continues to take advantage of that option, holding both automobile and consumer finance stocks in its top ten holdings.
Reminder: Fidelity’s recent equity additions to its top ten holdings are coded in each chartlist with stars (*). One star (*) next to the name of the equity denotes that it was added in the first quarter of the year. Two stars (**) denotes an addition in the second quarter, three stars (***) denotes a third quarter addition, etc. A double XX after an equity’s name denotes that the stock was sold out of the top ten holdings list during this quarter.
Trade well; trade with discipline!
-- Gatis Roze, MBA, CMT
UPGRADE INSTRUCTIONS FOR EXISTING CHARTPACK USERS:
Important: If you have modified any of the charts in any of the ChartLists that start with “GR - ”, those changes will be deleted as part of the upgrade process. If you want to keep those changes, you need to copy those charts into a different non-"GR" ChartList before you upgrade!
To Upgrade the Tensile Trading ChartPack, follow these steps:
1. Log in to your account and then click on the "Your Account" link in the upper right corner of the web page.
2. Scroll down and find the "ChartPacks" area towards the bottom of that page.
3. Find the entry for the "Tensile Trading" ChartPack in the table that appears. (If you don't see it, that means that you didn't purchase it - click here to purchase it.)
4. Click on the "Re-Install" button next to the Tensile Trading ChartPack to start the reinstall process.
The download should take about 15 seconds. At that point, you can explore the new ChartLists and updates.
INSTALLATION INSTRUCTIONS FOR NEW CHARTPACK USERS:
If you are new and would like to add the Tensile Trading ChartPack to your StockCharts account, please Click HERE to get started.
Developer of the StockCharts.com Tensile Trading ChartPack.
Presenter of the Tensile Trading DVD, Stock Market Mastery.
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