Portfolio Rebalance / May 13
In today’s Portfolio Rebalancing process, we’ll focus on counter-trading some themes that have run their course. First of all, in the broader context of the market, what we’re seeing so far resembles the price action of the 2022 bear market, as Real Investment Advice points out in their blog.
The issue with using analogs is that no 2 markets are ever the same. This comparison only proves that the difference between a bear market rally and the completion of a correction is visible in hindsight, not when it’s actually happening.
Enterprise — our core allocation model — will certainly flip bullish at today’s close. From a previous 41% allocation to stocks, the strategy will increase its position in SPY to 75%, close to the maximum allowance. There is plenty of technical data which supports this shift:
SPY is trading back above its technical lower channel trendline;
The break above key resistance levels at the 200 and 100 DMAs + S1 retracement is bullish;
Dark Pools flows and GEX data both support a more constructive view;
However, beneath the market surface that can be observed at the ETF level, we’re seeing some deterioration in trends within our own holdings. After this period of sharp bullish reversal, it’s time to rebalance our exposure in tech related names (APP, NVDA, CDNS) and add to previously underperforming assets (COKE, TLT).
The shift from inflation hedge Gold to inflation vulnerable treasuries should work out well here, as it’s supported both by institutional trading…
…and certainly makes sense from a chart perspective as well — with GLD making a double top and TLT forming a wide base.
Overall, exposure in the portfolio will only be increased on the treasuries side, with equities remaining just below our 60% benchmark.
Finally, today’s significant drop in HALO is closely linked with Trump’s executive order regarding drug pricing and the way insurance programs interact with various drug makers.
As the chart below shows, congressional action is required before such measures actually pass into law and the pharma sector has the highest spending in total lobbying. This will put undue pressure on Congress and likely minimize the executive order’s impact, when all is said and done.
Today’s Trades
At today’s close we will execute the following orders:
Buys:
COKE: BUY, 2.16%
EAT: BUY, 1.39%
TLT: BUY, 6.62%
KLAC: BUY, 3.66% (Initiate Position)
CF: BUY, 3.98% (Initiate Position)
FICO: BUY, 3.92% (Initiate Position)
Sells:
NVDA: SELL, -1.93%
APP: SELL, -3.12%
MELI: SELL, -2.35%
HES: SELL, -3.90% (Close Position)
CDNS: SELL, -5.27% (Close Position)
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