There are 2 trades this month. Continued unrest in the Middle East and Ukraine along with the ongoing overhang of challenging bank assets and sovereign debt in Europe has finally pushed international stock markets over the brink. It is time to sell EFA. At the same time, we learned this week of USA’s first unrestricted export of crude oil since the 1970’s. An oil tanker left Houston bound for South Korea carrying US crude. With energy independence seemingly on the horizon for USA, commodities prices have dropped, signaling a sell for our holding DJP.
The Pro-Folio USA model evaluates its holdings on a monthly basis. There are 2 trades this month. As of the last trading day of July (31st), we have the following trade signals:
- SPY – HOLD
- EFA – *** SELL *** Price: 66.59 Threshold: 66.74
- IYR – HOLD
- DJP – *** SELL *** Price: 37.22 Threshold: 38.22
- IEF – HOLD
For existing investors:
You should have spent the month of July invested in all of the 5 holdings above. Now, you should sell your entire position in EFA and DJP, keeping the cash proceeds on hand to re-invest when the appropriate signal occurs.
For new investors:
If you are new to Pro-Folio USA this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the securities shown above, marked as “HOLD” or “BUY.” Because you didn’t invest in the “HOLD” components of the model at the time when the buy signal first turned positive, your return on these initial trades may not be reflective of the model’s typical expected returns.
What I said last month:
The rise of ISIS in Syria and Iraq has rattled the oil markets and sent the cost of gasoline to a 5-year high. The rest of the world seems to be in World Cup euphoria. The global equity markets are getting overvalued as prices continue to advance even faster than economic recovery should warrant. Fundamental risk remains in overhanging government debt and bad bank assets in many places, especially Europe, US, and Japan. Many analysts are noting that the last time we saw a run-up like this was in 2007, right before the Great Recession and the stock pull back of 30% in 2008. Investor confidence is very high, which is a strong historical indicator for an impending pullback.
This month, we may be seeing the beginning of the market correction in global stocks that I was wary of last month. I will be interested to watch EFA from the sideline and see how far it falls. Likewise, the drop in commodities (DJP) may signal slowing economies around the world. We’ll continue to keep an eye on that as well.
Fortunately for us, the Pro-Folio USA model lost less than 1% of value in 2008, the only year on record that it lost value. We can continue to follow the model with confidence that our assets will be protected. Sleep well every night!
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Enjoy the winding down of summer! There’s still plenty of time for barbecue grills, iced drinks, and slip-n-slide. Personally I’m a grill fanatic – year-round I enjoy grilling cedar-plank salmon, BBQ chicken, secret-recipe steak burgers, veggies of all kinds, and anything else I can dream up! If you have a best-ever grill recipe you want to share, email it to me or post it as a comment for the group. Thank you for your interest in Pro-Folio.