EB Weekly Portfolio Report - Saturday, December 31, 2022
Happy New Year!!!
Upcoming Earnings Reports
According to Zacks.com, the following companies will be reporting earnings this week and each is a component of one of our portfolios:
Monday, January 2: None - Market Closed
Tuesday, January 3: None
Wednesday, January 4: None
Thursday, January 5: None
Friday, January 6: None
PLEASE NOTE: The above companies were provided using Zacks.com. We do hold our portfolio stocks through one earnings report, but every EarningsBeats.com member must make his/her own investing/trading decisions about holding stocks into earnings reports as it's the most volatile (risky) time to own a stock.
Portfolio Rules and Objectives
Here are the common traits and objectives of our portfolios:
- There are 10 leading stocks from up to 10 leading industries in each portfolio (at the time of selection). Generally, there will only be one stock per industry group, but there could be exceptions.
- They are typically held for an entire 90-day period, with no stops in place. We strive for consistency, transparency, and simplicity in our portfolios. EB.com members may hold these stocks for the entire 90 days, trade them, use stops, etc., but for purposes of our calculation, we will likely make no exceptions to our "buy and hold for three months" strategy.
- Every stock will generally be held through ONE earnings report
- The expectation is that relative winners will carry the portfolio to outperformance
- All portfolio stocks were announced on Thursday, November 17th, and were all entered into as of the close on Friday, November 18th for tracking purposes
- Primary objective is to outperform the benchmark S&P 500 over time; quarter-to-quarter performance can be extremely volatile, especially if significant rotation takes place intra-quarter
Here are several considerations for EB members:
- The Income Portfolio should have the least amount of volatility as it will typically be comprised of quality large cap stocks with solid dividends
- The Model and Aggressive Portfolios should be viewed similar to aggressive growth funds; they will typically have a lot of volatility and periodic drawdowns can be significant from time to time
- The Income portfolio stocks will all pay dividends, with the expected average dividend yield to be at least 1.0%
- Drawdowns (losses) should be much milder on the Income portfolio, with more volatility expected on the other two; please review inception-to-date charts below to gain an idea of the volatility associated with each
- I believe the larger drawdown on the Income portfolio at the beginning of the pandemic was an anomaly, occurring as many defensive, higher-yielding companies uncharacteristically underperformed during a market decline.
- Large drawdowns in the February through May 2021 and the November 2021 to February 2022 periods were due to the rapid rotation from growth stocks to value stocks; each quarter, our portfolios are based on themes and there is never a guarantee that our analysis and beliefs will be proven correct
- Consider owning or trading these stocks in whatever manner is most comfortable for you; while we will buy all 10 stocks in the manner identified above, feel free to trade certain stocks or wait for pullbacks if the stocks are overbought
- We have no idea what risk each member is willing or able to take. We are not registered investment advisors so be sure you understand the risk you take. Please consult your financial advisor.
- EarningsBeats.com shareholders/employees may own all or some of the portfolio stocks from time to time.
Weekly Snapshot
Here's a weekly recap:
Weekly Summary
Benchmark S&P 500:
The S&P 500 fell for the fourth consecutive week, though we've seen fractional drops the last two weeks. Nonetheless, we can see a pattern developing that we saw three different times in 2022 - the pivot at the tops in January, March, and August. In each of those 3 instances, prices rolled over and moved down to set lower lows:
The chart shows us that after each pivot at previous tops, prices fell precipitously and the RSI returned to 30 or below (light black circles). Right now, the pivot looks similar, but the RSI is attempting to hold 40 support. If it does so successfully and the S&P 500 returns to new highs, it would be much more indicative of the beginning of an uptrend. Of course, we have to see that first. We cannot assume it's going to happen. But it's one thing to watch for on this chart.
Model Portfolio:
The Model Portfolio dropped 0.29% last week, slightly underperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model Portfolio component stocks performed last week:
Aggressive Portfolio:
The Aggressive Portfolio slid 0.53% last week, underperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive Portfolio component stocks performed last week:
Income Portfolio:
The Income Portfolio gained 0.87% last week, underperforming the S&P 500.
Here's the updated inception-to-date chart of the portfolio:
Here are how the Income Portfolio component stocks performed last week:
Model ETF Portfolio
Our Model ETF Portfolio lost 0.13% last week, essentially matching the S&P 500.
Here's the updated inception-to-date chart of the Model ETF Portfolio:
Here are how the Model ETF Portfolio components performed last week:
Model Trade Setups
I will provide Model Trade Setups each week in this Weekly Portfolio Report, which will simply be to outline possible trades based on key support, resistance, relative strength, and where these trades come from. For instance, my trading strategy for Strong AD ChartList (SADCL) stocks might be completely different than my trading strategy on Strong Earnings ChartList (SECL) stocks. Obviously, it would be different from a Short Squeeze ChartList (SSCL) trading candidate. I'll lay out the annotated chart and my reasoning for the (potential) trade. I may provide follow-up on some or all of these setups in the Daily Market Report (DMR). I'll also provide full disclosure, if I own any of the setups provided. Feel free to trade these Model Trade Setups based on the annotated charts provided, or according to your own trading strategy. Or ignore them. It's completely up to you. I am not a Registered Investment Advisor (nor is EarningsBeats.com). THESE TRADING CANDIDATES SHOULD NOT BE VIEWED AS INVESTMENT ADVICE.
I view EarningsBeats.com as a market research, market guidance, and market education platform. We do not attempt, in any fashion, to manage anyone's money. We have no idea the risk tolerance of each of our members, nor do we have any idea of your financial goals and objectives. It would be irresponsible for us to provide advice to any of our members. Therefore, please consult your own financial advisor before considering any buy/sell decisions. You are completely responsible for the financial decisions that you make.
Last Week's Setups
Here were the setups provided last week and how they performed:
4 of our 6 portfolio stock setups finished higher on the week, while the S&P 500 was slightly lower. It wasn't a great week, but the trades certainly held their own.
This Week's Setups
Every week, I will provide setups among our Portfolio stocks and our ChartList stocks. My preference is to trade Portfolio stocks, when appropriate. These stocks are in our portfolios for a reason - they're generally leaders within leading or improving industries.
During the upcoming holiday-shortened trading week, there'll be few earnings reports. Most earnings will begin to kick in mid-month. From an economic perspective, the biggest upcoming news will be centered around the nonfarm payrolls, due out on Friday. Here are the trading setups for this week:
From Our Portfolios:
DBX:
Test of price support.
PODD:
Test of price support and the 50-day SMA.
LSCC:
Bullish engulfing candle and 50-day SMA test.
ENPH:
60-minute positive divergence. Watch for 50-hour SMA test.
ADP:
Hammer and false breakdown.
MCD:
Hammer at gap and price support.
PEP:
50-day SMA test and test of price support.
The Week Ahead
The first month of the calendar year has strong predictive tendencies of how the balance of the year will likely progress. In 2022, we had one of the worst Januarys on record and it preceded one of the worst years on record. The bulls will certainly be looking for any signal of a possible bullish year ahead and one of those signs will be January 2023 performance. I've studied this "January Effect" in depth and have broken down all Januarys in four quadrants, with quadrant 1 representing the best 25% of Januarys since 1950, down to quadrant 4, which represents the worst 25% of Januarys since that time. Here is how it breaks down:
- Quadrant 1: +6.96%, +15.27%
- Quadrant 2: +2.90%, +10.21%
- Quadrant 3: -0.47%, +2.51%
- Quadrant 4: -5.08%, +4.70%
The first percentage next to each quadrant is the average January performance for all years within that quadrant. The second percentage is the average "balance of year" performance (February through December). You might think that a strong January means the balance of the year wouldn't be so great, but that's not how the market history has worked. Clearly, you want January performance to fall in one of those top 2 quadrants.
Here's another consideration. Since 1950, January performance has been positive (greater than zero) 43 out of 72 years. Of those 43 positive Januarys, 37 of those years saw further gains from February through December. While January performance provides us no guarantee of balance of year performance, there's a lot of evidence that suggests the odds favor the bulls if January is positive.
One of our warning signals in 2022 was the January 2022 performance, which was -5.26%. The 2022 balance of year performance was -14.97%. 2022 held true to form. A very poor January 2022 (7th worst January since 1950) resulted in another down year.
One last historical fact about January. Since 1971, the NASDAQ has averaged gaining 2.39% in January, while the S&P 500 has averaged gaining just 1.05% over the same period. Historically, the NASDAQ tends to perform much better in January. That's particularly interesting, given the way the market performed in Q4 2022. The NASDAQ has been badly lagging. So will history suddenly change the NASDAQ's fortune?
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."