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Time to Get Defensive – Sept 2015

In the Auxan Capital style of wealth management, we have many strategies, one of which is a Sector Rotation system. Our approach is to purchase three sectors or countries each month out of a basket of 40. The sectors we purchase are determined by a series of four technical analysis indicators.  As I get the signal, though, I can’t help but consider what fundamental or economic scenario might be setting them up for success.  For the month of September, our Sector Rotation system is moving into defensive mode. It is invested 50% in the ProShares Short S&P 500 inverse fund (SH) and 50% in cash.  If you prefer not to use inverse funds, consider buying treasury bonds as a hedge instead.

There are times when a 10% pullback looks like a buying opportunity, and there are times when it looks like the beginning of a new bear market.  We think this pullback in recent weeks looks more like the latter.  Here are a few reasons:

1. In July the S&P quietly broth through a long term trendline established since the 2009 bottom.

2. The S&P broke through its trending channel and has pulled back to test the resistance.  It has been met with heavy selling every time it peeks into the 1980-2000 range.

3. On Aug 21st the S&P broke through its 350 day moving average, which has been an excellent litmus-test as to whether the market is in a bull market or bear market.  Now that it is below this line, odds are much higher that we are in the early stages of a bear market.

4. On Aug 20th, the S&P completed a Head and Shoulders pattern that had been developing over a 6 month period.  This pattern commonly occurs at key […]

By |September 14th, 2015|Commentary, Sectors of the Month|Comments Off on Time to Get Defensive – Sept 2015

Sectors of the Month – Aug 2015

In our company’s style of wealth management, we have many strategies; one of which is a sector rotation model. The system typically purchases 3 sectors or countries each month out of a basket of 40. The sectors we purchase are determined by a series of 4 technical analysis indicators. As I get the signal, though, I can’t help but consider what fundamental or economic scenario might be setting them up for success. These articles will be a monthly commentary detailing what we’re doing and why it might make sense from a technical and/or fundamental perspective.

For the month of August, our three sectors are Insurance (KIE), Housing & Construction (XHB), and Health Care (FXH).

Insurance

Occasionally in our process of sector rotation we have a sector that stays “in the zone” for more than one month. That is the case this month with Insurance, which we bought initially at the end of June and we will continue to hold for another month. From a fundamental perspective this sector makes a lot of sense. Insurance companies are constantly investing the premiums they receive into a variety of bonds and other fixed income instruments. The prospect of the fed beginning to raise interest rates very soon will really help this sector (along with many other financial sectors) improve the performance of their investment holdings.

Homebuilders

Homebuilders was added this month. The chart looks like it’s very close to a breakout and the thing that I like about this sector is that a big piece of its costs are related to raw materials. Because the value of most commodities have been getting hammered in recent months, I expect that that could decrease the cost of materials for builders and thus increase their profit margins. […]

By |August 7th, 2015|Sectors of the Month|Comments Off on Sectors of the Month – Aug 2015

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