Q3 2024
September 26, 2024
All of our analysis at the moment indicates that the market should be headed higher in the medium and long term. As such it makes sense to slightly increase our equity exposure, above the target weighting and essentially buying the breakout.
As far as the portfolio composition goes, adding Energy exposure opportunistically also makes sense. Tech also looks good. Gold has reached its technical limits for the moment and can be removed. And on the treasuries side, we can further extend our bond duration by swapping high yield bonds with TLT.
We will execute the following trades at market close:
SELL 100% HYG (Close Position)
BUY 5% TLT (Add 5% to Position - now at 30%)
SELL 100% GLD (Close Position)
SELL 100% CTAS (Close Position)
SELL 100% CL (Close Position)
BUY 3% XOM (Initiate 3% Position)
BUY 3% APP (Initiate 3% Position)
BUY 3% ANET (Initiate 3% Position)
BUY 3% EME (Initiate 3% Position)
These adjustments will bring our equity exposure slightly up from 60% to 64% and better align our portfolio with the sectors and factors which are poised for outperformance in the year ahead.
Click here to access our own tracker for the Sigma Portfolio and understand how the positions contribute to the overall exposure profile.
In total, we stand to gain $18.986 by risking $9.417 if our targets are correct. The risk-reward equation is good, as for each $1 of potential risk, we stand to gain almost $2. At this stage, it makes sense to increase both our potential risk and the potential reward.
September 12, 2024
Yesterday's market response to the CPI data was very encouraging and technically extremely bullish. As a consequence, we are adding to our equity exposure in the only corner of the market where we see relative value: large cap tech / growth with a high Momentum correlation.
We are executing the following orders at today's close:
BUY 2% AMD (Add 2% to Position)
BUY 2% CDNS (Add 2% to Position)
BUY 4% NVDA (Initiate 4% Position)
Our equities risk exposure profile will rise from 52% to around 60%.
August 28, 2024
In accordance with Millennium Alpha’s rebalance, we are closing the positions which are overlapping, namely FICO and GDDY.
Additionally, we are taking profits in PANW as well. We are adding MSI to our positions, and increasing KRE and FANG in order to maximise desired exposure to Value Stocks (IVE) and the Equally Weighted S&P500 (RSP).
There is no change in overall equity risk exposure.
The following order will be executed at today’s close:
SELL 100% FICO (Close Position)
SELL 100% GDDY (Close Position)
SELL 100% PANW (Close Position)
BUY 5% MSI (Initiate 5% Position)
BUY 2% KRE (Increase position from 3% to 5%)
BUY 2% FANG (Increase position from 3% to 5%)
August 23, 2024
We have taken various portfolio actions during this week in order to bring our allocation back near target weights. While we’d still like to see a confirmation of a “support retest” in SPY in order to get monstructive on risk exposure, there is no need to be overly defensive at the moment.
Today, we are adding Cintas Corporation (CTAS) to our portfolio, with a 5% weight, taking the total risk exposure to 51%.
The following order will be executed at today’s close:
BUY 5% CTAS (Initiate 5% Position)
August 20, 2024
Today, we are continuing to make portfolio tweaks, that should bring us more in line with our desired allocation and exposure targets.
These changes do not amount to a major increase in risk, but the quality of our picks is improved according to the Millennium Ranking System. The swap of regional banks positions is telling in this sense (ZION -> RF).
We are executing the following orders at today's close:
SELL 100% FE (Close Position)
BUY 5% COKE (Initiate 5% Position)
SELL 100% ZION (Close Position)
BUY 5% RF (Initiate 5% Position)
Our equities risk exposure profile will rise from 44% to around 46%.
August 19, 2024
Now’s as good a time as ever to point out that our automatic systems (Enterprise and Nostromo) were right to be buyers last Tuesday, and we were wrong to be sellers. That puts us in the unenviable posture to play “catch up” with portfolio exposures in the next period.
- Today's Weekly Preview
As such, we need to re-gross our portfolio on both the equities and treasuries side. But that doesn't mean we can't go bargain hunting to a certain extent (CDNS and AMD). We are also swapping healthcare exposure (HALO for LLY) and adding to our treasuries position with TLT.
We are executing the following orders at today's close:
SELL 100% HALO (Close Position)
BUY 5% LLY (Initiate 5% Position)
BUY 3% CDNS (Initiate 3% Position)
BUY 3% AMD (Initiate 3% Position)
Our equities risk exposure profile will rise from 35% to around 44%.
On the treasury side, the allocation goes from 19% to 29%.
The goal is to redeploy cash once as the correctionary process is clearly complete. We are still expecting a 50-DMA retest on SPY and will act accordingly when it occurs.
August 13, 2024
We are using the current rally to further reduce risk exposure. For the moment we are raising cash by cutting lagging positions, and hedging against future volatility. The most likely path for equities remains a retest of recent lows at some point.
If we are wrong, adding exposure is a trivial matter. The current rebound rally has most likely run its course for the time being and any advances will become more difficult going forward.
We are executing the following orders at today's close:
SELL 100% MSFT (Close Position)
SELL 100% RRC (Close Position)
SELL 100% LPG (Close Position)
Our risk exposure profile will decline to around 35% equities, the minimum value allowed given the bullish overall state of the market.
The goal is to redeploy cash once the correctionary process is clearly complete.
August 6, 2024
At this juncture, the correction process is likely not over just yet. Supply and demand dynamics dictate that volatility is set to continue - and no market goes straight up or down. Our bias currently is to de-risk our portfolio gradually, starting with unwinding our commodity positions. The overall target for asset allocation is the Enterprise model, which currently aligns with our thinking.
Since treasuries are overbought, we will take profits from this position, and re-enter at a better point later. We will withhold buying new equity positions at the moment, but speculation may occur in the short term via ETFs. We’ll take our cue from Nostromo, whenever the strategy finds BUY signals and gets leveraged.
The following orders will be executed at today’s close:
SELL 10% TLT (Reduce Position to 15% from 25%)
SELL 100% of UNG (Close Position)
SELL 100% of DBC (Close Position)
SELL 100% of QCOM (Close Position)
SELL 100% of GOOG (Close Position)
SELL 2% RRC (Reduce Position to 3% from 5%)
July 18, 2024
Our position in Microsoft (MSFT) has triggered a stop loss violation. We'll use this opportunity to bring the position back to target weight (3%) and reset the next stop level lower, at $390.
Additionally, as we would like less QQQ correlation in the medium term, the position in Palo Alto Networks (PANW) is showing a textbook rejection from its resistance level (see the chart below).
We are executing the following orders at today's close:
SELL 6% MSFT (Reduce to Target Weight 3%)
SELL 3% PANW (Reduce to Target Weight 2%)
Since we are not yet deploying this cash to the market, our overall equity risk exposure will decline from 63% to 54%.
There's no need for anything more drastic, as the market is holding up well at the index level.
PANW rejection results in wide potential downside:
MSFT stop-loss violation sets up similar wide downside:
We have updated stop and profit targets for our positions. The benefit of this consolidation phase is that the risk/reward ratio is finally skewing positive, and closing in to our desired 2-1 ratio!
July 9, 2024
In our sector analysis, we’ve already identified 2 trends: bullish Utilities (XLU), wary Industrials (XLI). We need to make the necessary adjustments in our portfolio single stock positions in order to reflect our findings. Millennium Alpha’s changes are also offering a degree of inspiration, supplying picks like HALO, FICO and GDDY.
At the broad asset class level, our mix is fine, and there’s little tweaking to do. So we will focus on individual stock positions this week, by removing losers, and adding potential winners instead.
The following orders will be executed at today’s close, in order to better balance our sector and factor mix. The asset class allocation will not suffer any changes:
SELL 2% GWW (WW Grainger Inc) - Close Position
SELL 3% VRTX (Vertex Pharmaceuticals Incorporated) - Close Position
SELL 4% AMAT (Applied Materials, Inc.) - Close Position
SELL 4% XOM (Exxon Mobil Corp) - Close Position
BUY 5% FE (FirstEnergy Corporation) - Initiate 5% Position
BUY 3% HALO (Halozyme Therapeutics Inc) - Initiate 3% Position
BUY 3% FICO (Fair Isaac Corporation) - Initiate 3% Position
BUY 2% GDDY (Godaddy Inc) - Initiate 2% Position