VIG NewsletterJune 1 Update

Will strong divergences take the market down? Is V3 ready?

June 01, 2024

Recap

The stock market closed this holiday-shortened week with losses but closed this month with solid gains. Mega-cap stocks had an outsized impact on index performance throughout the month.

The market also received a mixed batch of economic reports, highlighted by Friday's release of the April Personal Income and Spending report. The key takeaway from the report is that the year-over-year PCE inflation rates did not worsen; however, they did not improve either, so it seems unlikely that the Fed would find any new confidence in this report that inflation is moving sustainably toward its 2% target.

The SP500 was down for the week.

The Vig Co. portfolio was up this week and extended our lead over the SP500.

Performance (Weekly/YTD)

VIG Co. +.50% / +13.99%

SPY -.45% / +11.25%

VIG Co. Portfolio Holdings (Allocation).

KIAM V3. (100%)

Notes/Charts

We are pleased with KIAM V3's performance this week. We were long to start the week. We were 80% leveraged long during Tuesday’s session and shifted to 70% Cash (BIL) through the end of the week. The cause of the shift was the rise in interest rates back above key areas. Here is the tracking account for this week. We are slightly long heading into Monday’s session.

Here is the SP500 weekly with our hybrid chart. You can see where we are at the black arrow. We are in a bullish uptrend with moving averages, bands, and clouds all positive (Red arrows). Here is the concern though, you can see we have pretty significant bearish divergences with stocks moving higher and RSI moving lower. (Blue lines). The last time there was a similar look was before the major correction in 2022.

So, let’s backtest KIAM V3 during the same period in 2022.

Here are the simulated results of KIAM V2 during the first 6 months of 2022. You can see our symphony tested up 83% while the SP500 was down 20%. There was a maximum drawdown of 16%. Backtests are no guarantee of future performance as conditions are never the same. However, we feel good about the setup of our model.

Plan

I was able to communicate a few of my experiences, ideas, and thoughts to associates of the folks at Composer yesterday during a Zoom meeting. Great people. Hopefully, it will lead to more cool things in the future.

We will follow the math.

Note: Check out the updated App for Composer. (There is a link to it atop your Composer home page.) It works great.

Chris

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Market information from Bloomberg, ETRADE, Composer, Koyfin, and StockCharts.com.