‘Flight To Safety’ ETFs Belong In Your Portfolio, Avoid Junk Bonds

Richard Suttmeier

Yields are down, gold is up and utilities are providing dividend income in the wake of Hurricane Harvey and the North Korea missile launch.

No new highs last week for the Dow Jones Industrial Average and S&P 500, as investor interest remains strong for “flight to safety” investments, treasury bonds, gold bullion and utilities stocks. The gold bullion ETF set a new post-election high, and the utility ETF set new all-time intraday high.

The 20+ Year Treasury Bond ETF (TLT)

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The U.S. Treasury 30-Year Bond ETF trades like a stock using the 20+ Year Treasury Bond ETF, which a basket of U.S. Treasury bonds with maturities of 20+-Years to 30-Years. As a stock-type investment it never matures and interest income is converted to periodic dividend payments.

The weekly chart for the Treasury Bond ETF ($127.24 on Aug. 28) is positive with the ETF above its five-week modified moving average of $125.95 and above its 200-week simple moving average of $122.27 or the “reversion to the mean”, which had been a magnet between the week of Nov. 25 and the week of May 12, when the average was $120.63. The 12x3x3 weekly slow stochastic reading is projected to rise to 66.50 up from 62.08 on Aug. 25.

Investment Strategy: Buy weakness to my weekly, monthly and annual value levels of $125.60, $124.57 and $105.77, respectively. My semiannual pivot is $125.69. Sell strength to my quarterly risky level of $136.15.

The Gold Bullion ETF (GLD)

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Investors can trade gold bullion like a stock using the SPDR Gold Shares ETF.

The weekly chart for the Gold Bullion ETF ($124.69 on Aug 28) is positive with the ETF above its five-week modified moving average of $121.55 and above its 200-week simple moving average of $117.81, which is the “reversion to the mean”, tested several times since the week of Feb. 24. The 12x3x3 weekly slow stochastic reading is projected to rise to 78.73 this week up from 72.05 on Aug. 25.

Trading Strategies: Buy weakness to my weekly and quarterly value levels of $122.47 and $119.28, respectively. My monthly pivot is $124.70. Sell strength to my annual risky levels of $159.17 and $160.24.

The Utilities ETF (XLU)

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Investors seeking the safety of dividends can trade the utilities ETF, which is a basket of 28 utility stocks.

The weekly chart for the Utilities ETF ($54.24 on Aug. 28) is positive with the ETF above its five-week modified moving average of $54.02. The ETF is above its 200-week simple moving average or the “reversion to the mean” of $45.93. The 12x3x3 weekly slow stochastic reading is projected rise to 79.93 this week up from 77.28 on Aug. 25.

Investment Strategy: Buy weakness to my semiannual and annual value levels of $51.98 and $50.72, respectively. My weekly pivot is $55.16. Sell strength to my monthly and quarterly risky levels of $56.53 and $56.64, respectively.

SPDR Bloomberg Barclay’s High Yield Bond ETF (JNK)

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Investors should avoid junk bonds as they correlate more to stocks than U.S. Treasuries.

The weekly chart for the junk bond ETF ($37.13 on Aug. 28) is neutral with the ETF just above its five-week modified moving average of $37.08. The ETF is below its 200-week simple moving average or the “reversion to the mean” of $37.82, last tested during the week of Nov. 14 when the average was $40.08. The 12x3x3 weekly slow stochastic reading is projected to slip to 45.20 this week down from 45.80 on Aug. 25.

Investment Strategy: Buy weakness to my semiannual and quarterly value levels of $34.68 and $33.57, respectively. My weekly pivot is $36.98. Sell strength to my monthly and annual risky levels of $38.11 and $43.98, respectively.

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