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Earnings Economics Market Outlook Market Recap Market Update Stock Market

Stock Market Recap & Outlook (5/26­­­­/23) – A Whipsaw Week Fueled on Both Sides By AI and Debt Ceiling Issues

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Dividend Dollars’ Outlook & Opinion

Last week we called for a neutral to moderately bullish week in the market, and we got exactly that. The market moved slightly higher Monday, dropped hard Tuesday and Wednesday, before climbing back up the valley with strength on Thursday and Friday to end the week slightly in the green.

With the end of this week, earnings season is essentially over with 97% of companies having reported. 78% of companies reported positive EPS surprises with 76% reporting positive revenues surprises. The biggest surprise of all came from the $NVDA AI fueled earnings report. AI seems to have become a hot topic of conversation for this earnings season as a record number of companies mentioned the term in their earnings calls.

Aside from earnings, it was a fairly mild week for economic data. Core PCE came in very close to the estimates showing that inflation is still well above targets and jobless claims were lower showing that labor is still hot.

Technicals-wise, we finally got a little bit of a pull back this week on concerns of the debt ceiling. But then the unprecedented earnings report from $NVDA on Thursday singlehandedly turned things around. SPX, for another week, remains solidly above the 200, 100, and 50-day moving averages and is testing the 4,200 level for the 4th time in just two weeks. At the end of this week, a drop to the bear market low would take a 15% move, while the level needed to declare a new bull market is only 2% higher.

Even though next week is shorter with the holiday weekend, it still brings a good number of data releases. Next week is heavy with labor data releases, plus a consumer confidence reading, and ISM/PMI data. The current employment situation and inflation levels have raised the odds of another interest rate hike and I would be surprised to see if the coming data shifts that much.

As for sentiment indicators, there were a few more upgrades than downgrades. With VIX and ETF open interest changes, VIX and SPX open interest put/call ratio changes, and VIX implied volatility gap moving into more bullish territories while VIX and equity open interest and put call/ratio changes moved downward into neutral territories.

However, much like last week, since the debt ceiling issue is not resolved, this week’s outlook has a dual perspective again. With a no deal debt ceiling and the June FOMC meeting approaching, volatility is expected. On the other hand, if a ceiling deal is reached over the weekend even without being signed into law, a relief rally could result in a moderately bullish week ahead.

Weekly Market Review

Summary:

Much like how I finished this week on an upbeat note leading into the holiday weekend, the market did the same! Major indices saw some volatility as we dealt with a lot conflicting sentiments. Regardless, the SPX closed above 4,200 at its highest level since last August. Uncertainty about the debt ceiling and Fitch’s concerns about the US’s credit rating kept price action in check in the early week. However, by Friday, angst was eased as information on ceiling negotiations were released and $NVDA earnings charged the tech space.

Economic data this week corroborated some Fed members’ concerns that more rate hikes may be needed. Kashkari, Bullard, Waller, and Mester all were cited speaking this week that a pause isn’t guaranteed at this point. The higher-than-expected Q1 GDP report, lower than expected jobless claims, strong consumer spending, and uptick in PCE year-over-year all added to the case that more cooling may be needed.

Mega caps continued their outperformance with $MGK rising 2.2% this week versus a 0.3% gain in the market-cap weighted S&P 500. Meanwhile, the equal weight S&P 500 ETF $RSP fell 1.2%. The technology sector was the standout winner for the week while 8 of the 11 sectors all marked losses over 1% for the week.

Monday:

Monday had mixed action, but ultimately ended the day a little higher than the open, but not with much conviction as debt ceiling concerns were growing over the weekend. Janet Yellen reiterated that early June is the hard deadline for the ceiling and that the odds of the government paying its bills on the 15th are quite low.

Add to that commentary, the commentary from Fed President Kashkari that a decision to pause rate hikes in June is a close call and that a pause would not signify that tightening is over. Fed President Bullard also said that he thinks two more hikes are needed this year.

Stocks didn’t have huge reactions to these catalysts. The market clung to narrow ranges for most of the day while briefly peaking over the 4,200 level a few times. Price action could not hold above it, even with mega caps and bank stocks having a strong showing. The latter was spurred on by news that $PACW had entered into an agreement with $KW to sell a portfolio of real estate construction loans with a balance of $2.6B outstanding.

Tuesday:

Tuesday was another mixed day with no strength on either side of the tape. Mega caps dragged on the market, even though broader equities were holding up okay. Things began deteriorating as more press reports came out that a debt ceiling deal was far from agreed upon. House Speaker McCarthy said that a deal was nowhere near while House Minority Leader Jeffries said there is not a lot of progress being made.

The energy sector was the lone positive closer for the day, as $CVX offered a boost on its stock upgrade from HSBC. Consumer discretionary was down -0.9% as the outperformer, partially supported by $LOW’s earnings report.

Tuesday’s economic data included the IHS Market Manufacturing PMI and the New Home Sales Report. The latter event was up 4.1% MoM in April to an annual rate of 683k units, above the expected 660k and the 656k prior reading. Year-over-year sales were up almost 12%. Higher mortgage rates are holding down new homes sales activity as seen by the sales decline in the higher-priced Northeast and West regions that reflected affordability pressures.

The Manufacturing PMI fell to 48.5 in the preliminary May reading from 50.2 and back into contractionary territory. The Services PMI rose to 55.1 up from the 53.6 May reading, the highest level in 13 months. The Composite PMI was 54.5, also its highest level in 13 months. Overall, growth output seen in May was the fastest in over a year.

Wednesday:

Another weak showing happened this day, lead on by an approaching X-date for the ceiling battles. Reports of an impasse were somewhat corroborated by House Speaker McCarthy who told reporters that negotiations are still far apart on issues, but talks would continue.

The market also had to digest lingering rate hike concerns after Fed Governor Waller said that we need to maintain flexibility on the best decision to take in June… fighting inflation continues to be my priority. These concerns took a back seat to the debt ceiling angst though. The major indices all closed with losses, regardless of the attempted rebound in the late afternoon.

The weekly MBA Mortgage application Index came in Wednesday at 4.6% with a 4% drop in purchase applications and a 5% drop in refinance applications. With the average rate of a 30-year mortgage reaching its highest level since March, borrowers continue to be deterred.

Thursday:

Thursday was a mixed showing on the back of many news catalysts. The biggest one was $NVDA’s huge gain after reporting strong Q1 results with very optimistic Q2 guidance. $NVDA’s results fueled buyers in other semi’s and mega-cap stocks that propped up the broader market. Still though, market breadth reflected underlying weakness as Fitch watchlisted the US’s credit rating and Congress members reported their day off on Monday in spite of much needed continued negotiations. However, progress did seem to be made on negotiations and news said differences are narrowing.

Pleasant economic data with the Q1 GDP, jobless claims, and pending home sales came in.

US GDP growth during the Q1 period was revised higher to 1.3%, up from 1.1% in the initial estimate. The change was mainly a result of an upward revision to private inventory investment. Consumer spending was revised slightly higher to 3.8%, a good sign in spite of the ongoing inflation pressures.

Initial jobless claims rose less than expected to 229,000, vs estimates of 245,000. Claims were at 225,000 last week. Continuing claims were slightly lower at 1.79 million. Claims continue to be nowhere near recession levels and continue to reflect a hot labor market.

Pending home sales were flat in April, missing expectations of 1.0% growth. Pending home sales are down 20.3% YoY. Sales were up 3.6% in the Midwest and 4.7% in the West.

Friday:

Friday saw the market end the week on an upbeat note. Ceiling concerns seemed to ease somewhat as an solution was anticipated to be near. Mega-caps continued to boost the indices with economic data pointing to a resilient economy. Semiconductor stocks also continued to rally, with $SOX hitting a 6% gain after $MRVL reported good earnings and guidance.

The rally for the day was not weakened by rising concerns of another rate hike at the June meeting. According to the CME FedWatch Tool, there is a 64.2% chance of a 25 point hike, up from 51.7% yesterday and 13.7% a month ago. This followed the economic data releases for the day which showed strength and quelled worries of a hard landing. This data included the personal income and spending report, durable goods orders, trade in goods report, and consumer sentiment.

Personal income was up 0.4% MoM in line with expectations and above the 0.3% seen prior. Personal spending was up 0.8% MoM above the expected 0.4% and the 0.1% seen prior. The PCE Price index was up 0.4% MoM above the expected 0.3%. This was up 4.4% YoY versus the 4.2% seen last month. The Core PCE Price index was up 0.4% MoM above the expected 0.3% and was up 4.7% YoY versus the 4.6% seen last month. The 0.5% increase in real spending and the uptick in the YoY rates are the key takeaways here. This combination gives the Fed a reason to second guess if a pause is the right move now.

Durable goods orders rose 1.1% MoM in April versus an expected -1%. Excluding transportation, orders fell 0.2% MoM, lower than the expected -0.1%. The key in this report was that non-defense capital goods orders (a proxy for business spending) were up 1.4% MoM, a good sign.

The advanced international trade in goods report for April showed a growing deficit to $98.6B from an upwardly revised $82.7B deficit in March. This gap grew substantially as exports were $9.5B less than in March and imports were $4.5M more. Retail inventories jumped 0.2% while wholesale inventories fell by the same amount.

Finally, the University of Michigan Consumer Sentiment index hit 59.2 in May versus an expected 57.8. This is also higher than the preliminary reading of 57.7 but down from the April reading of 63.5. This time last year, the reading was slightly lower at 58.4. Consumer sentiment improved from mid-month, yet worsened from April as worries about economic outlook increased.

That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Dividend Stocks Dividends Portfolio Trend Trade

Dividend Portfolio: 5/26/23 Weekly Update

Welcome back to the weekly Dividend Dollars portfolio review which is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. I wrote a review of the product that you can read here if you’re interested in learning more! Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

Portfolio Value

To date, I have invested $16,090 into the account. The total value of all positions plus any cash on hand is $15,829.98. That’s a total loss of 2.34%. The account is down $161.26 for the week, which is a 1.01% loss. We added $120 in cash to the account last week, trades made will be broken out below.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -5.61% which puts us 3.27% higher than the market!

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week, the blue ones are positions that I reinvested dividends into, the yellow ones are positions that announced a dividend increase this week, and the red are positions that I trimmed. Our PADI grew $20 to $577.

Dividends

This week we received two dividends: $3.67 from $SMHB and $2.71 from $SBUX. The $SBUX dividend hasn’t hit my account yet and will most likely be invested on Tuesday.

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The $SPY dividend hit afterhours on Friday, so that will be invested automatically on Monday.

Dividends received for 2023: $205.62

Portfolio’s Lifetime Dividends: $616.02

Trades

This week we continued to use the turtle trend trade strategy on a few ETFs. The cotton futures ETN $BAL did not play out, we exited that on a loss this week and used the funds to open a new position in $VTWV. There are some takeaway lessons for me here, one is keep an eye on the big ask spread. The $BAL and $MEXX trade before that was difficult to exit cleanly due to the spread. Second lesson is to be mindful of sector rotations.

The second lesson is more specifically about my un-timely exit of $MGK last week and entry into $VTWV this week. $MGK was cut in order to have capital for an $XLC add. Ideally, I should have done that the other way around and that should have been obvious to me as $XLC is a mix of defensive and growth tech companies whereas $MGK consists of only bigger and better growth tech names. $MGK outperformed $XLC by over 1% this week. Then, to add insult to injury, I initiated a trade in $VTWV, a value small cap ETF, without thinking of the sectors. Mega-cap growths have been more in favor this year than anything else, and small cap value stocks are the most out of favor. So why am I fighting the market with this? I have no good answer, other than $VTWV hit a 20 day high and I entered per the Turtle Trade Plan. Can’t be mad at myself for that, but clearly there is room for me to improve by thinking about the context of the overall market before initiating. See the chart below that shows segments like $MGK have vastly outperformed segments like $VTWV year to date, these are things I will keep a better finger on going forward.

Overall, $XLC is still moving forward bringing me a $40 gain so far, but the total Turtle performance is lacking. You can see a summary of all the trades so far below. We are still working out the kinks and refining skills, but I’m hopeful for how it will play out time. I have published a full article on the turtle trend strategy which you can read here.

Aside from Turtle trades, we added to our $JKHY and $BAC positions leading up to the next ex-dividend date. We also did some adding to $T which has just gotten wrecked in the past few weeks. At this point, I really am adding down into this one so that my cost basis is low enough to allow me a decent exit sooner rather than later, but we will see if the market plays ball on that. I am fine with holding for some time, as the yield is good, but as my portfolio starts to shift to high quality stocks, this is one I will want to scale out of.

Full details for my trades are below:

  • May 22nd, 2023
    • ETRACS 2x Monthly Pay Levered US Small Cap ($SMHB) – dividend reinvested
  • May 23rd, 2023
    • Bank of America ($BAC) – added 2 shares at $28.84
    • iPath Series B Bloomberg Cotton Subindex ETN ($BAL) – sold 9 share position at $60.33, trend trade exit for a 3.8% loss
    • Vanguard Russell 2000 Value Index Fund ($VTWV) – added 5 shares at $118.81, trend trade entry
  • May 24th, 2023
    • Jack Henry & Associates ($JKHY) – added 0.25 shares at $146.20
  • May 25th, 2023
    • AT&T ($T) – added 5 shares at $15.12

Next week, I’ll be keeping my eyes on $BAC, $BBY, and $CMCSA for opportunistic DCA adds leading into their next ex-dividend date. Also am interested in adding to $APD, $NVO, and $JKHY to grow those smaller positions.

Summary

That is it for the update this week. The market recap/outlook is also live and provides tons of information on what macro statistics I look at to keep a temperature gauge on the market and inform my portfolio movements. Read this week’s here!

I will also work on finishing my write up on the trend following strategy to share with you, so stay tuned for that.

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on Twitter and CommonStock and other socials using the links below!

Thank you for reading! See you next week and stay safe!

Regards,

Dividend Dollars

Categories
Dividend Stocks Dividends Portfolio

Dividend Portfolio: 5/19/23 Weekly Update

Welcome back to the weekly Dividend Dollars portfolio review which is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. I wrote a review of the product that you can read here if you’re interested in learning more! Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

Portfolio Value

To date, I have invested $16,090 into the account. The total value of all positions plus any cash on hand is $15,850.10. That’s a total loss of 1.49%. The account is up $72.57 for the week which is a 0.49% gain. We added $120 in cash to the account last week, trades made will be broken out below.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -5.91% which puts us 4.4% higher than the market!

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week, the blue ones are positions that I reinvested dividends into, the yellow ones are positions that announced a dividend increase this week, and the red are positions that I trimmed. Our PADI grew $1 to $557.

Dividends

This week we received two dividends: $2.28 from $O and $1.86 from $TXN.

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The $SPY dividend hit afterhours on Friday, so that will be invested automatically on Monday.

Dividends received for 2023: $199.25

Portfolio’s Lifetime Dividends: $609.65

Trades

This week we continued to use the turtle trend trade strategy on a few ETFs, this week they performed decently with $XLC growing to a $20.60 gain so far. This week we exited out of $MGK as I used that capital for the $XLC adds. I also exited the $MEXX trade with a slim gain. It should have been a loss, but the bid ask spread worked in my favor (this is something I’ll have to keep my eyes on in the future). We also initiated a new trend trade in $BAL, a ETN for cotton futures, a position that is much more in line with how Richard Dennis traded. I have published a full article on the turtle trend strategy which you can read here.

Aside from Turtle trades, we added to our $MMM as it approached the $100 psychological level. We did a small DCA into $JKHY, a position I would like to grow while banking concerns are still relatively pertinent.

Full details for my trades are below:

  • May 15th, 2023
    • 3M ($MMM) – added 0.25 shares at $100.04
    • Direxion Daily MSCI Mexico Bull 3x ($MEXX) – added 1 share at $157.47, trend trade add
    • Realty Income ($O) – reinvested dividend
  • May 16th, 2023
    • 3M ($MMM) – added 0.4 shares at $98.53
    • ETRACS 2x Monthly Pay Levered US Small Cap ($SMHB) – added 3 shares at $4.30
    • Jack Henry & Associates ($JKHY) – added 0.25 shares at $150.72
    • Texas Instruments ($TXN) – reinvested divided
  • May 17th, 2023
    • Vanguard Mega Cap 300 Growth ETF ($MGK) – sold 5 share position at $212.80, trend trade exit for a 2.57% gain
    • SPDR Communication Services Sector ($XLC) – added 6 shares at $60.60, trend trade add
  • May 18th, 2023
    • SPDR Communication Services Sector ($XLC) – added 4 shares at $61.57, trend trade add
  • May 19th, 2023
    • Direxion Daily MSCI Mexico Bull 3x ($MEXX) – sold 4 share position at $150.97, trend trade exit for a 0.53% gain
    • iPath Series B Bloomberg Cotton Subindex ETN ($BAL) – added 9 shares at $62.73, trend trade entry

Next week I will look to continue my weekly buys into $SPY, $SCHD, and $XYLG and watch for opportunistic adds as well as trend opportunities. I’ll be looking to add to $JKHY and $BAC as their ex-dividend dates are close.

Summary

That is it for the update this week. The market recap/outlook is also live and provides tons of information on what macro statistics I look at to keep a temperature gauge on the market and inform my portfolio movements. Read this week’s here!

I will also work on finishing my write up on the trend following strategy to share with you, so stay tuned for that.

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on Twitter and CommonStock and other socials using the links below!

Thank you for reading! See you next week and stay safe!

Regards,

Dividend Dollars

Categories
Dividend Stocks Dividends Portfolio Trend Trade

Dividend Portfolio: 5/12/23 Weekly Update

Welcome back to the weekly Dividend Dollars portfolio review which is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. I wrote a review of the product that you can read here if you’re interested in learning more! Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

Portfolio Value

To date, I have invested $15,970 into the account. The total value of all positions plus any cash on hand is $15,642.60. That’s a total loss of 2.05%. The account is down $228.88 for the week which is a 1.44% loss. We added $120 in cash to the account last week, trades made will be broken out below.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -7.44% which puts us 5.4% higher than the market!

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week, the blue ones are positions that I reinvested dividends into, the yellow ones are positions that announced a dividend increase this week, and the red are positions that I trimmed. Our PADI stayed flat this week at $556.

Dividends

This week we received on dividend, $2.28 from $APD.

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The $SPY dividend hit afterhours on Friday, so that will be invested automatically on Monday.

Dividends received for 2023: $195.11

Portfolio’s Lifetime Dividends: $605.51

Trades

This week we continued to use the turtle trend trade strategy on a few ETFs, this week they performed decently with $XLC gaining 2.5%, $MGK 0.8%, and $MEXX 4%. I have published a full article on the turtle trend strategy which you can read here.

Aside from Turtle trades, we added to our $APD position after their poorly received earnings report. The dividend also happened to be reinvested on Monday as well.

Full details for my trades are below:

  • May 1st, 2023
    • Intel ($INTC) – added 1 share at $30.46
    • Cummins ($CMI) – added 0.2 shares at $234.80
    • AT&T ($T) – dividend reinvested
  • May 2nd, 2023
    • Cummins ($CMI) – added 0.5 shares at $231.72
    • Intel ($INTC) – added 1 share at $29.88
    • Bank of America ($BAC) – added 3 shares at $28.00
    • Novo Nordisk ($NVO) – added 1 share at $167.92
    • Global X S&P 500 Covered Call & Growth ETF ($XYLG) – dividend reinvested
  • May 4th, 2023
    • Direxion Daily Small Cap Bear ETF ($TZA) – added 5 shares at $36.20 (trend add level)
    • ETRACS 2x Monthly Pay Levered US Small Cap ($SMHB) – added 10 shares at $4.13
    • Schwab US Dividend Equity ETF ($SCHD) – added 0.4 shares at $69.75
  • May 5th, 2023
    • Direxion Daily Small Cap Bear ETF ($TZA) – sold 12 share position at $33.09, trend stop hit ($24.84 loss)
    • Investment Managers Series Trust II AXS Short Innovation Daily ETF ($SARK) – sold 14 share position at $42.80, trend stop hit ($25.34 loss)
    • Direxion Daily MSCI Mexico Bull 3x ($MEXX) – added 2 shares at $144.79, trend trade entry
  • May 8th, 2023
    • Air Products & Chemicals ($APD) – dividend reinvested
  • May 9th, 2023
    • Air Products & Chemicals ($APD) – added 0.25 shares at $282.52
  • May 10th, 2023
    • Direxion Daily MSCI Mexico Bull 3x ($MEXX) – added 1 share at $153.61, trend trade add
    • Vanguard Mega Cap 300 Growth ETF ($MGK) – added 2 shares at $209.29, trend trade add

Next week I will look to continue my weekly buys into $SPY, $SCHD, and $XYLG and watch for opportunistic adds as well as trend opportunities. I’ll be looking to add to my redder positions in $MMM under $100 and $BAC  under $27 to take advantage of the coming ex-dividend dates. I will also be keeping my eyes on $ATVI to see if it falls below my cost basis for a potential add. The stock lost substantial gains two weeks ago on account of the CMA blocking the transaction. Read my recap on the situation here.

Turtle Trades

Summary

That is it for the update this week. The market recap and outlook is also live and provides tons of information on what macro statistics I look at to keep a temperature gauge on the market and inform my portfolio movements. Read this week’s here!

I will also work on finishing my write up on the trend following strategy to share with you, so stay tuned for that.

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on Twitter and CommonStock and other socials using the links below!

Thank you for reading! See you next week and stay safe!

Regards,

Dividend Dollars

Categories
Earnings Economics Market Outlook Market Recap Market Update

Stock Market Recap & Outlook (5/12­­­­/23) – Debt Ceiling Concerns Overshadows Inflation Progress

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Dividend Dollars’ Outlook & Opinion

Last week we ended the outlook with a call that the early week would be fairly directionless leading into CPI, which could then lead to a green week on positive inflation reception. We were only half correct here, we nailed the catalyst and the lead up, but not the direction afterwards.

The Consumer Price Index report rose 4.9% for April year-over-year, down from 5% in March and the 5% consensus. The Producer Price Index came in at 2.3% for April, down from 2.7% in the prior month and under the 2.5% consensus. Both readings are still well above the Fed’s 2% inflation target, though they have been steadily falling since June of last year. Historically, both reports tend to have an outsized effect on the market (CPI more so than PPI), however, this go around they seemed to be overshadowed by debt ceiling concerns that muted their effects. Earnings surprises also seem to have muted moves up in stock price, likely for the same reason.

The Q1 earnings season wrapped up this week with 32 S&P 500 companies giving their reports. 21 of them beat EPS estimates. On average, this season has beat EPS estimates 78% of the time which is above the 10-year average of 73%. Despite the strong performance in earnings, the average stock price appreciation after an earnings beat was 0.3%, compared to a 5-year average of 1%. Meanwhile, companies that reported a surprise to the downside experienced and outsized moved down of 4.1% on average compared to the 5-year average of down 2.2%. The numbers show that the market is rewarding positive surprises less while punishing negative surprises.

While $SPY and $VIX were fairly flat this week, the technical have not changed much. Stocks continue to prove the naysayers and recession doomsday-ers wrong by performing better than most expected for 2023. SPX remains well above is significant moving day averages and the consolidation around 4,100 is not in its 6th straight week. At these levels, falling back down to the bear market low from October would take a 13% decline while a move higher needed to declare a new bull market is less than 4% away. It seems nothing is really moving the market much at the moment, despite debt ceiling battles, inflation, and ongoing recession warnings.

Next week’s economic calendar is light. With inflation continuing to moderate, political analysts expecting a debt ceiling deal, and a labor market hardly showing signs of slowdown, it looks like we may have another sideways week. OI changes on VIX, SPX, and equities are all mixed, same with open interest put call ratios. None of the market sentiment indicators that I follow have had extreme readings, and there were just a few more downgrades than upgrades this week. The indicators seem to be balanced, giving me a neutral outlook for next week.

Weekly Market Review

Summary:

The Nasdaq Composite closed the week with a slim gain while the S&P 500 closed with a slim loss. The 4,100 level was an important area of support for the S&P 500 this week. Mega-cap stocks held up the broader market, led by Alphabet who rose 11.0% this week following its Developers Conference.

The Fed’s Senior Loan Office Opinion Survey on Bank Lending Practices (SLOOS) confirmed that lending standards have tightened and banks expect to tighten standards across all loan categories over the remainder of 2023. PacWest was a losing standout from bank stocks, falling 21.0% this week after announcing that its deposits fell 9.5% for week ending May 5th and cut its dividend to one penny.

The debt ceiling angst weighed on the market after Yellen warned of chaos if the situation is not resolved. President Biden met with congress leaders on Tuesday to discuss the ceiling, but did not calm market concerns. He was supposed to meet with them again on Friday, but that got postponed to next week.

Inflation readings showed continued month-over-month moderation in inflation which may at least spur the Fed to keep its policy rate on hold in June. Economic readings culminated on Friday with the consumer sentiment survey that showed an increase in inflation expectations.

Disney was a drag on sentiment after reporting a decline in Disney+ paid subscribers. Energy, materials, and industrials sectors showed some of the steepest declines for the week while communication services and consumer discretionary sectors were the lone outperformers boosted by their respective mega-cap components.

Monday:

The market was mixed and in a wait-and-see mode leading into the SLOOS. The loan officer report confirmed what most were already expecting following the regional banking issues that began two months ago. Lending standards have tightened and are expected to remain tight across all loan categories through 2023.

The day mostly closed flat and was supported by mega-cap gains while regional banks rolled over at the end of the day. $KRE was up 2.7% in the morning and closed with a 2% loss. Concerns of the debt ceiling was a distracting factor with statements from Yellen and planned meetings with President and Congress leaders.

Tuesday:

The market traded flat and slightly weak in from the CPI report expected on Wednesday. Ongoing debt ceiling concerns continued to mute most moves as Biden and Congressional leaders met at 4PM on Tuesday to discuss the ceiling.

The $DIA outperformed on the day largely due to a gain by Boeing on the news that they received 150 orders for 737 Max-10 plans from Ryanair, with an option for 150 more. Data for the day was only the NFIB Small Business Optimism Index for April with fell to 89, a 10 year low.

Wednesday:

Wednesday was a mixed day as the $DIA was mostly negative while $QQQ and $SPY outperformed with gains in the mega-cap space. Price action was muted till a later afternoon rebound took place, leaving the indices closing comfortably above their opens. $GOOG was a big driver of support as it rallied on the back of its Developer’s Conference presentation, which included updates on its AI efforts.

Initially, the market responded positively to the April Consumer Price Index report, but a closer look left investors feeling uncertain about the Fed’s policy path. Total CPI was up 4.9% YoY, down from 5%, which marks the first sub 5% reading in two years. Core CPI was up 5.5% YoY down from 5.6%. The report may sway the Fed to hold rates at their current level at their next meeting in June, on the other hand, a 5% reading is not going to convince the Fed to cut rates any time soon. Especially with the fact that the shelter increase of 0.4% MoM was the largest contributor to the increase in total CPI.

Other data included the MBA Mortgage Application Index which rose 6.3% with refinancing activity up 10% and purchase applications up 5%. The April Treasury budget was also released which showed a surplus of $176B compared to $308B last year. The report showed that individual income and corporate tax receipts were $465B which is 32% less than April of last year.

Thursday:

The indices closed mixed near their highs of the day on Thursday, yet the overall market was a bit weaker then the indices indicated. Growth concerns are creating a rush to safety buying interest in mega-caps which is driving a lot of the price action. The Vanguard Mega Cap Growth ETF rose 0.2% while the equal weighted S&P 500 ETF fell 0.5%.

As previously mentioned, news about $PACW’s deposit loss and dividend cut paired with $DIS’s 2% loss of subscribers added to growth concerns. This paired with the continued looming debt ceiling threat is creating a rough market environment.

Data for Thursday included the April Producer’s Price Index and the Weekly Initial Claims. PPI came in at 0.2% compared to -0.4% last month, showing continued moderation in inflation. Weekly claims was 264k, up from 242k last week. Continuing claims also showed some gains. Initial claims hit their highest level since last October, tracking in a direction that reflects an initial loosening in our tight labor market.

Friday:

Friday closed out the week on a more upbeat note, despite the negative price action for most of the day. The late afternoon bounce left the indices with only modest losses on a low volume day. Money flows reversed somewhat on Friday as $MGK fell 0.3% compared to the 0.2% loss in $RSP, showing a more mixed market breadth compared to Thursday.

Economic data brought us the April Import/Export prices which followed suit with the CPI and PPI reports with its own moderation in inflation pressures on a YoY basis. Import prices rose 0.4% compared to a 0.8% loss last month. Export prices were up 0.2% compared to a 0.6% decrease prior. Year over year figures were flat for imports and down for exports.

The May Consumer Sentiment report showed worse expectations with a reading of 57.7 compared to a 63.5 reading last month, and a 62.9 estimate. Consumer sentiment has weakened on concerns about the economic outlook which threatens discretionary spending and took out nearly half of the index’s gains since bouncing from its last all time low in June.

That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

    Categories
    Strategy Uncategorized

    Trend Following Trading – I Am Now a Richard Dennis Turtle

    You’ll have seen in a few of my portfolio updates that I have restructured a bit of my portfolio to allow room for multiple strategies. One of which is using Richard Dennis’ trend-following technique. In this article I will explain who Richard Dennis was, why he is awesome, what his strategy was, and how I am implementing it into my dividend portfolio.

    All of the information I’ve come to know about Richard, his story, and his strategy has come from a book by Michael W Covel called “The Complete TurtleTrader: How 23 Novice Investors Became Overnight Millionaires” and a bit of extra online research. Covel has been the leading expert on all things Turtle traders for some time and has the first ever “on-record” interviews with actual Turtle traders. It is a great read, not only to learn about the strategy, but also for the riveting story.

    Who Was Richard Dennis

    Richard J. Dennis, the legendary trader with an uncanny knack for spotting trends, has left an indelible mark on the world of finance. Born and bred in the Windy City, Chicago, Dennis was a natural-born market aficionado from an early age. At 17 he became an order runner at the CME trading floor in the 60’s. He worked his way up to trading his own account and ran his own orders with his dad’s help.

    Richard borrowed $1,600 from his family to invest, $1,200 went to buying a seat at the MidAmerica Commodity Exchange where he traded. That left him with only $400 in trading capital. By 1973 he grew that $400 to over $100,000. In 1974 he made over half a million in profit trading soybeans and became a millionaire at 26. He quickly earned the nickname “Prince of the Pit”.

    Dennis’s illustrious career can be traced through different phases of amazing achievements. He established himself as a commodities trading legend, riding the waves of market trends with surprising ease. He had an unbelievable ability to spot profitable opportunities in the chaos of the markets including the era of commodity volatility in the 70s. Sugar, coffee, soybeans, and wheat all experienced crazy surges in prices due to Soviet Union demand and hoarding shifting the market.

    It was in the 80’s that Dennis really made a name for himself with his “Turtle Traders” experiment. Dennis believed that anybody could be taught to trade, while his partner and friend, William Eckhardt, believed success in markets was a product of talent and skill.

    In order to settle their debate, they created the Turtle Traders, a hand-picked group of 23 aspiring traders, fondly known as the “Turtles,” and trained them in his proprietary trend-following strategy. The Turtles were trained for only two weeks, taught the simple rules of Richard’s trend-following strategy, and then set loose with Dennis’s own capital to trade. These Turtles went on to make serious dough, earning millions and hogging the limelight in the trading community and the media.

    Dennis’s legacy is the stuff of trading legends, challenging the notion that trading success is all about gut instincts. His trend-following strategy and risk management principles have inspired traders worldwide and ushered in the era of systematic trading. Dennis’s work continues to be a beacon of wisdom in the ever-changing landscape of finance, and his legendary status as a trading maverick remains unshakable.

    So, here’s to you, Richard Dennis, the trend-whisperer, the Turtle maestro, and the guru of systematic trading. His contributions to the trading world have left an indelible mark and has planted in me the confidence to make the trend my friend! But how exactly do you do that?

    The Strategy

    Instead of quickly scalping commodity contracts on the CME floor like most other traders did, Richard developed his own strategy that allowed him to scale into strong trends like the sugar spike of the 70’s and earn greater returns over time.

    Richard and his Turtles used two trading systems for trend following. I’m only going to follow the first strategy, so if you’re interested in the second, go read the book. The first system used a 20-day price breakout as a signal for an entry and a ten-day breakout in the opposite direction for an exit. Notice that I don’t point out which direction, this is because the strategy can be used both long and short. I will only be using it long for positions and inverse positions.

    While this rule is straightforward, there are some more caveats to it. First, is the filter rule. The Turtles used a filter that was designed to increase the odds of finding a trend. They would ignore an entry alert if the last twenty-day breakout indication was a winner. Even if they did not take that trade, if it was a theoretically winning trade, they would not take the current breakout.

    Once a breakout is found, you must measure the volatility of the investment. The Turtles used the Average True Range (ATR) as their measurement and nicknamed it “N”. ATR is the absolute distance the equity moved in a 24 hour period, they would use the 20-day moving average of this value as it gave the sample volatility for the last few weeks. The Turtles used a hard 2N stop, which is known as their contract risk. They used the term “contract” within their own terminology frequently, this is because they traded in futures contracts. For me, however, I am following this strategy with shares, so we will keep our examples in that context. For an example of a stop, if $AAPL had an ATR of 10, your hard stop would be $20.

    Once N was understood, the Turtles had to determine how much to invest. They would bet a fixed 2% of their capital on each trade, each 2% bet was called a unit. They had unit limits on any market sector and unit limits on individual positions. Then they would determine their contract risk. The number of contracts to buy is determined by taking the 2% account risk and dividing it by contract risk. Again, if we are using $AAPL as an example, on a $10,000 account, the most the system will let you lose is 2% or $200 on a trade. If $200 is my account risk and the contract risk is 2N (2ATR) which is 20 in this example, then my position size would be 10. If your calculation gives you a decimal, always round down to the nearest whole number.

    These rules made any futures contract for any commodity an equivalent figure. A unit of corn was equal to a unit of gold and was equal to a unit of $AAPL shares, essentially making Richard’s strategy a numbers game with no fundamental expertise in any individual market or industry.

    In this strategy, N really has almost two meanings. One is a measurement of volatility and the other is a measurement of unit size. It takes a little bit to wrap your head around, but eventually the light bulb turns on and you get it. Once you understand volatility and position sizing, the next step is pile into your winning trades.

    Richard’s partner, William Eckhardt, told the Turtles to add into their winning trades. This would maximize their winners and is what helped to create the strategy’s edge. Once a breakout was alerted, and a turtle entered a trade, their next step was to add to the trade at every N level. If a particular stock broke out at $50 and had an N value (ATR) of 5, a new unit would be added at every N level of $55, $60, $65, $70, and so on. They were allowed to pyramid into a trade for a maximum of 5 units. On the first day of an entered trade, stops were 1/2N, then after that the customary 2N was used. When N levels were hit and new units were added, all stops were brought up to the newest unit’s 2N stop.

    This strategy protected profits, but not to the point that it would prevent the Turtle from missing out on the larger trend. This idea also guaranteed that profits would be piled into those big unpredictable trends that the Turtles were able to catch.

    There is a catch here though, aggressive pyramiding had a downside when false breakouts occurred, and no big trend materialized. Those little losses would eat away at capital. When dry streaks happened, the Turtles cut back on the unit sizes. The rule was that for every 10% drawdown in their account, the Turtles would reduce the size of their units by 20%. Once their capital started going back up, they would revert back to normal unit sizes. If they were going to ruin their accounts, they would ruin them effectively, however this wasn’t the case as most Turtles did tremendously well under this strategy.

    Under these rules, Richard Dennis and his Turtles made millions. Several of the Turtles had gone on to pursue their own professional trading careers. Their continued performance is proof that sticking to a system over the long haul can bring great success. The most notable of the Turtle traders had amazing years, with returns as great as 188% and losses controlled to -32% at the most in a single year. Most of the Turtles were able to grow their accounts from Richard manyfold in a few years before the end of the experiment, only to continue trading for themselves afterwards.

    Their story is motivational in that it shows that it is possible to learn the steps that top traders follow and replicate the process. However, the story also shows that mental toughness and drive is needed, as not every Turtle found vast success. Regardless, the overall win rate and performance of the Turtles was proof enough for me, so I decided to give it a shot as part of my portfolio.

    Dividend Dollars’ Implementation

    As is evident in the new restructuring of my portfolio (read the latest portfolio update here), I have allocated 15% of my account to following the Turtle’s strategy. I have been playing with the strategy a little bit in my trading accounts on the side and am excited to deploy it into my main account. If this strategy works, any gains on those funds over and above the 15% allocated amount will be used to grow my long term positions. Investing long term is boring and slow, but it is the best and safest way to build wealth, so I am sticking too it! However, if I can deploy this strategy properly and grow my funds a bit faster with a portion of my funds, we may be able to reach the end goal of financial independence sooner compared to without! So that’s the goal, lets dive into the implementation.

    I will only be trading ETFs under this strategy, not futures contracts like what the Turtle’s traded. This has caused me to need to tweak the strategy a little bit, as contracts are much more volatile than stocks, therefore, when using the 2% profile risk and 2N (ATR) contract risk to calculate position size, the resulting positions sizes were much larger than I would have liked. Therefore, I have shifted the risk per trade down from 2% to 1%.

    Through my experimentation, I also found that it was rare for a large enough trend to form and take my position through a full 5 units before breaking. Because of this, losses were way more common than winners. I decided I needed to find a way to ensure that the breakeven point, and therefore profits, would come in sooner unit adds rather than all the way through the fifth unit. Therefore, instead of adding the same unit size at every add level, I have scaled down the consecutive units by 40% with each add. So If my first unit is 10 shares, the next would be 6 shares, then 4 shares, 2 shares, and finally 1 share. This way, as the trend grows, my average cost of shares doesn’t grow in step and my breakeven point would occur somewhere between third and fourth unit, allowing me to make minor gains rather than a loss of the trend breaks earlier than desired.

    This also means I have less total capital deployed in each trade with each added unit compared to the standard strategy, this frees up capital for me to put to other trends if I can find them. Below is a screenshot of a table I have created to track my trend trades, the ATR, the add and stop levels for each unit, and the projected profit/loss at each 2N stop level.

    How do I go about finding the ETFs that are hitting 20 day highs? Using ThinkOrSwim, I have stock scanner set up with some ThinkScript that finds stock prices that are pushing above their historical 20 day highs. I also used the same code to create a chart indicator that shows the 20 day highs and 10 day lows so that I can visually track the entries and exits of these plays. Below is a screenshot of the code for the scanner and for the chart indicator. Use the same logic for a 10 day low. Also below is a screenshot of $SPY using the indicators that show the 20 day high and 10 day low.

    With all of this set up, ThinkOrSwim alerts me to when a new ETF fits the criteria of my scanner. This triggers an entry assuming the filter rule is not broken. At that point, I use my spreadsheet to calculate my risk, I get my ATR, I calculate my entry size, figure out my add level, calculate my stop level, and follow the systems rules.

    So how well does this work? Currently, I have no actually rode a trend all the way to 5 units yet. But when that happens, anything above and beyond 5 units is a stellar gain. We are in such a choppy market right now that I have been achieving small losses. But that’s okay. That is how the system operates. It’s like throwing spaghetti at a wall and seeing what sticks. Most times the trend breaks within a few days, but that one or two strong trends that you may catch could make your whole year.

    For example, lets look at $SGG, this is Barclay’s sugar futures ETF tracker which has had an absolutely wild 2023. On January 6th, the ETF went above its 20 day high, triggering an entry (it also cleared the filter check as you can see by the first arrow and the break of 10 day lows). At entry on January 6th, the ETF cost $65.73 and had an ATR of .91. Using a $10,000 portfolio risking 1% per trade as an example, our entry size would be 54 shares with a stop of $63.91 and an add level of $66.64. Below is a screenshot of the table I use to track entries, stops, and unit sizing for this example also refer to the chart below the next paragraph.

    The add level was actually hit the next day, at which point we reevaluate our N stop and add levels and add our next unit size of 32 shares at $66.64. Next add is $67.61 and the stop is moved up to $64.79. Again, this add level was hit the next day, even though it ended up being a red day for the ETF. We go through the same exercise of adding now 19 shares, recalculating ATR, and moving adds and stops to $68.61 and $65.73. Again, the add was hit the next day and this time we added 11 shares and moved levels once more. The next and final add would be at $69.77 and stop is $66.74. Now here is where it gets interesting, the next add is never hit till March 1st, however the stop of $66.74 is never hit, neither is the 10 day low. So we would have held onto the position the entire time. On March 1st, we would add out final unit of 5 shares at $69.77 and move our stop to $68.09. From there, the 2N stop and the 10 day low stop has yet to be hit as of this writing. Your total position of 97 shares with a cost basis of $66.55 per share would be worth almost $8,800 and result in a trade gain of 35% or $2,300. That’s a 23% gain on the entire portfolio in one trade, and the best part is that the trend is not done yet. Who’s to say how far it will continue.

    I won’t break down step by step other examples, but I will provide the screenshots! Take a look at $PNQI, $EWW, and $KOLD! Absolutely wild runs!

    I’m hoping I begin to catch some wild runs myself by implementing this strategy. I haven’t caught a wild one yet, but it will come! Stay tuned to the website and my portfolio updates to see what trends I try to find with the turtle strategy!

    Thank you for reading this. If you found it helpful please subscribe to the website on the homepage and follow my Twitter and CommonStock accounts. If you ever have any questions, feedback, compliments, etc. you can reach out there or leave comments here! Please do any kind of interaction, I do all of this research for free, run this website at my own expense, and write and share all that I am learning for your benefit. Any interaction with you all means a lot to me.

    Categories
    Dividend Stocks Dividends Portfolio

    Dividend Portfolio: 5/5/23 Weekly Update

    Welcome back to the weekly Dividend Dollars portfolio review which is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. I wrote a review of the product that you can read here if you’re interested in learning more! Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

    Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

    Portfolio Value

    To date, I have invested $15,850 into the account the total value of all positions plus any cash on hand is $15,736.74. That’s a total loss of 0.7%. The account is down $363.93 for the week which is a 2.26% loss. We added $120 in cash to the account last week, trades made will be broken out below.

    We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -7.16% which puts us 6.45% higher than the market!

    Portfolio

    Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

    Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week, the blue ones are positions that I reinvested dividends into, the yellow ones are positions that announced a dividend increase this week, and the red are positions that I trimmed. Our PADI decreased from $557 to $556.

    Dividends

    This week we received two dividends: $28.17 from $T and $4.25 from $XYLG.

    In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The $SPY dividend hit afterhours on Friday, so that will be invested automatically on Monday.

    Dividends received for 2023: $19.84

    Portfolio’s Lifetime Dividends: $603.54

    Trades

    This week we continued to use the turtle trend trade strategy on some inverse ETF positions, they ultimately did not pan out. I’m thinking I will avoid inverse and maybe even leveraged ETFs depending on how performance continues to look. This was the second week that we really followed the Turtle Trend strategy. Soon I will be post a large in-depth article of the strategy, its history and story, and how I have altered it a little bit to accommodate my portfolio. This was a choppy week for the market which made finding trends difficult. I have added a new table below to show the performance of the strategy so far.

    Aside from Turtle trades, we initiated a small position in $NVO, a healthcare diabetes/obesity play, the market for their products continue to expand and their financials look solid. I will conduct more research before growing the position. We also did some averaging into $CMI after the negative reception of their earnings report, as well as $T, $INTC, $BAC, and $SMHB.

    Full details for my trades are below:

    • May 1st, 2023
      • Intel ($INTC) – added 1 share at $30.46
      • Cummins ($CMI) – added 0.2 shares at $234.80
      • AT&T ($T) – dividend reinvested
    • May 2nd, 2023
      • Cummins ($CMI) – added 0.5 shares at $231.72
      • Intel ($INTC) – added 1 share at $29.88
      • Bank of America ($BAC) – added 3 shares at $28.00
      • Novo Nordisk ($NVO) – added 1 share at $167.92
      • Global X S&P 500 Covered Call & Growth ETF ($XYLG) – dividend reinvested
    • May 4th, 2023
      • Direxion Daily Small Cap Bear ETF ($TZA) – added 5 shares at $36.20 (trend add level)
      • ETRACS 2x Monthly Pay Levered US Small Cap ($SMHB) – added 10 shares at $4.13
      • Schwab US Dividend Equity ETF ($SCHD) – added 0.4 shares at $69.75
    • May 5th, 2023
      • Direxion Daily Small Cap Bear ETF ($TZA) – sold 12 share position at $33.09, trend stop hit ($24.84 loss)
      • Investment Managers Series Trust II AXS Short Innovation Daily ETF ($SARK) – sold 14 share position at $42.80, trend stop hit ($25.34 loss)
      • Direxion Daily MSCI Mexico Bull 3x ($MEXX) – added 2 shares at $144.79, trend trade entry

    Next week I will look to continue my weekly buys into $SPY, $SCHD, and $XYLG and watch for opportunistic adds as well as trend opportunities. I’ll be looking to add to my redder positions in $MMM and $BAC to take advantage of the coming ex-dividend dates estimated to come in the next month or two. I will also be keeping my eyes on $ATVI to see if it falls below my cost basis for a potential add. The stock lost substantial gains two weeks ago on account of the CMA blocking the transaction. Read my recap on the situation here.

    Turtle Trades

    Summary

    That is it for the update this week. Big week for DividendDollars!

    The market recap and outlook is also live and provides tons of information on what macro statistics I look at to keep a temperature gauge on the market and inform my portfolio movements. Read this week’s here!

    I will also work on finishing my write up on the trend following strategy to share with you, so stay tuned for that.

    Let me know what you think of the progress so far, share with me your progress and questions, interact with me on Twitter and CommonStock and other socials using the links below!

    Thank you for reading! See you next week and stay safe!

    Regards,

    Dividend Dollars

    Categories
    Earnings Economics Market Recap Market Update

    Stock Market Recap & Outlook (5/5­­­­/23) – Apple Earnings Carry the Market & FOMC Rate Hike

    This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

    Dividend Dollars’ Outlook & Opinion

    Last week we ended with the statement “…overall performance for next week will ultimately be determined by the reaction to the FOMC decision and if continued earnings surprises can negate a downward move or enhance an upward one”. And that is precisely what we saw. Earnings, with the exception of $AAPL didn’t move the market much. The FOMC meeting sure did, and the jobs report that followed. We were in a solid downtrend for the week that only became negated last minute on account of $AAPL’s earnings and the strong jobs report.

    At this stage in the earnings season, a majority of companies have reported and the market has recorded its best performance relative to analyst expectations since Q4 2021. The number of positive EPS surprises and the size of the surprises are above their 10 year averages, despite a year-over-year decline in earnings for two quarters in a row.

    85% of the companies in the S&P 500 have reported. Of those, 79% have reported EPS that beat estimates by an average of 7%. Five of the eleven S&P sectors have reported year-over-year EPS growth, with consumer discretionary and industrials leading the pack. Materials and Utilities lag behind. Eight of the sectors are reporting year-over-year growth in revenues.

    Looking ahead, analysts still expect earnings growth for the second half of the year, meanwhile, Mike Wilson, the Chief Investment Office at Morgan Stanley, cautions investors to not be tricked by earnings beats as he has continued to warn of a coming slowdown in earnings and even potential earnings recession.

    we were hesitant to make any call aside from volatility on account of earnings being the main item that would control price action this week. Earnings did push the market higher by roughly 1%, with over a 2% swing from the mid-week low to the end-of-week high. I’d say the volatility call and its reasoning was correct.

    Though the market ended the week slightly down, SPX still managed to climb back above the key $4,100 level. Technicals week are not much changed from last week. However, a slightly less chaotic earnings and data calendar may help the market be a bit more fruitful this next week. There’s not many heavy hitters on the docket, the key will be the CPI report on Wednesday. Much like this last week, I expect moves on Monday and Tuesday to slight as we anticipate the CPI report. After which, the reception of the report may determine direction through the end of the week. With heavy earnings mostly out of the way and a week for investors to digest the effects of the most recent Fed rate hike, I think the market is poised to have a green week next week if CPI plays ball.

    Weekly Market Review

    Summary:

    The stock market closed the first week of May on an upbeat note, but Friday’s positive price action was not enough to recoup this week’s losses for most of the major indices. The S&P 500 approached its February high level (4,195) this week, at 4,186 on Monday, before slipping below the 4,050 level on Thursday. Market-moving events were full and plenty this week with earnings, FOMC rate hike, ECB rate hike, employment numbers, and a surprise announcement from Treasury Secretary Janet Yellen that measures to pay the nation’s bills could be exhausted as soon as June 1st. It was later announced that President Biden will meet with House Speaker McCarthy and other Congressional leaders on May 9 to discuss the debt ceiling.

    Debt ceiling worries, growth concerns, bank fallout, and overtightening were all overarching themes that drove the price action this week; however, Friday’s trade was dictated by the upbeat response to Apple’s earnings report, the April Employment Report, and a needed rebound in the regional bank stocks.

    We learned last weekend that First Republic Bank ($FRC) was seized by regulators. The FDIC facilitated a deal for JPMorgan Chase ($JPM) to acquire a majority of assets and assume deposits and certain liabilities of $FRC. Then on Thursday, PacWest ($PACW) confirmed it’s searching for a sale. Concerns continued to mount after Western Alliance ($WAL) is also considered strategic alternatives, including a possible sale, yet Western Alliance disputed the report, calling it “categorically false in all respects.” Both fell sharply this week, despite solid gains being made by the banking sector in general.

    Worries about central banks overtightening occurred on Wednesday after the FOMC voted to raise fed funds rate by 25 basis points to 5.00-5.25%, which was largely expected. The indices fell that day on the view that the Fed is not inclined to cut interest rates soon despite a contrary view that has been priced into the fed funds futures market. Some of Fed Chair Powell’s statements in his press conference included his acknowledgement that the process of getting inflation back down to 2% has a long way to go. He added that if the Fed’s inflation forecast is broadly right, it would not be appropriate to cut rates. A number of other central banks followed suit with their own 25 bps hikes as well.

    By Friday, some concerns about overtightening started to dissipate. The shift in sentiment was in response to the April Employment Report, which was good enough to encourage thoughts that a soft landing for the economy may still be possible despite the Fed’s aggressive rate hikes. Apple ($AAPL) also drove a lot of the market’s gains on Friday following its pleasing earnings report and capital return plan.

    Only 3 of the 11 S&P 500 sectors closed with gains this week unsurprisingly led by the information technology sector (+0.3%), benefiting from the move in Apple. The defensive-oriented health care (+0.04%) and utilities (+0.07%) sectors also outperformed. The energy sector (-5.8%) saw the biggest decline followed by financials (-2.5%) and communication services (-2.6%). 

    Monday:

    The stock market started May on a positive note as investors looked ahead to a busy week of potential market-moving events such as the Federal Open Market Committee (FOMC) decisio, followed by the European Central Bank meeting, Apple’s earnings report on Thursday, and the April Employment Report on Friday.

    The S&P 500 index rose to 4,186, breaching its February high closing level (4,179) on Monday, but couldn’t maintain its posture above that level by the close. Ultimately, the major indices closed just below flat, due to lagging mega-cap stocks such as Apple, Amazon.com, Alphabet, Tesla , and Microsoft.

    Weakness in bank stocks also weighed on the index performance, with the SPDR S&P Regional Banking ETF down 2.8% and the SPDR S&P Bank ETF down 2.2%. This followed news over the weekend that regulators seized First Republic Bank, and subsequently, JPMorgan Chase acquired a substantial majority of assets and assumed the deposits and certain liabilities of FRC through a deal facilitated by the Federal Deposit Insurance Corporation.

    The energy sector (-1.3%) was the worst performer, led by falling oil prices, another manifestation of growth concerns, and losses in Exxon, which was downgraded to Neutral from Buy at Goldman Sachs. Notably, it was the only sector to move more than 1.0% in any direction.

    On Monday’s economic data front, the April IHS Markit Manufacturing PMI was 50.2, down slightly from 50.4 in the prior month. Meanwhile, the March Construction Spending showed an increase of 0.3%, beating consensus of 0.1%, though new single-family construction remained weak. Finally, the April ISM Manufacturing Index was 47.1%, up from 46.3% in the prior month, reflecting a continued state of contraction in manufacturing activity, albeit with some notable strength in nonresidential spending to offset that weakness.

    Tuesday:

    Tuesday’s market saw a downturn driven by concerns of economic slowdown and the unexpected drop in bank stocks. These worries were compounded by Treasury Secretary Yellen’s warning about the government’s ability to meet its financial obligations by June. Despite opening below the 4,100 level, the S&P 500 was able to recover somewhat from its lowest point and closed with losses of 1.1%. Wednesday’s FOMC policy decision continues to hold attention; while a 25 basis point rate hike is expected, it is unclear how the directive and Chair Powell’s comments will be interpreted.

    Bank stocks were hit hard due to concerns about the economic slowdown affecting earnings. PacWest and Western Alliance suffered the most significant losses in the regional bank industry, while larger banks like JPMorgan Chase and Bank of America underperformed the broader market.

    Concerns about the economic slowdown were enhanced by weak manufacturing PMI readings for April in the eurozone, a decline in nondefense capital goods orders for March, and a JOLTs – Job Openings Report for March that showed a shrink in openings. Additionally, global growth concerns led to falling commodity prices notably in oil and copper.

    Tuesday’s economic data showed that factory orders rose by 0.9% in March, with nondefense aircraft and parts orders driving the increase. However, new orders were down 0.7% month-over-month for the 2nd straight month when excluding transportation. The March JOLTS – Job Openings stood at 9.590 million compared to 9.974 million from the prior month.

    Wednesday:

    The stock market closed with losses, with major indices ending near their lows for the day. Investors were cautious ahead of the Federal Open Market Committee policy decision and press conference by Fed Chair Powell.

    While the FOMC‘s decision to raise the target range for the fed funds rate by 25 basis points to 5.00-5.25% was largely expected, the market experienced some volatility as Fed Chair Powell spoke during his press conference. His comments, including acknowledging that the process of getting inflation back down to 2.0% would take time and that cutting rates would not be appropriate, were seen as less market-friendly than expected. The fed funds futures market, however, is pricing in three rate cuts by year-end, according to the CME FedWatch Tool.

    In other news, the ADP Employment Change for April came in at 296,000, well above the consensus of 142,000 and the March figure of 142,000. The final IHS Markit Services PMI for April fell slightly to 53.6 from 53.7, while the ISM Non-Manufacturing Index increased to 51.9% from 51.2% in March, indicating continued growth in the services sector at a somewhat faster pace than the prior month. Overall, the majority of respondents to the ISM survey were positive about business conditions, although some expressed concerns about inflation and an economic slowdown.

    Thursday:

    The stock market had a down day following the FOMC rate hike, with the major indices closing off their lows. Concerns about central banks overtightening and a potential economic slowdown contributed to the weakness, as several central banks followed the FOMC’s lead and raised their key lending rates.

    The regional bank industry also faced ongoing issues, with PacWest considering strategic options and Western Alliance disputing reports of a possible sale, as previously mentioned. The SPDR S&P Regional Bank ETF and the SPDR S&P Bank ETF both saw significant declines.

    9 of the 11 S&P 500 sectors closed in the red, with the financials and communication services sectors showing the largest declines. Despite the rough day, there was a successful IPO with Johnson & Johnson’s consumer health spinoff Kenvue going public.

    Weekly initial jobless claims continued to run well below levels seen during prior recessions. March trade balance had a deficit of -$64.2 billion exhibiting weak import activity and a cooling of the US economy. Q1 productivity came in at -2.7%, much lower than the expected -0.1%. The weak productivity is feeding into the elevated labor costs were contributing to elevated inflation and the Fed’s thinking that it will have to keep rates higher for longer.

    Friday:

    The stock market had a positive close for the first week of May, with major indices showing strength throughout the day. The S&P 500 almost reached the 4,150 level before pulling back slightly at the close. Apple’s pleasing earnings report and capital return plan contributed to a nearly 5% gain in its stock price, which helped boost the technology sector. Regional bank stocks also rebounded, with PacWest and Western Alliance experiencing outsized gains due to short-covering activity. The financials, energy, and technology sectors were the top performers for the day, with the Russell 2000 also outperforming thanks to strength from regional bank stocks and energy shares.

    Market participants were also digesting the April employment report, which showed that nonfarm payrolls grew by 253,000 (compared to a consensus of 180,000) and the unemployment rate fell to 3.4% (compared to a consensus of 3.6%). Average hourly earnings also increased by 0.5%, beating the 0.3% expectation. These results suggest that the Fed may not need to cut rates soon, but at the same time, the continued strength in the labor market after nine rate hikes (the 10th rate hike came after the data for April were collected) provides hope that a soft landing for the economy is still possible.

    That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

    And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

    Regards,

    Dividend Dollars

    Categories
    Dividend Stocks Dividends Portfolio

    Dividend Portfolio: 4/28/23 Weekly Update

    Welcome back to the weekly Dividend Dollars portfolio review, and a very special one at that! If you didn’t catch it last week, you’ll notice within the screenshot of my portfolio that the general structure has changed a little bit. I am starting to implement a new strategy! I am quite excited about the new direction of the portfolio, so read on to see what we’re doing!

    This portfolio update is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. I wrote a review of the product that you can read here if you’re interested in learning more! Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

    Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

    Portfolio Value

    To date, I have invested $15,530 into the account the total value of all positions plus any cash on hand is $15,725.46. That’s a total gain of 1.26%. The account is up $27.97 for the week which is a 0.18% gain.

    We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -6.42% which puts us 7.7% higher than the market! I love tracking my portfolio against a benchmark like the S&P. The above chart comes from Sharesight which makes portfolio and dividend management a breeze!

    We added $120 in cash to the account last week, trades made will be broken out below.

    Portfolio

    Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

    Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week, the blue ones are positions that I reinvested dividends into, the yellow ones are positions that announced a dividend increase this week, and the red are positions that I trimmed. Our PADI increases from $539 to $557.

    Dividends

    This week we received two dividends: $5.30 from $CMCSA and $1.51 from $SPY.

    In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The $SPY dividend hit afterhours on Friday, so that will be invested automatically on Monday.

    Dividends received for 2023: $160.72

    Portfolio’s Lifetime Dividends: $571.12

    Trades

    This week was the first week that we really followed the Turtle Trend strategy. Soon I will be post a large in-depth article of the strategy, its history and story, and how I have altered it a little bit to accommodate my portfolio. This was a choppy week for the market which made finding trends difficult. I have added a new table below to show the performance of the strategy so far.

    Aside from Turtle trades, we made a move from $FIS and $JKH simply based on better performance and financials but still is a position in the banking tech space. I much prefer this new hold over $JKH.

    Full details for my trades are below:

    • April 24th, 2023
      • Fidelity National Information ($FIS) – sold 3.020708 share position at $56.17 (roughly $18 loss)
      • Jack Henry & Associates – added 1 share at $160.08
    • April 25th, 2023
      • iShares US Transportation ETF ($IYT) – sold 2 share position at $220.86, trend trade stop hit ($19.72 loss)
      • Investment Managers Series Trust II AXS Short Innovation Daily ETF ($SARK) – added 8 shares at $44.04, trend trade starter
    • April 26th, 2023
      • Invesco Solar ETF ($TAN) – sold 5 share position at $75.75, trend trade stop hit ($35.95 loss)
      • iShares US Broker Dealers & Securities Exchanges ETF ($IAI) – sold 10 share position at $90.86, trend stop hit ($22.00 loss)
      • Direxion Daily Small Cap Bear ETF ($TZA) – added 7 shares at $36.16, trend trade starter
      • Investment Managers Series Trust II AXS Short Innovation Daily ETF ($SARK) – added 6 shares at $47.67, first add into trend trade
      • Comcast ($CMCSA) – dividend reinvested
    • April 27th, 2023
      • The Communication Services Select Sector SPDR ($XLC) – added 10 shares at $59.45, trend trade starter
      • Vanguard Mega Capp 300 Growth ETF ($MGK) – added 3 shares at $206.26, trend trade starter

    Next week I will look to continue my weekly buys into $SPY, $SCHD, and $XYLG and watch for opportunistic adds as well as trend opportunities. I’ll be looking to add to my redder positions in $MMM and $BAC to take advantage of the coming ex-dividend dates estimated to come in the next month or two. I will also be keeping my eyes on $ATVI to see if it falls below my cost basis for a potential add. The stock lost substantial gains this week on account of the CMA blocking the transaction. Read my recap on the situation here.

    Turtle Trades

    Summary

    That is it for the update this week. Big week for DividendDollars!

    The market recap and outlook will be posted later this week and provides tons of information on what macro statistics I look at to keep a temperature gauge on the market and inform my portfolio movements. Read last week’s here while you wait for the new one!

    I will also work on finishing my write up on the trend following strategy to share with you, so stay tuned for that.

    Let me know what you think of the progress so far, share with me your progress and questions, interact with me on Twitter and CommonStock and other socials using the links below!

    Thank you for reading! See you next week and stay safe!

    Regards,

    Dividend Dollars

    Categories
    Due Diligence Stock Analysis

    UK’s CMA Blocks the Microsoft-Activision Merger

    I’ve been spending some time this morning digesting the news that the UK’s Competition and Markets Authority (CMA) has blocked the $MSFT acquisition of $ATVI. The announcement from the CMA is linked here and is about twenty pages long. After reading and organizing some thoughts, I decided I want to share major points on the decision.

    CMA’s Conclusions

    After the CMA’s investigation and assessment of the acquisition, they concluded that the action may result in a “substantial lessening of competition” (SLC) in the cloud gaming services within the UK. This is a very different reasoning from the initial concerns surrounding the ideas that Microsoft would withhold the large Call of Duty franchise from competitor’s platforms. The CMA says that the deal could change “the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

    Microsoft provided a Cloud Remedy Proposal to the CMA in which they would be committed to license Activision games royalty-free to specific cloud gaming providers for 10 years. A proposed change in consumer licenses of the games would also give the right to stream an Activision game within the cloud service provider’s online store. This essentially means that if Steam’s online store was selling Activision games, the consumers of those games would be able to play it on Steam’s cloud service (assuming they have one) and wouldn’t be forced to use Microsoft’s cloud gaming service. Microsoft also offered to appoint a monitoring trustee to ensure compliance with the proposed remedy.

    The CAM determined that the proposed remedy was unlikely to provide structural remedies to the SLC. Their reasoning for this is that the proposal limits different types of commercial relationships between cloud gaming service providers and game publishers, restricting arrangements like exclusive content, early access, or gaming subscription services. They also conclude that this proposal lessens the incentives for Activision to make their games available on non-Windows operating systems which may exclude or restrict cloud service providers who wish to use other operating systems now and in the future.

    The CMA ends their conclusions by stating that the “only effective remedy to this SLC and its adverse consequences is to prohibit the Merger.”

    My Opinions

    I was shocked to read that this rejection was literally only about cloud gaming. The CMA even recognized that they understand the public support for deal as it would

    It is extra odd when considering the fact that cloud gaming is such a small part for the entire video game industry, let alone Microsoft. Google’s cloud gaming attempt with Stadia failed and was officially discontinued in January of 2023, only three years after it was launched in November of 2019. Amazon’s attempt at cloud gaming, called Luna, is still up and running but has mixed reception and not a huge base due to major complaints around impracticality, lag issues, and extra monthly fees to access all the content.

    These other players aren’t struggling because Microsoft is out-competing them, its because cloud-gaming just isn’t as good compared to console or PC gaming. I’ve messed around with Xbox’s cloud service called X Cloud Gaming. It’s not mind-blowing.

    As internet speeds improve over time and as it becomes more cost effective for companies to house all of the necessary computing power that is needed to offer cloud gaming services, I’m sure the sector will grow. With Microsoft having a 60-70% market share in cloud gaming, the CMA is concerned that this deal would make their market share greater, and as a result make the industry less competitive. The CMA seems to believe they are forward-looking in terms of the potential growth in cloud gaming, but given the context of the small size of cloud gaming relative to the entire industry and the significant time and money it will take to get cloud gaming anywhere close to being competitive with console/PC gaming, it seems the CMA’s focus on cloud is extremely misled.

    Moving Forward

    Next steps lie at the Competition Appeal Tribunal (CAT). This is the special judicial body within the UK that hears and decides on cases involving competitive regulatory issues. Just last November, the CAT overruled the CMA’s decision on a case involving Apple for disregarding statutory time limits. In Apple’s case, this was a procedural error and was overrule quickly. Microsoft’s case does not have any procedural issues (though if there are some they may appear in the near future).

    The CMA’s initial key concern when the merger was first reviewed was regarding foreclosure in the console market. Their concerns then of Activision games becoming exclusive to Game Pass or removed from Playstation were entirely misinterpreted on the CMA’s part. Now the focus is on cloud gaming and their decision to block a merger over an infant market at the expense of greater aggregate consumer benefit within PC and console gaming. The CMA may have a hard time explaining to the CAT why this is reasonable.

    Immediately following the CMA’s decision, Microsoft and Activision reaffirmed their commitment to this deal and that they would appeal the decision. Lulu Cheng Meservey, CCO of Activision Blizzard, tweeted that “the UK is closed for business”. Brad Smith, Vice Chairman of Microsoft, tweeted that they will appeal the CMA in an offical statement. Their statement says that the decision “reflect[s] a flawed understanding of this market and they way the relevant cloud technology actually works.”

    The deal has been cleared in other jurisdictions such as Japan, South Africa, Brazil, Saudi Arabia, Serbia, and Chile. It should be cleared by others in the near future as the European Union has a May 22nd deadline, an August trial within the US is expected, and Australia and New Zealand appear to be waiting further outcomes from the CAT as their historical ties with UK show.

    Microsoft has been more cooperative and friendly with regulators than nearly any big tech company I can think of. Now, they have no choice but to fight to back as they have shown they dedicated to this deal and will see it to the end. I hope we get to see this to fruition, however, there is always the risk impatient and despairing investors push Activision to take the $3 billion break up fee. Only time will tell.

    In the meantime, $ATVI is down over 11% in today’s trading session, wiping out almost three months of uptrending gains for the stock. My current position is still up over 3% with a cost basis of $74.07. If prices manage to drop below my cost basis before more news develops, I may look to add to my position.