Author: Amin Khakiani
Disclaimer: Amin Khakiani does not own SPY, KBE, OIH, LQD or JNK in his Covestor Quantitative Hedging Model
August 30, 2010: After a strong July, August was a choppy month for the equity markets.
Our models performed in line with choppy market environment. Our technical indicators led to us to hedge our long positions at times, particularly as we began to see increased institutional selling in the equity markets. Our short term technical oscillators help hedge and take advantage of the daily choppy action.
As we head into September, our models favor large cap indices (SPY), and our sector rotation models favor banking (KBE) and energy services (OIH). Our fixed income strategies currently favor corporate bonds and high yield instruments (LQD, JNK).
One thing we are watching for is volatility, which increased sharply during the May/June swoon, and has continued to remain at elevated levels. Increased volatility may cause our models to do more tactical shifting into and out of long and short positions.
