Editor’s note: As of 9/7/11, James Peera no longer manages a Covestor model
Author: James Peera
Covestor model: Total Alpha
Disclosures: Long S
Current strategy: Looking for opportunities during market consolidation/commodity correction
Key positions as of 6/1/11: Cash, Long Sprint Nextel (NYSE: S)
Fundamentals
The US economy is going through a ‘soft patch’ in the recovery due to high gas prices, weak US housing and jobs, and weakness abroad. This is further confirmed by the May jobs report. I believe weakness in stocks is a buying opportunity; however, patience is required as the correction/consolidation will likely last through most of the summer.
Technicals
The technicals suggest the S&P 500 is in correction mode, as it recently broke below the key 1300 level. The correction/consolidation is supported by market uncertainty over the end of QE2 and weakness in US jobs.
Portfolio Trades
The portfolio holds significant cash and recently sold Citigroup (NYSE: C) as it fell below its 50 day moving average and near-term fundamentals in financials suggest the stock price will remain subdued. Sprint Nextel was purchased as it broke above a key long-term threshold and the wireless industry shows growth potential due to increased consumer interest in smartphones and higher priced data plans.
I’m considering shorting oil again, as economic weakness combined with reduced turmoil in the Mideast could reduce prices.
I’m also considering shorting the broader market again if there is a rally, as I believe a correction will continue through most of the summer due to further economic softness and worries about a lack of agreement for raising the national debt level before the August deadline.
