Author: TruePath Financial
Covestor model: Archipelago
Disclosures: Long EWX
In the month of May the model triggered an equal momentum score for microcaps and emerging market small caps; therefore, we purchased SPDR S&P Emerging Markets Small Cap ETF (NYSE: EWX), a fund that tracks small caps in emerging markets.
We continue to hold our microcap ETF positions. On a short-term basis it looks like US small caps may have been oversold relative to other equity classes. They may bounce back in the coming weeks.
We continue to hold onto our hedging positions, as advisory sentiment has yet to correct. Of course, investors are getting much more bearish. Mutual fund flows data from the Investment Company Institute show that investors have been aggressively selling equity mutual funds recently.
We may see a pullback like last summer, although I doubt it will be as deep just yet. I expect the S&P 500 to push past 1400 before it craters again.
Sources:
“U.S. stock fund outflows hit 9-month high as more investors cash out” Los Angeles Times, 6/15/11 http://latimesblogs.latimes.com/money_co/2011/06/stock-mutual-fund-outflows-investors-ici-redemptions-bonds.html
