Author: Gary Harloff
Covestor model: Opportunistic ETF
Disclosure: Long IWM
Last month we called for a defensive position. For the month of June, 2011 the S&P 500 lost about 1.8%. Our model portfolio rose about 3.8%.
We continue to have neutral signals on both the S&P500 and NDX, a sell on XAU, and our US 10 year bond yield signal remains on a sell (that means a buy on this bond). The S&P500 trend is down. It is time to be in the money market. It appears that lower bond yields are forcing the markets lower at this time. Other market analysis we perform suggests the market may be turning up in the next week or two, but big boats take some time to turn around.
Our style box analysis indicates that all U.S. styles have negative momentum. Our sector analysis indicates that all sectors have negative momentum. On a world-wide scale, only the U.S. dollar has positive momentum. U.S., Germany, London, and emerging markets all have negative momentum. These results are similar and more negative than last month.
The Federal Reserve will soon stop pumping liquidity into the financial sector when QE2 ceases this month. In general, emerging markets appear to be slowing with a reduction in global growth. The Greek default is looming large at this time and this is yet another reason for uncertainty on a world-wide scale. In contrast, Japan seems to be poised to recover on the upside, yet it is a little early to be sure.
The lackluster equity market trends may need 1 to 3 months to adjust to new global realities. Because the markets can turn quickly, be ready. May the market be with you!
