Author: Michael Arold
Covestor model: Technical Swing
June was a positive month for my Covestor model portfolio, Technical Swing. As presented on the Covestor model page, Technical Swing finished the month up 4.91% vs. a 1.83% decline for its benchmark, the S&P 500.
I was very defensive in the first half of the month and used market weakness to close short positions in St. Joe’s, LDK Solar and Ann Inc.
The market took a dramatic turn in the second half of June as the S&P 500 recovered much of the month’s losses. At the same time, I turned short-term bullish as well and started to engage in various long positions. It seemed to me that the market ignored positive U.S. economic news and instead focused on global macro issues from the developments in Greece, Japan and China.
Most of the sentiment indicators I follow signaled an excess of negativity from market participants, so I turned bullish based on principles of contrarian thinking. If everybody expects prices to fall further, that suggests that these investors have already sold. Prices only decline when there are more sellers than buyers.
Going forward, I remain bullish and plan to expand my long portfolio on minor pullbacks. Earnings season will start after the July 4th weekend and a positive outlook of many companies could fuel this rally. Analyst expectations did generally come down in the last few months and the stock market tends to rise amidst earnings that beat expectations.
