Friday, May 25, 2012


This summer is set up to be as sloppy as the previous two. The recent sell off in the market is overdone on a short term basis and with weekly technical sell signals currently in place the easiest path for the market at this point is to the downside. Therefore, raising cash to hedge portfolios until the next “buy signals” are generated is recommended. 
  1. Liquidate weak and underperforming positions as the market approaches the 1350 and 1360 levels.
  2. Rebalance winning positions by taking profits and resizing positions back to original weights,
  3. Look for rotation into precious metals as a “safe haven” investment which are currently very oversold and holding support. (We are currently long GLD and GDX)
  4. Short duration fixed income is still an alternative to “money markets” as rates will likely remain under pressure as rotation out of stocks continue.
  5. Our call to buy bonds over the past month has played out well. They are currently overbought and extended. Hold current positions but be selective on new additions at this time. Wait for a move in interest rates to 2.2% on the 10-year treasury before aggressively adding more
  6. Be careful with dividend yielding stocks — while they will likely hold up better during a market correction they are already overbought in many cases. Sometimes “cash” is a better alternative for protecting portfolios versus “less of a decline”.”
  7. Hold cash for the next “buy” signal becomes apparent.
The next few months heading into the political election are likely to be fraught with volatility, uncertainty and fear. There is currently little question that the Fed will intervene at some point soon with QE 3 as there is little evidence that any assistance will be coming from much of anywhere else to support the economy. The potential collapse of the Eurozone and the impact on the financial system will reign supremely in the coming months which is why it will most likely pay for investors to remain more cautious.
Read it at Pragmatic Capitalism
By Lance Roberts, CEO, StreetTalk Advisors

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