"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
Sun Tzu

Tuesday, June 21, 2011

Covestor Model Portfolio Commentary: From Cash to Long

I maintained a bearish stance during the first half of June and played the market predominantly from the short side. Recently, I had been taking profits and increased my cash position to over 80%.
Yesterday marked a significant change in my short-term trading strategy. I closed an index short position (TZA) and went long various strong momentum names in the Covestoor Model Portfolio. I acknowledge that this is still a weak market and I don't expect to hold these stocks for a long time. Various factors suggest that we could see a bounce for a couple of days:

- The technical picture of the Russel 2000 looks short-term positive if important resistance levels can be broken.
- Some indicators (not all!) suggest a very high level of negativity in the market, which is usually the base for an oversold bounce.
- The markets ignored some positive surprises in economic indicators last week. Participants seem to focus solely on Greece. Greece is still a risk factor before the confidence vote and I might put up some hedge later today.