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.