Author: TG Asset Management LLC
Covestor portfolios: Tactical All Asset and Tactical Growth
Bottom Line: Euro Zone leaders have achieved their short-term objective in bringing down yields on Spanish Government debt through a plan to recapitalize the Spanish banking system. They also put forth a growth plan and appear to have temporarily eased investor fear over a Euro break-up until at least the end of the summer. With short and intermediate-term strategy factors turning bullish, a growth strategy of 100% domestic stocks is optimal at this time.
Ø Long-Term Stock Pattern (3-5 yrs) – Bearish, Stock prices will eventually move lower
Ø Intermediate-Term Stock Trend (1 year) - Bullish, Stock prices are pointing higher
Ø Short-Term Stock Volatility (30 days) - Bullish, Stock prices have room to head higher
Ø CURRENT ASSET ALLOCATION OBJECTIVE – GROWTH
Technical, Trend & Volatility Indicators
Strategy Indicators:
TECHNICAL PATTERN: BEARISH; Stock prices have partially retraced their fall from their May 1 high. While they have the potential to complete a further retracement, the overall technical pattern is bearish. Once prices complete the topping process, the larger Primary Wave 3 pattern down in stocks will resume. Primary Wave 3 has the potential to carry stocks well below their March ’09 lows.
TREND: BEARISH; The trend in stocks turned bullish on June 6th as the S&P 500 index moved back above its 200 day moving average. The S&P 500 now has the potential to top out near the May high of 1405 before starting lower again.
VOLATILITY: BEARISH; The S&P 500 VIX hit a low of 17.08 on June 30, approaching the May 1 16.60 low. With Spain government bond yields below 7%, Euro Zone leaders can breathe easier for now. However “Animal Spirits,” the term Yale economist Robert J. Shiller uses to describe investor sentiment can change quickly as witnessed recently. We need to watch for spikes in the VIX to identify the start of the next turn down in stocks.
Strategy
A 100% allocation to US Stocks will be employed at this time.