Fundamentals haven’t changed – this market remains quite frothy, with commodity prices hanging as a dark shadow over economic growth, not to mention slow job growth and continued deleveraging around the world. That makes it tough for small companies to access the capital they need for growth, since banks keep lending criteria very tight during times of shrinking macro-economic debt.
Greece looks like it is preparing to swallow the bitter pill offered by the European Central Bank in order to receive bail-out funds to avoid a government bankruptcy. The Greek economy is headed for 1-2 years of painful contraction at a minimum. Hopefully, the austerity measures will allow the country to get back on over time. We will see.
Overall we continue to see little change so far this year as far as the Pro-Folio model is concerned. There is 1 trade this month as commodities prices settle back down from their recent stratospheric highs.
SPY – HOLD OR BUY
EFA – HOLD OR BUY
IYR – HOLD OR BUY
DJP – SELL – Threshold: 47.37 Price: 47.23
IEF – HOLD OR BUY
For existing investors:
Sell your entire position in DJP. You should remain fully invested in the other 4 holdings of the Pro-Folio model as shown above.
For new investors:
If you are new to Pro-Folio this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the securities shown above marked “HOLD” or “BUY”. Because you didn’t invest in the components of the model at the time when the buy signals first turned positive, your returns on these initial trades may not be reflective of model’s typical expected returns. DO NOT invest in IEF right now. Stand by with that portion of your portfolio in cash, awaiting the buy signal.
For the portion of your portfolio that is not following Pro-Folio, continue to keep an eye on the US equity markets. Nothing has changed in May, or June, and I quote: “we’re right back up in nosebleed territory in terms of valuation, the S&P 500 earnings are near record highs, the economy is fragile, state governments and school districts across the country are cutting budgets. I hate to say it but the US stock market does not look like a tightly wound spring getting ready to launch. It looks more like someone high on cocaine waiting for the inevitable crash.”