Yesterday the Dow Jones Industrials closed up 71 points at 10,629, on volume of 1.57 billion shares. The S&P 500 reached a four year high while the Nasdaq set a new for the year. Sometimes it's lonely being on the sidelines when the market is advancing. I feel like a kid who is indoors watching his friends play outside during a lightning storm.
While we are impressed by the markets recent action, one cannot ignore the fact that the S&P 500 is heading into a weak seasonal period that usually lasts into October. Secondly, many influential traders are on vaction and away from their posts. I believe the market has enough steam to put on an impressive performance that could last through yearend, but not before a seasonal correction that could take the averages down 5-10%. This being said, we have lightened our long positions to take advantage of any weakness that occurs over the coming weeks.
Technology shares have awakened from a long slumber, but keep in mind that this sector was heavily shorted, and short covering has been taking place. Also, the people at Standard and Poors are adjusting their index funds by selling stocks that are heavily owned by insiders. This adjustment will continue until September, so Tech could once again experience some profit-taking in the weeks a head.
We adding several stocks in late August and September to take advantage of the yearend rally. For now, we are standing aside.
