So it appears that hedge funds are now all long the equity markets which means we will likely have a little more upside in the near term followed by another round of selling later on this year. If the S&P clears the $1278 level then we will likely head higher over the medium term as $1278 is the 200 day moving average. The market model is still holding our 33% short position which can be covered for a 1.5% loss to the total portfolio. While we are hurt by the small loss, the market model is still up nicely since our July 7 short call and we have had absolutely no correlation to the roller-coaster equity markets this summer. Once the S&P 500 hits $1274 we will again be more negative on equities and will likely issue another 100% short position or more at that time. We are now over the 100 day and 50 day MA’s so the vacuum higher should be relatively easy for the robots to perform even without any fundamental reason to move up in the near term. Stocks in general move higher over the long term but the situation in Europe needs to be watched closely.
