STRATEGIES

Quite possibly, but for long-term investors, the smart money is not made month-to-month. The best move is to get your portfolio summer-ready before you run out of chances, while starting to build a strategy for the probable fall rally, writes MoneyShow's Tom Aspray.

June so far has been a tough month for stocks. The S&P is down around 2.5%, although it was able to close the week above the lows.

Since 1950, the S&P 500 has been down slightly in June, including a 5.2% loss in 2010 and an 8.55% slide in 2008. Over the past ten years, the best was 2012's gain of 3.99%.

So what about July? Here, the record is a bit better, as the S&P was up 34 years and down 29, with an average gain since 1950 of 0.8%. Since 2003, the best year was 2009, when we saw a 7.24% gain; 2004 was the worst, as the S&P lost 3.28%.

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The seasonal trend (using data since 1930) shows that from the late June lows, the minor trend (line a), is generally upward until September, which is statistically the worst month of the year. Stocks generally peak in the middle of September-remember the high of September 14, 2012?

At this point, the technical studies show no signs yet of bottoming out, as the strength early last week was short-lived. As I noted in last Friday's column Did You Summer-Proof Your Portfolio?, the daily technical studies are still in correction mode, while the longer-term patterns suggest that this current market decline will provide a good buying opportunity.

The turmoil in the markets was in reaction to the prospect of higher rates, exacerbated by the confirmation that the Fed would cut back their bond buying if the economy continued to improve. I assumed this would be the case last week, but the market obviously took the news quite hard.

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The weekly bottom in long-term rates was confirmed at the end of May, when the yield on the 30-year T-Bond completed its reverse head-and-shoulders bottom formation. The chart shows that yields moved above the neckline (line a), which projects a move to the 4% level.

A similar formation in the ten-year T-Note yields was confirmed last week. Both yields are at or above the weekly Starc+ bands, indicating the yields have likely risen too fast. This makes a pullback in yields and a rally in bond prices more likely in the coming weeks. Bondholders should have a nice opportunity to reduce their exposure and shorten their maturities.

One should keep in mind that rates need to still move significantly higher to confirm that the long-term bull market in bonds is really over.

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Tickers Mentioned: DIA, SPY, QQQ, IWM, IYT