## Why I Sold My Tactical Long Trading Positions and Raised Cash to 30%
Last Friday, I made a significant move by selling all my tactical long trading positions and raising my cash level to over 30%. Additionally, I plan to hedge the remaining strategic long positions by selling covered calls. Here’s why I’m taking these steps:
### Seasonality
July is typically the last strong month for the stock market before the summer and autumn correction period sets in. This seasonal pattern has been consistent, and I’m cautious about the upcoming correction phase.
### Earnings Season
With the earnings season kicking off, there’s heightened anticipation as guidance has been raised across the board. While expectations are high, there’s also a risk of disappointment if results don’t meet these lofty projections. Moreover, even positive earnings reports might not translate into favorable price actions if the good news is already priced in.
### The Bond Market
The bond market has been reacting sharply since the Biden TV election campaign mishap last week. We’ve witnessed a significant bear steepening, breaking the upward trend of the TLT ETF. Treasuries are now pricing in the potential of a Trump 2.0 scenario.
Long-term US government bond prices have plummeted since the presidential debate, with the 10-year Treasury yield rising from 4.29% on Thursday to nearly 4.50%, the highest level since May 31. This increase comes despite favorable economic indicators, such as the lowest year-over-year print for the personal consumption expenditures deflator since March 2021 and another sub-50.0 report for the M-PMI on Monday.
Economic expectations for the long term are shifting, although the Federal Reserve’s interest rate policy outlook has remained relatively stable. The 10-year TIPS yield has increased by around 14 basis points to 2.15% since Thursday.
### Bottom Line
If Trump wins, the market anticipates a combination of stronger economic growth, higher inflation, and increased Treasury supply. This outlook is particularly bearish for hypergrowth stocks. Given these factors, I believe it’s prudent to lock in profits and observe how the US navigates the presidential battle between the old white men.
In the comments, I’ve included a chart of the Nasdaq 100. Late in 2023, I projected an index level around 20500 for the Nasdaq 100 as my target for 2024. Last Friday, the Nasdaq 100 briefly crossed 20000 before reversing, which might indicate a top. Alternatively, we could see another upward move in July before the anticipated correction. However, several negative divergences under the surface are too complex to detail in a short blog post.