Bookkeeping: Some Morning Sales

As mentioned in this week's summary we headed right to that to that 50 day moving average which is around S&P500 level 1355. Ironically last week when I was "bullish" I expected a move to this level, but we had that one day slide of 300 points out of the blue, before completely reversing Thursday and this morning. So my prediction was accurate - we just sold off massively for some odd reason in between.

Either way, I am taking this time to take some profits off positions bought last week, cut back other positions, and begin expanding short exposure. Since I am not clear where the market's head is right now, I am using the most simple broad market Ultrashort Russell 2000 (TWM) as my main tool. Now that the market is in love with the financials, retailers, and homebuilders (as it seems to do like clockwork every 7-8 weeks), I will be treading a bit more carefully in those shorts until I see a return to reality.

Once again I find this market to be bipolar and very tiring - the moves are so severe and in such complete opposite directions from day to day. What works today, fails tommorrow. What works tomorrow fails 2 days later. And nothing bought on fundamentals lasts as a trend for very long. Until this behavior changes, I will continue to assume all sharp rallies will be shortly followed my sharp selloffs, and vice versa - so even the positions I have the most conviction in, I need to cut back on these spikes up, even if I find their valuations compelling. So I am cutting to some degree positions I added in panic selloffs late last week - until the market makes up its mind for more than 48 hours at a time cash seems the best options many times. These are in general $5-$7K sells - sadly of late the only way to make any money is this quick allocation trades, moving from long to cash and vice versa. I've done more of these large scale swings in and out in the past 3 weeks than the previous 3 months combined. Again the market is so disjointed right now and I prefer some sort of trends that last more than a few hours, so I am trying to move to a more neutral bias... with more cash.

1. Powershares DB Agriculture Fund (DBA) - this was a larger sale, around $12K, simply because the "commodities are trash" trade might have more downside ahead... I'll re-up once sense returns to the market and this is still the largest long position, but just want to ratchet back some exposure on this +2% move. This has nothing to do with my long term outlook - simply the fear of hedge fund computers.
2. Mosaic (MOS) in $96s/$97s (fertilizer)
3. Potash (POT) in $152s (fertilizer)
4. Baidu.com (BIDU) in mid $230s (Chinese internet)
5. Mechel (MTL) around $120 (Russien iron ore/steel/coal)
6. ICICI Bank (IBN) in $40.50s (Indian bank)
7. HDFC Bank (HDB) in $105s (Indian bank)
8. DryShips (DRYS) in $62s (dry bulk shipper)
9. Massey Energy (MEE) in $35.40s (coal)
10. Blackrock (BLK) near $220 (asset manager)
11. Cabot Oil & Gas (COG) in $47.50s (natural gas)
12. Foster Wheeler (FWLT) in $56.60s (infrastructure) - I can only assume Thursday's move down to $47 was a hedge fund liquidation it happened so quick and then reversed but I was happily buying at $48, which I am now flipping out 1 session later for a nice profit.

I will change my tune on the market to constructive, if we see a move north of S&P 1400. Until/unless then I doubt any of these moves sustainability and will trade accordingly. If I am wrong (which one day I will be as the market puts on a real move that lasts for more than a week), then I'll buy back my favorite positions at higher prices, missing the first part of the leg up, but still enjoying the vast majority of the Kool Aid. Remember, all these liquidity injections (over $1 trillion now from Europe and US) inflate EVERY asset at a level higher than they otherwise would be - including stock prices. So it's the war of Main Street vs Wall Street - inflate everything to keep the financial system greased.

Long all names mentioned in fund; long Mosaic, Potash, Foster Wheeler, Mechel in personal account