Friday, February 6, 2009

Bookkeeping: Cutting Quality Systems (QSII) in Half Until Clearer Picture Arrives

A very interesting past few days - congrats for those in the tech/China/commodities trade; you killed it the past few sessions. Looking around at the winners today outside those sectors it's the 'worst of breed" reverting to mean YET again (snapping back to the rubber band after being hammered).

I wonder how many times we can rally on the EXACT same news. 10 days ago we jumped from S&P 830 to 875 on soon to be announced bad bank news. The past two sessions we rally from 825 to 870 on... you guessed it.... soon to be announced bad bank news. Now the countdown for our salvation is Monday at noon.

I am debating who levitates higher over water... Tim Geithner or Obama? This is actually a grand psychological experiment... desperate people tend to cling to hope in their leaders when all else fails. False idols if you will. Especially when they have little else. It is sad that is what we have come to in this country... a lot of fascist regimes actually start off this way. With the power grab at the Fed and other government agencies you can only hope this is not step 1....

But hope it is for a few days... as we've been saying for many weeks - 2009 will be the ping pong between "hope" and "reality". We now have hope... just like we had 10 days ago. We also rallied strongly in December off Geithner's appointment to Secretary Treasury (I remember it was announced at 3 PM and my short exposure was destroyed on a huge rally). Again - he must walk on water.

Most of our long positions are not in the above mentioned "flavor of the past 2 weeks" groups NOR did we decide hey it's time to buy financials, retailers, Las Vegas casinos, or REITs 48 hours ago. This is a daytrader's market and the time frames for "favored" groups are simply too fast for my style. So we're really sitting this one out... along with our short positions obviously working against us the past 2 sessions.

We do have many of our stocks running into resistance so I am making cuts here and there. Many were leaders of January - unaffected while today's "winners" were being slaughtered to the tune of 30,40,50% drops. So it's a completely backwards period right now - we're losing while those names are winning. Just like we were winning in January while those stocks were cratering - frustrating today to not be involved, but we don't have a ton of ground to make up from losses in January so we don't need to take the same level of risks. That doesn't mean I don't wish I had a bevy of Research in Motion (RIMM) sitting on the book at this moment.

One such name that has been mostly not participating of late is Quality Systems (QSII) - the stock is in the mid $37 range, rallying about 6% today. QSII recently fell below the 50 day moving average of $38. And the 200 day is down at $36. A narrow range here, and this is a 50/50 set up - we have no advantage; it could break either way. Until I see more clarity I am going to reduce exposure and cut the position in half from 1.5% to 0.75% exposure. I would like to be a buyer north of $38.50 and a seller(shorter) south of $36. It is in no man's land right now so I don't want to have a major stake either way. Instead I am going to use today's "salvation" as a chance to get smaller in the position.

I also dumped some (homebuilder) Lennar (LEN) into the close.

I'll update Sunday how I plan to play this market as we are at a very important technical level yet again; we're either going to be very bullish (and hopefully not find ourselves turning into Charlie Brown) [Charlie Brown Market] or back to bears based on price action in the first few days of next week. We are simply in the churn zone - now back to the top of it. These are such abnormal times - it is sad how Washington D.C. means more than stock selection or thinking or charts. It's been going on for so long that it's now become old hat aka the "new normal"...

Be here at noon Monday when Sir Geithner unveils how the US financial system will be fixed. Hopefully he announces it while standing directly over the Atlantic... that would be make for great TV! Sir, your peons await your great blessings....

Long Quality Systems, Lennar in fund; no personal position

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