Monday, February 15, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 28

Year 3, Week 28 Major Position Changes

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 78.1% (v 83.5% last week)
20 long bias: 13.8% (v 7.8% last week)
5 short bias: 8.1% (v 8.7% last week) [Includes 2 'long dollar' positions, 1 option related]

25 positions (vs 27 last week)

Weekly thoughts
A volatile week with very little to show for another round of global moral hazard.  Despite some Hank Paulson "bazooka" like pledge (we don't need to save Freddie and Fannie Mae, but let me tell you - we have a bazooka waiting) for Greece, the major indexes were not much changed from where they closed the previous Friday after many declared a late hour short covering swarm was a "key reversal".   The market continues to have no memory from day to day, and we continue to be hostage to news events and the HAL9000 inverse trade on the dollar - rather than individual company metrics or fundamentals.  While remaining in a "white noise" range the indexes have nudged to the upward end of said range, and although the S&P 500 has made little progress the NASDAQ and Russell 2000 are closer to either (a) the top of the white noise range and/or (b) poised to break over it.

[click to enlarge]

S&P 500


Russell 2000

As I would often tell readers in 2008, I don't normally pay *this* much attention to the indexes but since almost every stock moves en masse nowadays, it's impossible to analyze things in a vacuum.  Looking above, the "price" action is looking better for the NASDAQ and Russell 2000, but if you look at the bottom of the S&P 500 and NASDAQ charts you can see we continue to be missing volume.  For anyone brought up to learn how markets should work prior to 2009 this is a huge failing.  But it did not matter in 2009 - we had epic rallies without any volume.  That makes little sense but it appears to be the new market - it can do amazing things.  There was a snow storm Wednesday that had volume drop off a cliff, but in the rallies Thursday and Friday ... well, there was almost no different at all in volumes versus Wednesday's levels.  Which makes such rallies incredibly suspicious suspect.   If this was the old market (pre 2009 magic) this lack of expansion of volume on any and all rallies would be a license to short.  However, as stated above - anyone who followed those rules in 2009 was taken out in a stretcher.  One last thing to point out for those who don't believe in "tea leaves" - look at how both the S&P 500 and Russell 2000 bounces PERFECTLY off that 200 day moving average (green).  You don't think technical analysis has become the dominant methodology of "The Street"?

While the indexes are still in a stalled mode some individual stocks look a lot better this week than they did a week ago when everyone was celebrating the "reversal" in the last hour Friday.  Hence, all things being equal, I'd be a bit more bullish this Friday 4 PM, then I was last Friday 4 PM.  But with that said I actually put on a medium size index short in the closing 10 minutes Friday.  I'll post some more information on charts of interest in a separate post.

Just as important to review - since the US dollar dictates almost all trades nowadays is the dollar chart.  It can be viewed one of two ways ... thus far it continues in an uptrend.  However its intraday high Friday matched an earlier high the previous Friday, so we have to monitor this to see if this is the early sign of a "double top", roughly in the $80.70s.  One wants to see bullish charts continue to make new highs - so thus far we don't have that.

There was some economic news last week but no one really cares.  Same for earnings.  Everyone was stuck on a country the size of Alabam and its impact on the debt markets.  We are now back to 2008 type trading - guess the bailout. Europeans really said very little Thursday other than "we really like Greece as a friend".  But the market in desperation for any sort of moral hazard that is enjoyed throughout 2007-2009 roared in approval.  This week will be another round of talks regarding Greece and we'll see what specifics come out.  Judging by how happy "free market capitalists" are each time governments and central bankers come to their aid, it's still a risk to be short because each rescue seems to cause such cheer.  The other issue of the day is China - who appears to be attempting to put some sort of brakes on their economy (and potential asset bubbles) - something speculators hate.  Anything that attacks free and easy money brings a tear to their eyes.

On the economic front, it's a relatively light week - reports of interest are housing starts & industrial production Wednesday, and both inflation reports (CPI and PPI) Thursday/Friday.  The inflation reports used to matter but with "Extended free money now and forever" Bernanke at the helm they have taken a back seat.  Remember, there is no inflation unless you happen to live in the real world... in the government data it's not an issue.  Earnings season is still happening but now we begin to focus more on smaller issues along with foreign equities.

For the portfolio, from a 40,000 foot point of view we cut out some short exposure (including selling some "long dollar" exposure as rumors of a Greek rescue surfaced) early in the week, but added some back late Friday.  Long exposure was increased by about 5% as we started Seagate Technology (STX) as a new position and some of our other stocks bounced back during the week to recapture support levels they had broken last week.  Most of them seem to be concentrated in the technology space - F5 Networks (FFIV), Atheros Communications (ATHR), DragonWave (DRWI) - we even noted Riverbed Technology (RVBD) Thursday (we don't own it) and it shot up Friday. I did close out long time holding (and hedge fund favorite) Priceline (PCLN) early in the week when it broke support, but this was one of those names that recovered nicely to finish the week.  I also took a hit Tuesday when I tried to buy some calls for a quick intraday trade going long moral hazard (Greek bailout rumors) but instead bought some puts, so that caused a day of pain.  A couple of our stocks reported, and I continue to like what I am seeing - BHP Billiton (BHP), Wyndam Worldwide (WYN), etc.  EnerNOC (ENOC) had a mixed report, but I thouhgt it was fine.

Last Monday was one of the few failures of Magical Mondays [Mondays Continue to be Wonderful] in the last 1/3rd of the year - let us see if, with the short week, Tuesday can take the reigns of Mondays.  If I were the Plunge Protection Team I'd have saliva on my lips as all it takes is one of their patented pre market mark ups of 0.5% and the Russell 2000 and NASDAQ will be in good shape to get HAL9000 and his merry band all excited about breaking above key resistance areas.   Bulls will be celebrating with this combination: S&P 1100, NASDAQ 2210, Russell 2000 620.

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