Monday, March 8, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 31

Year 3, Week 31 Major Position Changes

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

Cash: 66.5% (v 80.6% last week)
18 long bias: 22.1% (v 12.1% last week)
6 short bias: 12.4% (v 7.3% last week) [Includes 1 'long dollar' position]

24 positions (vs 23 last week)

Weekly thoughts
Thus far last week was the week of the year with S&P 500 +3.1%, NASDAQ +3.9%, and Russell 2000 +6%.  As written in last week's summary, my plan coming into the week as long as S&P stayed above 1109 was to try to deploy 10-20% cash rather quickly:

If the market doesn't begin another "student body left" run if and when S&P 1109 is cleared, then I'd like to begin building a more balanced portfolio of long and short individual positions, otherwise we'll just concentrate on adding to some very nice charts on the long side.

With the now traditional "premarket fireworks" combined with "Magical Monday" we really did not have a chance to ease into the week and found ourself chasing.  It was (shocker) another "student body left" movement, no different from the rallies of 2009 where almost every asset was correlated and ran up together... on light volume of course.  Monday I said all technical resistance had been cleared, and we were off to the races... sometimes I need to listen to myself.  (granted we bought some index longs Monday morning, but exited them mid week - nice gains but could of been nicer)  The Russell 2000 broke over January 2010 highs early in the week, and the NASDAQ reached 2010 highs on Friday... the S&P 500 still has some work to do.
Middle of pack...
The ETF we use often to catch index exposure is TNA - which is focused more on smaller caps, which experienced a great week (+6%) coming off a great month (+15%).  That's all fine and dandy but the rubber band is getting stretched quite far and I would not be surprised mid week to get a chance to profit on the downside - in the 'real world' use of TZA works fine, but for record keeping purposes short TNA will be the methodology.  What the catalyst for any move down, I am not sure... but when indexes become detached from moving averages like they are becoming now, it's close to time to expect some pullback.
However, last week was another week where the market was "marked up" in premarket 4 of 5 sessions, and in this day and age once the market opens up, it almost never reverses - especially without huge amounts of volume.  Any light volume means sideways or drift up.... last week was a great example... 2 big moves sandwiching 3 drifting days; all on weak volume.
Economic reports are extremely light this week, so again I am unclear what will cause this anticipated selloff... really there is nothing happening Monday-Wednesday.  Thursday brings some trade data and weekly claims which apparently the market is fine with over 450,000... Friday has retail sales and a sentiment report; no huge game changers anywhere.   Therefore after the market jumps in premarket Monday morning... err, I mean *if* it jumps in premarket Monday morning (wink wink), we have to see how S&P 500 reacts as it approaches 1150.  Almost all resistance in the other indexes thus far has meant nothing... but with such an extended market, the ability to break over a previous high without a rest would seem... strange.  Generally these types of move exhaust themselves - hence no "news" is needed, but this is not a normal market the past year. While it is hard to envision downside ever again the stock market at this moment, let's not forget all the gaps we are creating along the way with our "premarket specials".  Some individual charts I am looking at now have 3-4 in a month's span, but all 3 indexes above now have some - NASDAQ with 3 that are very clear highlighting how the "urgent buyer" has working his magic multiple mornings.   The lowest is in the 2180s which corresponds to the 1078 level on S&P 500.  Generally these gaps on indexes don't last longer than a few months, and we are already close to a month away from when the oldest were created.  Something to keep in the back of our mind for April and May.
It was a bit of a struggle this week, as a 'straight up' market doesn't suit my style at all.  But this was the week to buy high, and sell higher - or not to sell at all in fact.  We sold the last of our month long (held) dollar calls early in the week for a sizeable gain which helped us keep pace with the frantic market.  I was looking for a stock that was near support but had not joined the party early in the week so I expanded our position in Rackspace Hosting (RAX)... unfortunately the stock did nothing all week despite a market going ballistic.  Assured Guaranty (AGO) was sold completely out as it was not participating in the rally; it also did nothing the rest of the week.  Added some Ultra Silver (AGQ) as the precious metals charts started to shape up... this one did "pan out" (would of been funnier if I had bought gold).  I cut back DragonWave (DRWI) mid week as the stock not only was a non participant in the festitivies but broke support; in retrospect that worked out in the near term.  F5 Networks (FFIV) has gone up 20% in a short amount of time, so I took 70% off the table.
Then I did the unthinkable - I shorted some stocks.  Thankfully I did not buy puts or shorted the index since I was wary of the employment report ... instead Greenhill & Co (GHL), American Superconductor (AMSC) and AthenaHealth (ATHN).  Most likely by the time the market is ready to drop, I will be stopped out of some of these - which is generally how it works.   Judging from Friday's moves - these were the right stocks to short, but it is like being a salmon swimming upstream - the tide is so strong against me here.  Back to the long side, I am going to highlight 3 stocks I am concerned with... if they don't shape up early this week I am apt to cut back (for one) and sell out (for the other two).  First as mentioned above, we added to RAX just above support early in the week hoping any rallies would help it lift off.  Instead it got a flat tire, and now if the market rolls over it is looking dangerous.
DragonWave and EnerNOC (ENOC) both are small positions now after being culled but are candidates to be booted if they don't recover very soon.  By not participating in the upside (especially with the Russell 2000 leading), they are prone to breaking down further if the wind of a market on 'roids is not behind their back.  I'll be watching these 3 closely this week; Rackspace of most concern as the largest position...
And with that... let's enjoy another week where 4 of the 5 days we surely will see the market up in premarket.  Because the "urgent buyer" certainly has no time to buy the previous day between 9:30 AM and 4:00 PM ;)

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012