To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.
Cash: 73.1% (v 66.5% last week)
17 long bias: 19.2% (v 22.1% last week)
5 short bias: 7.7% (v 12.4% last week) [Includes 1 'long dollar' position]
22 positions (vs 24 last week)
Another week with no quit in the market. While the run up was not quite so strong as the previous week, I was incorrect in predicting 7 dags ago, that by the back half of this past week we'd finally see some downside. Unless you count -0.1% as downside. We are seeing some amazing things, and even Mr. (Almost) Perma Bull is astounded ... it's not just me questioning why all historical precedent is nearly useless. After the close Friday in reference to the move in the industrials:
These changes are incredible and, like retail, they defy the shorts. I hope people realize that these are hugely abnormal moves. I have never seen anything like them. - Jim Cramer
Before I go to the charts of the indexes, let me show you the 3 main groups leading the charge. Last weekend these groups were highlighted in [Mar 7, 2010: CBSMarketwatch - Riding the Rally, How to Money in the Bull Market's 2nd Year] and the "playbook" is being worshiped here by the institutional money - HAL9000 or otherwise.
Using the usually slow moving SPDR ETFs, first let's look at Cramer's industrials... non stop moves he has "never seen anything like" I am showcasing the 10 day moving average in the charts below to show you how strong this move is; many of these indexes are not even resting enough to come down to the 10 day....not to mention the 20 day. This is not an index full of Chinese small caps, this is led by General Electric (GE) as an overweight.
Then consumer discretionary which we have been speaking of as unstoppable; this one is so strong that it barely is touching the 5 day moving average on "pullbacks"
Last, financials which have exploded
While areas I am concentrated in are doing fine - I tend to focus on high growth subsectors and companies - I am generally not overweight the typically slower growth, cyclical areas above. Hence I've noticed some days with very good breadth, and a nice move up in the market but a lot of stocks on my watch list are relatively mixed....
A quick look at the indexes shows the S&P 500 has come to January 2010 highs, which everyone is watching.
The Russell 2000 is on some sort of streak I cannot recall seeing before, only 3 down sessions in over a month and 2 of those sessions are only "down" on technical measures - i.e. down 0.1%ish. Truly we have seen 1 down session in the Russell 2000 in over a month. Boggling.
I suppose from here, like any good CNBC pundit I will just repeat every week we are due to a breather "next week" until one week I am correct. If not last week, then it will be this week. If not this week, then next week. Eventually I will be able to pat myself on the back for "nailing the call". On a more serious note, since I do not recognize this market behavior - I have little to offer from historical reference. I can just say it is best to stay out of its way, and like a broken record repeat that the farther we get away from meaningful supports (i.e. the 50 day moving average) the harder - and more swift - the return to trend should be. Really no different than things we were saying in fall 2008 and mid winter 2009 as the S&P 500 fell a before then not heard of 40% below the 200 day moving average. Same rubber band being pulled away from the trend line... just in a different direction.
Anecdotally, when you begin to hear how idiotic it is to sell anything and how S&P 1200 is in the bag, it usually would tell every antenna to be wary. But again - this market has an entirely different feel to it so bringing out the contrarian suit has thus far been useless. Eventually it will be correct, as it appears everyone is now close to being on the same page - or will be once S&P 1150 is pierced [What's the Potential End Game for this Move] My thought now is any drop (if we are allowed to have one) is going to be aggressively bought, by those who see this as simply a needed correction before the weigh station at 1200 is reached. Let's see how it plays out.
Last week, other than Thursday and Friday, was more or less dead from an economic report point of view; hence the market essentially just ground its way up. This week we pick back up, but since inflation means little to the Fed (watch what they do, not what they say) - most of the reports will not be huge impacts.
Monday: Empire State Mfg (lesser importance) & Industrial Production
Tuesday: Housing Starts
Wednesday: Producer Price Index
Thursday: Consumer Price Index, Philly Fed, Leading Indicators
For some reason the Fed announcement this month is on a Tuesday rather than a Wednesday but truly there is no drama. Rates will be low for an 'extended period' of time because we live in the perfect economy - it's healing and growing (bullish) but not healing or growing fast enough that we cannot have emergency rates for on, and on, and on (bullish). The new paradigm Goldilocks economy - Kudlow style. Everyone is excited about the exit of the Fed from buying MBS but that $1.25T of mortgages is sitting on the balance sheet I.e. supply and demand is now out of whack since all this supply has been effectively hidden in a cubby hole) creating an artificial market, and the Christmas Eve massacre has passed the baton of needed support for the market from the Fed to our zombies Fannie and Freddie. [Jan 5, 2010: WSJ - The Treasury Department's Christmas Eve Masscare of the US Taxpayer] Can you follow which shell the purchases are under?
For the fund, our cash position jumped versus last week not out of strategy but our largest long position entering the week (Rackspace Hosting) was stopped out of (and closed), as was our largest short position (Greenhill & Co)
Also, profits were taken in Las Vegas Sands both early in the week, and later as the stock shot up. (consumer discretionary)
To replace the long exposure, I restarted positions in Google (GOOG), Braskem (BAK) & Riverbed Technology (RVBD)
DragonWave (DRWI) was also closed out, (but surely must be due for a dead cat bounce) and Seagate Technology (STX) after breaking support (50 day moving average), was cut back by 40%.