Monday, March 22, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 33

Year 3, Week 33 Major Position Changes

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

Cash: 71.6% (v 73.1% last week)
18 long bias: 19.3% (v 22.1% last week)
5 short bias: 9.1% (v 7.4% last week) [Includes 1 'long dollar' position]

23 positions (vs 22 last week)

Weekly thoughts
Last week?  Almost a repeat of the previous week.  A slow grind up, relentless in nature.  Any minor intraday dips bought greedily.  Complacency overwashing all.  I was wrong yet again in calling for at least a minor (2-3%!) selloff at some point during the week; that makes it 2 weeks in a row made the fool.  As I said last week, I'll keep repeating it will happen -- until it happens.  Sooner or later I have to be correct. Amazingly Friday was the first down day over 0.2%ish in the ENTIRE month of March.  And only the second since mid February.  Effectively that is 2 "down" days in 6 weeks; and both those were minor affairs.   Strangely a lot of the stocks I own have been doing nothing for 2+ weeks, as the market grinds higher using the strength of other sectors we don't have much exposure too.  Like scouts in 1400 AD I've sent forth some candidates on the short side, only to be slaughtered for the most part.  But with very tight stop losses, I've kept the damage at a minimum... ironically when this "correction" comes I expect some of the most damage to be in the names that have run the most, because there is such glee and carefree attitude around them, but anyone early has been sent out on a stretcher trying to bet against these names.

So with that let me bring out my broken record and say "we are overdue for a pullback".  Even the bushiest of bulls, Jim Cramer has been plaintively calling for one the last 3 sessions.

Let's take a look at the S&P 500 chart:

[click to enlarge]

After breaking over January 2010 highs, and clearing S&P 1153 this index immediately raced to 1170.  Then one day of stalling, and a slight pullback Friday.  I though the move down Friday would be stronger because (see broken record above), but instead - after falling through 1160 a swoon in the last hours was met by those dip buyers in the closing 30 minutes.  So we sit half way between 2 key points - recent support (breakout point) at 1150, and recent highs of 1170.  These are areas I call "white noise" ranges, and those 20 S&P points mean nothing to me... like any good supercomputer I will be a buyer over new highs and make an *attempt* again at shorting more aggressively is 1150 can be broken with conviction.   In between those 2 lines, the market tells me nothing.

We see an identical pattern in the NASDAQ; just replace 1150 with 2325, and 1170 with 2400.

The Russell 2000 is on a warpath of it's own, and the strongest of the major indexes.  Rather than looking at that chart which is not that interesting let's continue to look at the 3 sectors leading this charge off the February lows - we see very little weakness in any but again... they are massively overextended.  But that is all "bad" you can really say about them.

If S&P 500 level 1150 is broken, my forecast might actually come to fruition [What's the Potential End Game for this Move] and I'd look to be targeting S&P 1124. But anticipating such things has been like a solo salmon swimming against a massive tide in the stream.


Economic news remains fixed and this market seems to be anticipating what I forecast to be a quite positive jobs figure (which will combine census jobs, February jobs lost to snowstorm and the 100K jobs the "birth death" model seems to plug in almost every month).  Quite rarely, this report will be released on a market holiday (Good Friday) which will leave the market a full 3 days to digest it; that is going to make for a very interesting situation for traders and the 'fast money' types who now dominate trading.  If the report was this Friday I'd say the market was creating a classic "sell the news" reaction since it has run up so much in anticipation to the news, but in 2 weeks anything can happen so we'll have to reassess how things look a week from Wednesday or so.  Quarter end mark up games also await us in that time frame.

Economic data has been shrugged off most of the past few weeks so not sure how much it matters as long as every central bank and government pledges to bailout / backstop every other entity on Earth, but on the docket:

Tuesday: Existing Home Sales
Wednesday: (the always volatile) Durable Goods, New Home Sales
Thursday: Jobless Claims - weekly
Friday: the 3rd! revision to Q4 09 GDP (yawn), and Consumer Sentiment

As for home sales, existing homes are always far more important than new home sales as they make up about 90% of transactions in America.  As happens EVERY spring, we shall see each month get progressively better as home transactions are a seasonal event.  Last year, this fact was ignored as "the great house recovery" was announced as March was better than January, May was better than March, and July was better than May.  I will be curious if the market will be "shocked" by the same thing happening this year.  I do believe a lot of first time home buyers were drawn in to the government handout last year, and short of new and bigger incentives by government we'll only see the normal seasonal growth.  Thus far the homebuilders have not surged more than the market as a whole, and much of their "great" earnings results have been less from operations and much more to do with the grandest of taxpayer giveaways - effectively 75% of the taxes we collected from these firms from the bubble times is being handed right back as Congress is a very generous bunch.

The other wildcard are potential rate increases especially in Asia.  Brazil surprisingly decided to hold rates steady this week, while India did a rate increase.  China is the other, and while America's market is celebrating, China's continues to stall.


For the fund, net positions (long v short v cash) did not change must although the names did.

On the long side, after throwing so many sacrificial lambs out to be eaten, I am now trying to do it with a few long names (most prominently ANR) to try to bring this market down.  I sent ANR up the volcano, and perhaps my knuckling in to chase after a market darling will be the straw that breaks the camel's back. ;)  3 different of our stocks were actually downgraded on valuation this week - as if anyone care's about such things, right Baidu? 

Early in the week a limit purchase order hit for TriQuint Semiconductor (TQNT) after it pulled back to the 50 day moving average; that position was sold right back out after a 8% gain within days as TQNT raised guidance.   The stock immediately fell after I sold, so I got the position back - this company gets no respect despite a steady stream of good news, so I have to trade it.   The big move of the week was an index play where after thinking I might get 16 points on the downside Monday (if S&P 1140 was to break), instead I grabbed 16 points on the upside with a move from 1154 to 1170ish.  Half my index positions (SPY calls, and TNA ETF) were sold just under 1170, and another half sold once 1165 was broken.  Late in the week I restarted coal player Alpha Natural Resources (ANR) [sacrifice to the gods so that they would bring us a real selloff] with a 1% position, and healthcare e-records name Quality Systems (QSII) as a potential breakout candidate - which it was doing Friday, but the "down" market slowed it.  Friday, I closed lagging Seagate Technologies (STX).

On the short side, I attempted to short True Religion (TRLG) - still holding this one.  I had less than 24 hours in shorts of Vulcan Materials (VMC) and Cemex (CX) - they stopped out very quickly.  My other candidate of the week - Shanda Interactive (SNDA) actually turned out to be an excellent short, but I did not take it.  For the sport of it, I shorted the stock which went 1 full month without 1 down session - Maidenform Brands (MFB).  As mentioned above I thought a break of S&P 1160 Friday would lead to more damage so attempted some downside index plays (SPY puts, short TNA) but only squeezed out a few measly points as the market smashed shorts who attempted this "breakdown" play with a quick rally to finish off the week.  One has had to be so agile to make even a few sheckles on the short side the past 6 weeks.

To finish of this week's summary let me show you some stocks of concern - and potential things I will be punting.  First, Google (GOOG) which was breaking out nicely until news broke they will be pulling out of China... I bought this as a technical breakout, and now it appears ready to fail.  I cut a little of the position late in the week, but if it breaks down the rest will go.

Brazilian chemical maker Braskem (BAK) was also looking like a breakout - but then it stalled.  Frustrating, when if it was Braskem the women's apparel company it would be running day after day.

I'm a little frustrated with these names, and in fact my entire long portfolio the past few weeks since other than Las Vegas Sands (LVS) nothing has really broken out to the upside and made a strong run.  So to join the "playbook" I need to start to deploy to "retail, industrials, and financials".  So I can go chase a name like Harley Davidson (HOG) which has shown almost no uptick in business but due to vague market rumors of a buyout bid by private equity ... is flying.  Plus its consumer discretionary - so HAL9000 is buying it hand over fist.

Riverbed Technology (RVBD) reports this week, so hopefully something that disappoints the Street, even if it's not really bad - to get some air out of the stock.   The stock has been weak of late, after a downgrade on valuation - and while still at support, looks like it could face more downside.

The last 2 positions are TriQuint and Alpha Natural Resources - which at this point I plan to buy even if they break support, and build up positions.  The former can't win despite constant good news, and the latter could start posting some -6 to -8% days if the market EVER pulls back.  I will be looking to add other coal and iron ore names even if they fall through some support levels because once the market turns back up, these are the "go to" names (seemingly replacing Freeport McMoran) for this recent leg of the "all good news is good news" market.  So I'll take some losses in the near term to build up the position, not knowing where they bottom.

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