Monday, March 29, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 34

Year 3, Week 34 Major Position Changes

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

Cash: 76.0% (v 71.6% last week)
17 long bias: 17.8% (v 19.3% last week)
3 short bias: 6.3% (v 9.1% last week) [Includes 1 'long dollar' position]

20 positions (vs 23 last week)

Weekly thoughts
This is getting repetitious.  Last week the market went up.  We are overdue for a pullback of at least 1%.  Which has not happened in about 6 weeks.  It will happen someday.  Each of the past 3 weeks I predicted this will be the week. Each week I was (am) wrong.  Rinse.  Wash.  Repeat.

The monotonous, emotion less market continues ever upward.  Last Thursday there was an actual reversal but all it did was turn us from +1% to 0% for the day.  It simply has a feel of computers trading day in and day out, on light volume, happy to collect their rebates for creating liquidity.  Only when volume picks up (what I assume is when humans actually get involved in some manner) does the market have a chance to drop.  But volume only picks up for hours at a time.   We've been pointing to this Friday's job report the past few weeks as an event the market seems to be anticipating.  The thought here is a 300Kish type number of "job gains" .... sprinkle 100K+ census jobs, plus 75K+ "weather related" gains from February, plus our always reliable 100K jobs from the birth/death model ... which will be revised away next March - and presto magic, you have a jobs recovery.  This has all the smell of the "housing recovery" the bulls were frothing at the mouth to tell us about spring 2009.  You know the one - where people are amazed home sales in May are higher than February, and sales in June are higher than March.  Especially when bribed with $8000.  Now we will be amazed that a million plus census workers being hired causes job gains.   As long as we don't look under the surface, amazement is a very easy achievement, and it since market analysis is done in 10 seconds or less the jobs figure headline is all that matters.  The *only* wildcard is the data is going to be released Friday when the market is closed - allowing people to stand in awe of the figure for a full 3 days.  We shall rejoice. (and be surprised)

To the indexes - last week the S&P 500 looked like this... we said the index was in a white noise area between 1150 and 1170.

After the healthcare bill passed the premarket futures were down sharply but a rampage of buying caused the market to surge, and almost the entire (white noise) range was hit Monday alone.  Then the break over 1170 happened in the last hours of Tuesday, at which point you could see the vertical move up as the computers took over.   The market sort of hung around Wednesday, made another surge up Thursday for no specific reason other than the market needs to go up, but a late day reversal (a rarity) caused the S&P 500 to turn from +1% to 0%. (which nowadays is considered a negative day).  And Friday we just hung around.  So we are going nowhere fast in particular but betting against the market remains nearly impossible.  Now the chart looks like this and we remain between 1170 and 1150.

I remain reluctant to actively short the index for more than a few hours at a time, unless S&P 500 level 1150 is broken as it's been a losing trade.  Eventually it will be a winner but we're all dead eventually.   Downside targets remains (a) 1124 and (b) 1078.  The latter is 3.6% downside and the latter 8%.  Since this move up has been unrelenting, yet glacial (most days +0.3%, 0.4%) with sideways moves consolidating each stair step up, the moving averages are coming along and the underlying index price is not moving too fast ahead of the moving averages.  Interesting.

The NASDAQ had a similar journey, although slightly stronger with its top end of the white noise being 2400.  The 3 sectors leading this chart: XLI (Industrials), XLY (Consumer Discretionary), XLF (Financials) continued to lead last week.  One area of weakness / under performance is XLE (Energy).....

The dollar broke out as bailout planet continued in Europe, and bonds acted a bit naughty late in the week but without any auctions this week that might be put on the back burner for now.

And that about summarizes the action - its slow, many days very boring, and except for mini bursts in premarket, the first 30 minutes of the day, or last 30 minutes, much of the day is sideways churning - certainly not much of a traders market the past month.  China remains range bound and listless, and many other emerging markets are blah.


The economic data has not been squat the past few weeks, as all news is good news as long as Ben Bernanke promises us free money for an extended period of time.  Which he did yet again last week in Congressional testimony after the Fed meeting.  Which means (wink wink) we can push out any tightening another 6 weeks and the language at the next meeting will be identical to the one we just saw.  Even the flailing housing numbers have been completely ignored.  Just as we did a year ago, we'll clap like seals the next 4 months as housing figures improve (as they do every April - July), then I guess as we did last year ignore them when they falter the following 8 months.  This week:

Monday: Personal Outlays & Income
Tuesday: A consumer confidence report
Wednesday: Chicago PMI, Factory Outlays
Thursday: ISM Mfg, Construction Spending
Friday (holiday): Employment

The only data point above that I could see derailing things is ISM Manufacturing, the data point is roughly at 56 consensus and the flood of global stimulus has pushed companies to rebuild inventories.  If the private sector does not take over from the government sector, at some point inventories will stack up and the nascent recovery ends.  But it's impossible to see what is going on under the surface with so much governmental money flooding in from every crevice.

The consensus for jobs is +200K with a range of 75K to 300K.  I don't know what world the guy at 75K is living on as the birth death model (where the US has been creating fictional small business jobs the entire recession) and census workers alone will get us way over that point.   There should be another 600-800K census jobs coming in the months to follow so until the market fully discounts this, good cheer shall continue.  Of course at some point the market must discount all these jobs extinguished in the fall as well.  So the only interesting data point is how traders square up their books knowing they won't have access to the casino within milliseconds of the monthly jobs report and must wait until Monday to be surprised by a better than expected react to the jobs data.   One other interesting thing is economists estimate the workweek to shoot up to 33.9 hours which would be the highest we've seen in a long while.


For the portfolio cash went up because (a) I am having a hard time applying money to the 3 hot sectors, when so many of those stocks are up 50-70% in 6 weeks and (b) the market is taking away almost any and all short positions within days of when I put them on.   Frankly when I am looking *this* hard for individual long positions that has always marked a time the market pulled back at least modestly.  But I've been looking hard for 2 weeks, and the market does not go down - again, my historical experience means little with the way this market behaves.  Many people I've been reading for years on the intertubes have been expressing the same opinions for most of the past month.

On the long side I began a position in NetLogic Microsystems (NETL) simply due to error - the stock split 2:1 and the simulator I run my portfolio in did not compensate so my long standing limit buy order executed - it was a small order so no big deal.  Within 48 hours after splitting the company did an offering, at which point I bought more shares, to make the position a moderate size.   I started a position in Massey Energy (MEE) - within hours the company announced a stock offering (notice a theme?), which hurt the stock - but in the George Costanza market, stocks now rally when they company diluted shareholders.  I closed a large position in Google (GOOG) for a smallish loss as it broke support and continued to sell off on the same news from China....  which appears to have set the bottom in the stock.  Later in the week someone bought $530M worth of shares in one fell swoop - mind boggling.  Since I sold the stock jumped right back over support.

EnerNOC (ENOC) a position held since last fall was closed out, as it has been unable to move for many weeks on end.

On the short (i.e. loser!) side - I reshorted Athenahealth (ATHN) which has been good to us; we won again as I quickly covered for a 3% gain.  That might sound like peanuts but 3% down in this market is like 15% down in a normal market.   AsiaInfo Holdings (ASIA) was shorted as it broke support and eyed a large gap in its chart - still holding.  I covered a multi week short in True Religion (TRLG) for only a 1% loss and consider it a major victory as the stock went nowhere for 2-3 weeks as its sector was the hottest in the market.  The stock still has not broken to the upside but I became nervous once the S&P 500 broke over 1170 and the unstoppable market seemed ready to take away my candy.

Exact same logic in Maidenform Brands (MFB) - the strength of the market simply hit my stop loss and I could not stay in.   I covered our modest allocation in iShares Barclays 20+ Year Bond (TLT) as bonds swooned mid week.  If something goes awry in the bond market we'll jump back in, but generally this is slow money and since this has been range bound for months on end, I would not expect a "breakdown". (yet)

We played some index positions this week but went nowhere with them as we were chasing our tail most of the time - unless a sustained move in 1 direction happens they don't generally give good results and we did not get that this week.   It's one of those weeks where the only person who got rich were the brokers.

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