Sunday, June 6, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 44

Year 3, Week 44 Major Position Changes

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

Cash: 84.8% (v 83.0% last week)
17 long bias: 13.1% (v 13.7% last week) 
4 short bias: 2.1% (v 3.3% last week) [Includes 1 'long dollar' position, and 2 option positions]

21 positions (vs 21 last week)

Weekly thoughts
A short 4 day week repeated the same extreme volatility we've seen the previous few weeks.  The large range of S&P 1070s to 1100+ was all in play during the week, with Friday's bad labor data pushing the index away from a potential move upward through the 200 day moving average and instead putting the low end of the past few weeks (S&P 1040s) back into play.  While 2 of the past 6 sessions have seen huge upside (3% type moves) this market remains more inclined to the downside... but it certainly is not easy for either side as the upside moves are dramatic and come many times the very next day after a big loss.  So while difficult to navigate the day to day, the intermediate term calls for a 'hands off' approach as the S&P 500 remains below its 200 day moving average.

Friday the Euro gave up the ghost and broke down below the range it had been holding... and indeed fell below $1.20.  I need to make clear that currency is not like equity - it should not be moving like Apple stock; the viciousness of the moves in the currency markets are quite breathtaking.  It is one thing for the Euro to go to $1.18 or whatnot but to see it happen in rapid fire movement as if it is a stock is not normal.

Of course as the world's best toilet paper amongst the largest toilet papers, the US dollar is reigning supreme as 'safe haven' and Friday broke out to a new leg up.  In retrospect my sale of US dollar long position hoping to buy back lower is not working out since the 'breather' the dollar took was only a few days.

And really in the student body left trading environment we have fashioned for ourselves, these are the only charts that currently matter, excluding gold.


We remain in a quiet period for U.S. company earnings so the focus remains Europe and economic reports.  Unfortunately the big economic report of the month just passed Friday and it was a severe disappointment.  Maybe 1 month from now when expectations are lower and both President and VP are not talking up the number we set ourselves up for a "surprise" to the upside but until then we're in a bit of a quagmire.   With the ISM reports and employment data out of the way, there is not much to look forward to in the near term in economic reports.  Much of the data this week is secondary type of stuff:

Monday - Consumer Credit

Thursday - International Trade

Friday - Retail Sales


For the portfolio it's been mostly ducking and weaving... when not sitting on hands.  With the day to day volatility and market that has little to no memory from the previous session (huge up days followed by huge down days followed by huge up days, and most of it happening in premarket) it's not something you can build intermediate term positions in... so we have not.  Further we remain in "prove it" mode with the S&P 500 below the 200 day moving average and thus far, the market has not proved anything other than it can cause people severe heartburn.  So no need to play.  Frankly for this period (period 6), 2 weeks in the NAV barely budged until Friday since we've been swimming in cash and so much of the daily moves have been premarket... only in this last session have we been able to make some hay to the upside.  As for individual positions we've been dunking around - culling some non performers and trying out some new positions with higher relative strength but in very modest size.  This will continue to be the game plan since the upside moves are so sharp, and sudden - and random.  We'll offset that with some hedging, intraday or otherwise on the downside.  It's been a solid game plan.

On the long side:
  • I bought back some Tibco Software (TIBX) and F5 Networks (FFIV) but less than 1% into each.  It seems at this moment when I decide to buy this pair the market sells off, and when I sold them to pare position size a week and a half ago, that marked the near term bottom.  But these have the best relative strength in the portfolio of positions I've had previous to the past 3-4 weeks so I am using them as my scouts. 
  • I closed home builder Lennar (LEN) as it had a nice run in April but has not been performing lately as it is becoming obvious that the housing market is not doing very good despite bribery by the U.S. government to buy homes, all time lows in mortgages, and affordability.   I was hoping for a seasonal play but the window of opportunity was short.
  • Friday, I closed Capital One Financial (COF) for similar reasons to Lennar in terms of technical set up... will revisit.
  • Thursday I said keep an eye out on natural gas with the 2 choices to play being the gas itself via ETF, or companies that produce the gas.  The ETF for natural gas is fraught with issues so Friday I decided to buy First Trust ISE Revere Natural Gas (FCG) which focuses on the companies.  However, much like buying gold miners during a market sell off... even if gold rallies, the miners will sell off... and hence in the short run the natural gas producers sold off as in the market weakness, while the gas continued to break out.

On the short side:
  • Wednesday when the S&P 500 surged 3% on Prez Obama's promise of a "strong" jobs report, we were stopped out of our Ross Stores (ROST) short for a 2% loss.  All the better since the next morning it reported good same stores sales data and surged higher. 
  • Friday, I bought some June 108 SPY puts when the S&P 500 broke 1080 as an intraday hedge versus my long book... I took one third off the table for decent profit when the S&P hit 1072ish but said if the market broke down below 1068 or so I'd add those back.  Instead I ended up buying some June 107 SPY puts when the market weakened, and sold 90% of both positions in the closing moments of the day to avoid any weekend headline risk.

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