Monday, June 28, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 47

Year 3, Week 47 Major Position Changes

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

Cash: 76.2% (v 70.8% last week)
17 long bias: 21.8% (v 16.8% last week) 
2 short bias: 2.0% (v 12.5% last week) [Includes 1 'long dollar' position]

19 positions (vs 24 last week)

Weekly thoughts
Looking back at fund exposure last week, with the advantage of 20/20 hindsight of a -3%+ week, one would think a quite hedged exposure would have worked out well.  Unfortunately, a Chinese announcement of some vague yuan revaluation policy, set world markets on fire including U.S. futures and multiple short positions were stopped out in the opening moments of the week.  Effectively that marked the high for the week and other than a quiet day Friday, mostly affected by Russell 2000 rebalancing, it was downhill from there.  Monday morning [Jun 21, 2010: S&P 500 Up 8.2% in 10 Days] I noted the sharp rally in the S&P 500 and said we were due for a pullback, but I certainly did not expect it to happen within hours - and not with such velocity.  In a snap the S&P 500 went from being over (intraday) the 50 and 200 day moving averages, to below them by mid week.  Hence, using the simplest of methodologies - bullish over the 200 day, bearish below the 200 day - once again the yellow caution flag is up. Much as we had in May, we sit in 1 big range of 1040 to 1110 with 2 sub ranges separated by 1070.  Everyone waits to see which side of this range we pop out of this time around as "risk on, risk off", "student body left, student body right" trading dominates everything as it has the past few years. Other than that, the only major development last week was the detachment from obsession of the Euro, as the currency held flat while the S&P 500 cratered and a FOMC meeting that has become a non event as easy money is pledged for as long as the eye can see.


This will be a busy week in economic reports unlike last which were dominated by some horrid home sales data.  Theweek will be dominated by Friday's monthly employment report which might actually surprise to the upside since expectations are now poor again, after last month's headfake by Prez Obama and VP Biden ("the job report is going to be strong!").  But the bigger picture, no matter what one month prints, is poor as structural unemployment is under reported as economists are surprised by an economy that at this point coming out of a steep spiral, should be creating 300-400K private sector jobs.

Monday - Personal Income & Outlays; not a market mover.

Tuesday - S&P Case Shiller House Prices & Consumer Confidence.

Wednesday - Chicago PMI

Thursday - ISM Manufacturing, Construction Spending, Pending Home Sales - the first of these reports will most likely capture the most attention

Friday - Employment Data, Factory Orders


For the portfolio, we were positioned decently for a market swoon with the most individual short positions held in more than a year - but were taken out of quite a few in the Monday morning moon shot.  A few other short positions were liquidated as the week went by to lock in profits, with the hopes of getting them back on a rally.  As currently positioned I am very near term "bullish" only through Tuesday-ish, with the hope that 'window dressing' by the long only fund managers gets the S&P 500 up closer to 1100.  At which point I will liquidate and begin focusing again on the short side.  If indeed there is no early week / end of month rally - we'll cut bait and focus on shorts below 1170.  As for last week:

On the long side:
  • Monday, I restarted a smallish position (0.6%) Chinese coal name L&L Energy (LLEN) as it broke out.  However I was aware in the 'student body left' environment, if the market sold off this stock would be hit regardless of fundamentals or breakouts.
  • Wednesday, as the S&P 500 fell below the 200 day moving average I got more defensive.  I closed the L&L Energy I had bought Monday, NetLogic Microsystems (NETL) which also was a recent purchase, and First Trust ISE Revere Natural Gas (FCG) as the hedge fund algo's abandoned natural gas stocks after a 2 week run.
  • Moving up the relative strength chart, I began a modest 0.75% exposure in Netflix (NFLX).
  • Friday, I cut some Sandisk (SNDK) exposure as the stock was holding in quite well but had a gap to fill, was hoping to buy it back lower if possible.
  • Late in the day after what appeared to be a successful retest of S&P 1070, I went long for a trade into quarter end "mark up" with exposure added in (CRM), Netflix (NFLX), F5 Networks (FFIV), and TNA ETF.
  • Restarted South American internet company Mercadolibre (MELI) with a 1.4% exposure.

On the short side:
  • Monday morning I was stopped out of roughly half my short exposure for losses - Pitney Bowes (PBI), Discover Financial Services (DFS), and Celanese (CE).
  • Thursday, I covered Energizer Holdings (ENR) and Hartford Financial Services (HIG) for 4% gains.

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