Monday, July 12, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 49

Year 3, Week 49 Major Position Changes

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

Cash: 70.6% (v 78.3% last week)
18 long bias: 27.8% (v 21.1% last week)
2 short bias: 1.5% (v 0.6% last week)

20 positions (vs 19 last week)

Weekly thoughts
The market turned in a relatively predictable performance last (holiday shortened) week as silicon and carbon footprinted creatures both decided to student body right once more, after student body left"ing" for 2 weeks.   Risk on; risk off.  Wax on; wax off.  Whatever you want to call it in the most highly correlated market (and increasingly so) we've ever seen.  While many of the gains came in last half hour salvos the charts don't care how it is done; they just register the movement - so we seem to be back to the post 3:15-3:30 PM rally days of old.  The market has been feasting on premarket magic for much of the past 9 months, so this change to the 3:30 PM rally bring back memories of summer/fall 2009.  The market where almost all the gains are in the premarket OR in the closing 30ish minutes have been hallmarks of the move from March 2009; rendering much of the rest of the day somewhat moot.

I submitted last week that a move to S&P 1040 should be the minimum and if the 'action' is good more good be in store, certainly there was room for a run all the way to S&P 1100"ish".  1070 was the only key rest stop in between.  Both 1040 and 1070 were captured by end of week.  I am going to show below 2 separate charts of the S&P 500, one with the exponential moving averages and one with the simple; in the past two months the simple moving averages have seemed to held more sway.

Long story short, if you are not a daytrader or someone trying to turn on a dime simply be aware that S&P "1094 to 1100" is the key area ahead.  If these levels are achieved, the next objective are mid June highs of S&P 1130.  The market has been making a series of lower highs so surpassing 1130 would be a key achievement; something to keep in mind if and when.  Certainly probability says the indexes are rejected at the stone wall of 50/200 day, but historical references have been failing often the past year and a half, so open to any possibility.


Aside from the general market there are many items at critical junctures - many having accomplished their cursory dead cat bounce from oversold levels and now reaching some resistance areas.   I could post 100s of similar charts, but let's look at two key ETFs.  Remember in this day and age of HAL9000 every stock in an ETF is the same stock... with hedgies piling in and out of ETFs as their weapon of choice, every underlying stock will go up or down - hence feeding the student body left cheer.

This is a key week for financial company reporting with some big players hitting - XLF is fast approaching key resistance.  Make or break it time.

After being *the* darling of the stock market in Q1 2010 as the "playbook for recovery" was utilized by the institutional money, consumer discretionary was dropped like Cleveland in a Lebron James made for TV special.  It too sits at a make it or break it area.

Others instruments, we are stroking our virtual chin as we wonder what they are 'saying' (if anything).

"Doctor" copper - much like the instruments above (remember, we are all one big monolith nowadays) has rebounded from oversold levels and ... (broken record) is at make it or break it areas.

Gold broke down for the first time since March as it 'felt' like a hedge fund blew up - word has it John Paulson suffered $2 Billion of redemptions so maybe he had to do some selling? Who knows.  It rebounded late week and (yawn) make it or break it.  I still have a sinking feeling about that potential double top formation.

The Euro and dollar continued their "Trading Places" characters - some resting on both late last week but both seem to be resting before continuing their new roles.  If so, a lot of "Euro to par" folks are going to be feeling foolish - at least near term.  A move in the dollar index over 85 would be key for the bulls to get their footing back.  Remeber, these currencies are *not* supposed to move with this sort of velocity ... but just another risk asset for HAL9000 to "wax on, wax off" with.

10 year bond?  After falling below 3% recently - stirring up fears of deflation and/or a new recession on the horizon, it regained that level late in the week, but thus far is yet another dead cat bounce actor.

And one for fun - I think I read that the Baltic Dry Index (shipping rates) is down 30 days in a row.  Essentially BDI has been taken hostage by China' whims.  When they are hungry for commodities BDI runs and we all clap and cheer and sing songs of green shoots.  When they pull back, BDI falls and ... well people try not to talk about it because it might upset the bull case. Shhhhh!

Speaking of which, China has been unable to get out of its own way... so weak the relatively minor 20 day moving average is acting as a noose around the neck   At this point the 'sideways action' (while the rest of the world rallied) is not looking so bad in comparison.  Another (wait for it) oversold bounce.

Needless to say the (quote-unquote) easy trades are in.  Now we have a bevy of items approaching make it or break it levels, within a stock market that has no memory from day to day (bipolar) and ready to react to each major earnings report as if the world is either ending or green shoots are going to take over the world.   Should be a lot of "fun" in premarket this week.


Economic reports pick up this week after a slow one last week.  Last week saw even more weaker than expected day (ISM Services being the key) but it shows you the market often does its thing and the reaction to news is almost an afterthought much of the time.  Thursday of this week, even excluding the weekly jobless claims, is especially full.  However, earnings reports in the premarkets and after the bell will cause as much, if not more, volatility.

Tuesday - International Trade
Wednesday -  Retail Sales (market will knee jerk to this one), Business Inventories
Thursday - Producer Price Index, Empire State Mfg, Industrial Production, Philly Fed
Friday - Consumer Price Index, Consumer Sentiment

Some key earnings reports for the week:

Monday - Alcoa (who cares, but as the first company each quarter market is obsessed with it as some sort of tell on the economy)  Instead market should care about CSX (railroad) not for "hitting earnings" but what they see in the economy.
Tuesday - Intel: nothing else matters
Wednesday - market will obsess over Texas Instruments; for a gauge of the higher end consumer & business consumer I'd interested in Marriott instead. 
Thursday - JPMorgan will make sure you know it's the alpha male oligarch; however I bet trading is going to be off a bit since Q2 was so volatile and fixed income which has been the bread and butter for a few quarters might be light too.  We'll see if expectations were brought down enough.  In other news, before Apple reinvented itself, Google was the thing.  As if our entire economy is based on internet searches and how many people in the top 15% can buy higher end computers and gadgets.  Again, I'll be more interested in what JBHunt (trucking) company has to say rather than if "Google beats the whisper number!!!"  But JBHunt does not make for interesting financial entertainment TeeVee.
Friday - big day for our oligarchs aka taxpayer backstopped tools of "free market capitalism" Bank of America and Citigroup.  The parent of financial infotainment TeeVee, which also has a big financial arm ... oh yeah I guess they still make things some things as well as a side business, General Electric also speaks.

As I've been saying for about a month now, this is yet another easy year over year comparison (the last "very easy one") and the whole game on Wall Street is for execs to promise low, and beat.  (Alcoa being the exception as their execs find a way to miss 99 out of every 100 quarters). Analysts are happy to go along so their firm can win investment banking business and we all clap along in awe as we are "shocked" at the earnings beats!  Oooh! Ahh!  You mean the CFO winked at your earnings model estimates as "ok" and then they beat said estimates by 4 cents, goodness - what are the chances?  Get the seals clapping on CNBC - more estimates bested! The more important nuggets in these reports have nothing to do with the headlines, but since everyone needs to put in 5500 trades within 1.2 seconds of the headline hitting Reuters, only old fashioned people like me actually read reports anymore.  I'm a dinosaur and I still consider 3 seconds to be "long term".  

As always the reaction to the data is more important than the data.  Especially with guidance this time around.  In the go forward quarters, year over year comparisons are going to start getting much tougher.


Did you make it this far?  Gosh you might be an addict to FMMF; support groups forming.  I'm in hour 3 of writing this piece - boo yah.  All this information handed to you, at no charge.  Lucky duckies.

For the portfolio I had essentially lifted all shorts coming into the week but the market was in limbo under 1040.  I said I'd decide what to do (sell the long positions I had bought in the depths of despair last Thursday) when I saw how the market acted around 1040.  There was a naughty little reversal Tuesday, but the premarket magic and roaring day finally showed up Wednesday ... which was the day we made some serious hay with some intraday long index positions as well.   I did throw on a little short exposure later in the week but a pittance.  We're waiting to see some signals before making any serious next level moves; for now just riding the wave and taking profits along the way as we crest upward.

On the long side:
  • Tuesday, I cut Powershares DB Double Long Gold (DGP) exposure by half as the gold chart broke support for the first time since March.  I wanted to see how things developed.
  • Wednesday was big money day - as the market surpassed Tuesday's intraday highs in the mid 1040s I went in with some SPY calls and TNA ETF. My objective was S&P 1070; did not expect it to happen with 24 hours.  I took half off Thursday AM as the market jumped right from the open and said I'd sell the other half of these positions on any break of 1067ish - no questions asked.  That happened within an hour, and we booked substantial wins for renting our money for just 4-5 market hours.
  • I closed the position in Cummins (CMI) as the chart was still weak at the time and my position size was smallish; by Friday the chart improved but the stock remains largely range bound.
  • Thursday, sold 2/3rds of VMWare (VMW) for a quick 10% gain in a week.
  • Sold 90% of Las Vegas Sands (LVS) for a 8.5% gain in a week; my limit sell price just missed or else it would of been double digits.
  • Sold 40% of Netflix (NFLX) to lock in modest profits of 6.5% and lower my cost basis.
  • Friday, I cut 30% of largest individual position Acme Packet (APKT) for a 10% gain in 6 days.
  • With the S&P 500 over my pivot point of 1070, I decided to replace the exposure I had sold earlier in the week with an ETF that would be easy to get in and out of, so back to TNA ETF with a new position.
  • Late Friday, I added to (CRM) and Akamai Technologies (AKAM) along with topping off with some more TNA ETF.

On the short side:
  • I shorted some (PCLN) and (AMZN) Thursday.  I covered the former the next day for a 2% since that was a "yes or no" trade - either it was going to cross key resistance or not.

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