Monday, July 19, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 50

Year 3, Week 50 Major Position Changes

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

Cash: 77.9% (v 70.6% last week)
19 long bias: 18.2% (v 27.8% last week)
2 short bias: 3.9% (v 1.5% last week)

21 positions (vs 20 last week)

Weekly thoughts
After a holiday shortened week of oversold rally, this past week was much tougher sledding for the market.  I opined coming into the week that the 'easy trade' (to S&P 1040 and then 1070) on the long side was over - and that came to fruition.  Monday was good, Tuesday was better, Wed/Thu the market did not give up the big gains which looks promising, and then it all fell apart Friday.   The question coming into earnings season was if the "good" earnings would be sold off, and from Intel forward the answer was yes.  The economic reports that are coming out are showing such dramatic signs of slowdown it seems to simply be overshadowing earnings - thus far.  This, despite 3 key pieces of uncertainty alleviates (BP, Goldman, Financial Regulation)

As for the charts, the S&P 500 was rejected 3 days at S&P 1100 and Friday gave up the ghost.  We are now once more stuck in this tiring range of S&P 1040 to 1100 where the index has been trading for much of the past few months.   Further, with the failure to match or exceed the previous high of S&P 1130, we appear to have made yet another new "lower high" - continuing a recent pattern.

Last week, I posted a series of charts and said they were approaching "make it or break it" after their (mostly) oversold bounces.  Almost without fail all these charts failed this week:

XLF (financial ETF) - rejected at 200 day moving average
XRT (retail ETF) - rejected at 50 day moving average, then crossing below 200 day Friday
Copper - rejected at 200 day moving average
Gold - rejected at 50 day moving average
China - rejected at 20 day moving average

In the currency markets - after some consolidation of recent big moves the prior week, the Euro continued up and dollar down.   In fact after hitting lows of $1.19, the Euro touched $1.30.  The US Dollar index has broken down so quickly it is now scraping the 200 day moving average.

Indeed it now appears the yen has taken over the mantle of the 'safety trade' as fears of the future of the U.S. economy swamp the dollar's previous safe haven status.

And the 10 year bond went back BELOW 3.0% - either signaling coming recession or deflation; neither of which is a goal of U.S. policy.

All in all, it does not paint a great picture.


Earnings season accelerates this week [A Look Ahead at Earnings Next Week] so we'll continue the battle of economic data, and 'risk indicators' rolling over versus company earnings and CEO's guidance.  Keep in mnd many (most? all!) of these good folk failed to guide to any coming reality check back in summer/fall 2007.   As for the economic data, it's housing centric.

Monday - NAHB Housing Market Index (a lesser report)
Tuesday - Housing Starts
Wednesday - Ben Bernanke testifies to Congress
Thursday - Existing Home Sales (big one), and Leading Indicators

Keep in mind the weekly jobless claims will continue to be affected by lack of seasonal shutdown of some auto plants, a fact that was actually mentioned in most analysis last week of the claims; frankly that shocked me.  Good job media.


For the fund portfolio, our game plan as we were buying a few weeks ago in the selling frenzy below S&P 1130 was to let go of this exposure "higher" whether than meant S&P 1040 or 1070.  I did not think we'd reach all the way to 1100 within a week and a half, but this bipolar market has been putting on moves you'd get in a year (8-10%) in 2 week increments lately.  That provides a lot of opportunity for adapt traders but it's just a mess out there.  Whatever the case, I had been layering out of long exposure late in the previous week as well as throughout last week.  While I did add some new names, they were generally smaller positions with stronger charts - and they only offset a portion of the large amount of sales I did.  We were waiting to see if S&P 1100 would be surpassed after teasing market watchers Tue, Wed, Thu.  When this failed the time to become more cautious, "small" (less exposure), and more hedged was back in the game plan.  Late Friday as S&P 1070 was broken we did add some index short exposure.   Overall we're stuck again - hard to be bullish for anything other than a quick trade until S&P 1100 (and then 1130) is breached to the upside, and a break of S&P 1040 brings out the short broom.  In between 1040 and 1100 is this nasty 60 point range that has become repetitive; essentially we've been here since mid May.

On the long side:

  • Tuesday, with a 10% gain in just over a week, I took 1/3rd of F5 Networks (FFIV) off the table.
  • As the S&P 500 rallied into the 200 day exponential moving average (1094) Tuesday, I sold 60% of my TNA position (I had put a 7% allocation on the previous Friday) 
  • I continued a round of profit taking to lock in profits: 30% of Acme Packet (APKT), 40% of Tibco Software (TIBX), 33% of Polypore International (PPO), and 50% of Mercadolibre (MELI)
  • I started a trader position in Citigroup (C) ahead of earnings as the stock looked like it finally broke out over the 200 day moving average; Thursday I cut the position in half as JPMorgan (JPM) earnings did not impress the Street, and I sold out the other half Friday when earnings did not provide any boost and the chart degraded. 
  • Wednesday, I sold the other 40% of my TNA long on the "non" Intel bounce - I was hoping for some fireworks and gap up to sell into, but nothing. 
  • I cut BorgWarner (BWA) in half as it was up 20% in 6-7 days. 
  • Thursday, sold a third of what remained of Acme Packet (APKT), and almost all of VMWare (VMW). 
  • Thursday I restarted Monsanto (MON), and (PCLN); two positions from the past.
  • I began a position in a new name, Rovi (ROVI). 
  • Late Thursday when the market rallied on Goldman, BP I threw on some modest TNA long but dumped it first thing Friday morning when there was no follow through. 
  • Friday, I closed Chinese small cap semi name Spreadtrum Communications (SPRD) reluctantly as a 'non performer'. 
  • I added back some Acme Packed (APKT) at a nearly double digit discount to where I had sold the previous day. 

On the short side:

  • (AMZN) had cleared its 200 day moving average so I took a 5% loss on a small short (1%).  Later in the week it reversed down but with earnings coming this week, I would not have a position either way. 
  • Added some TNA short late in the week on the break of S&P 1070.


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