Sunday, July 25, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 51

Year 3, Week 51 Major Position Changes

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

Cash: 69.9% (v 77.9% last week)
19 long bias: 26.9% (v 18.2% last week)
2 short bias: 3.2% (v 3.9% last week)

21 positions (vs 21 last week)

Weekly thoughts
Stocks shook off Ben Bernanke's shot of reality Tuesday as corporate multinational dominance showcased the diminishing need of a surging U.S. economy in the fortunes of the new masters of the universe.  Risk was "on" as Chinese stocks and Brazilian stocks both shot up over 6% for the week, copper surged [China, Copper Begin to Change Complexion to "Risk On"] and in the latter half of the week the "hot money" jumped head first into commodities, as the student body left surges en masse in algorithmic fury.  [HAL9000 Starting to Get His Commodity Play On]  This is a very different situation than any of the rallies seen over the past few months, so this change must be respected.

Technically the S&P 500 cleared the hurdle of the past few weeks in the closing hour Friday - that would be S&P 1100.  This will be the next pivot point to watch, and upside targets from here are S&P 1113 (the 200 day simple moving average) and then 1130 which was the mid June intraday highs.  Clearing 1130 will be important as it would be the first "higher high" in quite a few months.

To show what we want to see happen in the United States of Corporations, we look to Brazil which just cleared the mid June high Thursday.  That's promising...

China finally got out of its own way and cleared the 20 day moving average... and went exactly to its 50 day moving average (to the point).  While still a troubled chart, simply moving up to the 200 day moving average would provide 9% of additional gains.

The irony with China is fears of tightening have been the major fear factor, so despite having an outperforming economy the worry about taking away of cheap and easy money has been crushing the market.  Meanwhile, economies doing far worse but with central banks pressing on the accelerator have outperformed this year.

While Treasuries still act punk, the 10 year at least crossed back over 3% in Friday's session.

So all in all, the bipolar market now seems to be running student body left... until it changes its mind.


Last week was very light in terms of economic news - the big events were Bernanke's testimony and existing home sales.  Despite registering an awful home sales figure for the month of June it was "better than expected" so as we saw in much of mid 2009 even if the figure is awful, as long as it beats expectations we cry green shoots and party like Romans circa 800 AD.  Multinational corporate earnings were solid, and hence dominated the air space for the week.  We do continue with another week of heavy earnings but less of the big names and more of a mix of more U.S. centric companies thrown in.  On the docket this week economically the main focus will be durable goods Wednesday and first pass of Q2 GDP Friday (after such a retrenchment seen the past 2 years, the US economy should be shooting up by 6%+, instead it is doing 3% with government behind almost all growth):

Monday: New Homes Sales (not as important as Existing Home Sales from the previous week)
Tuesday: Case-Shiller Home Price Index, Consumer Confidence
Wednesday: Durable Goods
Friday: Q2 GDP first revision, Chicago PMI, Consumer Sentiment


For the portfolio mostly we sat on hands early in the week, waiting to see which way the market would break.  The bipolar herky jerky action continued with big moves up and down, with no regard for the prior day's actions making it impossible to build intermediate term positions.  Late in the week the market shrug off Bernanke, and rose on the back of corporate earnings.  As the technical condition improved we expanded the long side of the book.  I threw on a cursory short Friday but with the student body stampeding in one direction I'd expect to be blown out of it in a stop loss if the S&P 500 heads to 1113.

On the long side:
  • Wednesday, ahead of earning reports for each I cut back positions in F5 Networks (FFIV) and Netflix (NFLX).
  • I cut the position in Dr. Reddy's Laboratories (RDY) by 2/3rds as it broke the 50 day moving average a day ahead of earnings.  Thursday, I sold off the rest of the position as earnings were released and the stock continued its sell off.
  • Friday, I added to Rovi (ROVI), (CRM), and Acme Packet (APKT).
  • As Currency Shares British Pound (FXB) ran into the 200 day moving average, I closed out the position for a small profit.
  • Friday, I started Cirrus Logic (CRUS) as a poor man's play on Apple.  I also added a decent amount of exposure in Direxion Small Cap Bullish 3x (TNA).
  • Almost all remaining F5 Networks (FFIV) was sold into the close Friday as the stock has had a tremendous run.

On the short side:
  • Tuesday as the S&P 500 cleared 1070, I cut back sharply the TNA short position I had put on the previous Friday, at a modest lost. 
  • I shorted (AMZN) post earnings after a sharp rebound from intraday lows.

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