Monday, August 2, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 52

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Year 3, Week 52 Major Position Changes

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

Cash: 79.6% (v 69.9% last week)
16 long bias: 17.8% (v 26.9% last week)
1 short bias: 2.6% (v 3.2% last week)

17 positions (vs 21 last week)

Weekly thoughts
Year 4 for FMMF begins!

Not much was accomplished last week as an early week push through the 200 day simple moving average of 1114 (Tuesday) was taken back the same day, and a few days of selling followed.  The action Thursday and Friday were almost complete opposites with 2 very volatile days, led by surge Thursday (that was sold) followed by a big drop to start Friday (that was bought).  The action was particularly tricky those 2 days.  The U.S. multinationals continued their dominance but the "beat the estimate" game seemed to be 'in the market' by mid week, and a return to focus on economic data - which was mostly weaker - caused much of selling mid week.

Below is the S&P 500 chart with simple moving averages shown, as the 200 day simple moving average has been an important level to observe - it remains near 1114 as we enter this week.  As we've mentioned this past week there are 3 key levels: S&P 1100, 1113/1114 (200 day simple moving average) and 1130 (June intraday highs)  A move over 1130 and I'll be more apt to feel comfortable being long.



In other markets, we have received a mixed and sometimes contrary tale.  Copper held onto its breakout, while China - still weak in the big picture - continues its bounce, but precious metals show weakness, and the 10 year bond faltered late in the week as Q2 GDP came in light.  Head scratching cross currents - while the 10 year bond action scares me, it is telling us a completely different story than copper so I hesitate to put any serious bets against the market until the S&P 500 breaks support, and China stops going copper shopping.



One market I wanted to highlight this week is Brazil, up a resounding 10 sessions in a row!  Indeed in this world of almost perfect correlations where ETFs and HFTs conspire to make almost every stock and commodity trade identical, look at how closely Brazil and copper have been trading since May 1!



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This is a very big week for economic data with multiple ISM reports and the monthly employment reports.  Chinese PMI also is released this week but the initial reaction to further weakening in the Chinese data seems to be "bad news is good news" or "it's backwards looking, and copper is telling us something different".  Earnings season continues but it mostly moves now to smaller companies who are either more domestic leaning and/or foreign companies; the multinationals are more or less done at this point.

Monday:  ISM Manufacturing and Construction Spending - the former will suck up most of the oxygen
Tuesday:  Personal Income & Outlays, and Factory Orders - the latter will get more attention.
Wednesday:  ADP Employment and ISM Services - both reports should have some impact
Thursday:  Weekly Jobless Claims
Friday:  Monthly Employment Data in the morning and Consumer Credit in the afternoon

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For the portfolio it was not a great week as my attention was on fund launch, and I missed a few earnings reports - of which one (Acme Packet) hurt some.  That said, the S&P 500 remains in a large range of largely S&P 1040 to "the 200 day simple moving average" and I want to look at intermediate plays at new intermediate highs or lows.  On the top side that would be a move over S&P 1130.  Many traders have complained of being "chopped up" in trading the past few weeks and I don't blame them; some of these days have been extremely volatile and the market continues to have little memory from day to day, swinging from 'end of days' action to 'all is well in the world' - sometimes within hours.  When the action is that violent I 'get smaller' and wait to see how things turn out; best case you protect against the volatility and potential losses - worse case you miss some opportunity cost.  Many of the names of interest for us also reported last week or will report in the next 2 weeks so we don't want to stick our next out ahead of earnings.

On the long side:

  • Monday, I closed a position in Direxion Small Cap Bull 3x (TNA) as the S&P 500 ran to the 200 day simple moving average of 1113, that I had bought the previous Friday on a break over S&P 1100. This was just a quick trade which garnered 6% in under 24 "market hours".  In retrospect, while the market peaked the next day at 1120 it ended up being a good trade considering the chop fest that was to occur the rest of the week.
  • I closed out the rest of Netflix (NFLX) which had been cut back the previous week, as the stock struggled post earnings.  Still like the story and I expect a dead cat bounce, but I need to see the chart firm up OR a drop lower to re-enter.  I replaced Netflix with Chinese semi stock Spreadtrum Communications (SPRD) as money was moving into Chinese small caps after months of underperformance by this group.
  • I closed the last of a gold position held since March 2009; Powershares DB Gold Double Long (DGP) as the technical condition weakened. 
  • Tuesday as the market surged over 1113 to 1120 I took 1/3rd off the table in Polypore International (PPO) and Tibco Software (TIBX) to lock in some profits as their charts were very overbought.  Polypore dropped 9% from where I sold within 24 hours, so I bought back what I sold (plus a bit more) Wednesday. 
  • Thursday, after the stock was punished post earnings I cut back half of my modest Akamai Technologies (AKAM) position; with the other half I was willing to give the name some more rope to see if it could regain key support levels quickly.  In the morning selloff Friday when it looked like the market was going to fall apart, I sold out the other half portion of AKAM, closing the position.
  • I restarted NetLogic Microsystems (NETL) which reported a great quarter, but still sold off sharply.  Unlike some other stocks which were punished post earnings it still held support as of when I bought so I began a 1.7% stake and decided to watch to see if it could hold support.
  • Acme Packet (APKT) reported stellar numbers but the stock was priced for perfection.  With the work on the mutual fund this week and on pledges, I did not monitor earnings releases closely and had a pretty good sized position on - which was hammered Friday morning - taking away all my unrealized gains along with giving some capital losses.  A big 'red candle' was formed, so I sold 2/3rds to right size until I see how the stock reacts and if it is quickly able to regain support.   


On the short side:

  • A long standing limit order to short Energizer (ENR) hit Tuesday - since the price was not that bad (the stock gapped up to fill my order) I let it stand for a few days to see how the stock fared on any selloff... later in the week when ENR held up well during a selloff, I closed out the position for 'flat'.
  • In the Friday morning selloff, I added a hedge on the indexes with a short of TNA - this was to be held if the S&P 500 stayed below 1093/1094.  That drop was quickly bought and I just as quickly got out of the short for a loss.
  • I closed out a long held short of iShares Barclays 20+ Year Treasury Bond (TLT) as bond yields continue to plummet, causing this position not to work.

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