Sunday, October 10, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 4, Week 10

Year 4, Week 10 Major Position Changes

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

Cash: 62.5% (v 62.6% last week)
16 long bias: 19.1% (v 25.2% last week)
11 short bias: 18.4% (v 12.1% last week)  [Note: Long bond, long dollar, and volatility positions considered 'short']

27 positions (vs 25 last week)

Weekly thoughts
"The market can only go up."  Week 6 of the quantitative easing rally concludes; the S&P has tacked on 125 straight points as the dollar is bludgeoned on a daily basis. 

This continues up....

.... while this continues down....

Until the psychology that the Fed has all the answers ends, the parade of buying any risk asset priced in dollars continues, no matter the news.  Eventually it ends, we don't know when or how.

Any further analysis would be a disservice to the drivers of the market, and your intelligence.

A few weeks ago I listed S&P 1170 as a 'peak' level for Fibonacci retracement levels to work, in terms of filling the S&P 1090 gap.  If the market blows through that level (which is also May 2010 highs) than Fibo is going to be useless this time around, and the talk turns to yearly highs of S&P 1220 as there is no real resistance between 1170 and 1220.  A move to 1220 without pit stop would be a remarkable 180 point S&P move off of 1040 aka +17% without a rest.

[click to enlarge]

Of course the further we move from 1090, the larger the fall will eventually be to fill the gaps at 1090 and 1110.

The percent of S&P 500 stocks now over their 50 day moving average has hit 90% in the past week - an extreme overbought condition last seen in March/April when the Kool Aid of "V shaped recovery" was prevalent.  Now, no one has visions of V shaped recoveries... no one cares.  They only care about free money that will be pushed into risk assets, and the concurrent debasement of the currency.


There will be economic data released this week, but it will not matter.  Good news will be cheered (QE anyways), bad news will be cheered (more QE).

Tuesday: FOMC Minutes (2 PM)
Wednesday:  Import/Export Prices (Premarket)
Thursday: International Trade (Premarket), Weekly Jobless claims (Premarket), PPI (Premarket) - only thing of interest is to see if PPI starts to rise as easy money from central banks starts to feed into the supply chain.
Friday: Bernanke speaks (8:15 AM), Consumer Price Index (Premarket), Retail Sales (Premarket), Empire State Mfg (Premarket),  Consumer Sentiment (9:55 AM), Business Inventories (10 AM) - Bernanke promising QE should supersede anything else released this morning.

Earnings season begins in earnest - the front end of earnings season is dominated by U.S. global multinationals who will benefit from the weaker dollar, a crushed domestic labor force, outsourced labor - rising input prices will only begin to hurt at the margin 1-2 quarters out but for most the top cost is labor, which has been taken care of nicely during the recession.  The question marks are banks, which have missed most of the rally - and if heightened expectations for guidance can be met, on the back of a non stop rally for 6 weeks.   While individual blowups are to be expected - as we have seen the past 3-4 weeks; they have mattered little as the road kill is left on the side of the road, and the rest of the market goes up due to QE expectations.



Coming into the week ISM Services and monthly labor data were the 2 key economic data points - but in retrospect none of it really mattered.  The drumbeat of QE heightened and the dollar was punished - everything else was a sideshow.

In the portfolio analyst actions hurt us with 2 names being downgraded and taking serious hits.  Further, a warning by "cloud" (not really) player Equinix damaged the group.  While we sold off much of our exposure in the group during the run up, there were a few names we took hits.  Strangely, quite a few names we held broke through support levels but the greater market just continued up.  We did make some money buying the 'breakout' on ISM Services data (as S&P 500 cleared 1150), but that was largely reversed the next day due to the 'cloud' damage.  Long exposure was reduced mostly due to stop losses being hit.  I did add some short exposure but frankly at this point it is like running your head into the wall - each time you put one on, you expect to be stopped out shortly with a 3-4% loss.

On the long side:
  • Monday, took 1/3rd off of Las Vegas Sands (LVS) position after a 10-11% gain in 2 weeks on a sizeable trading position. 
  • Took a good chunk of Gafisa (GFA) off the table, after a 15% run the past month.
  • Tuesday, on the ISM release and a clear of technical resistance at 1150, TNA ETF and SPY Calls were bought for 'breakout' reasons (short term); at end of day 1/3rd of the SPY Calls were sold for roughly 35% profit.  The next day I sold the rest of the long exposure for much smaller profits as the market sold off.
  • Wednesday, an analyst downgraded Maidenform Brands (MFB) which acted like a stock in very weak hands, a tremendous selloff occurred, causing us to stop out as the 50 day moving average was punctured.
  • The "cloud computing" selloff had VMWare (VMW) break through key support, so this name was closed out.
  • A good size batch of (CRM) was bought late last week at $111s area; with the "cloud computing" selloff, our stop loss of $107.50 was triggered so all the exposure bought last week, went right back out the window.
  • Thursday morning, bought back some exposure in F5 Networks (FFIV) and Riverbed Technology (RVBD) as they had come in with the 'cloud' plays - unfortunately the next morning Goldman downgraded FFIV causing pain, causing us to cut back until we saw if the name could recapture support quickly.
  • Cut back 75% of Acme Packet (APKT) as the cloud / momo plays continued to suffer Thursday morning.
  • Thursday, sold the majority of the remainder of Gafisa (GFA) (to lock in a 17% gain) and 1/3rd of Polypore International (PPO) - locking in a 21% gain.
  • Similar to a few other names this week, Mercadolibre (MELI) broke through some support levels - so the position was closed.
  • Sold 25% of Magna International (MGA) as the stock has run nicely the past 3 weeks.
  • Went long SPY Calls Friday afternoon as the market was impervious to selling off, and Monday morning melt up awaited

On the short side:
  • Tuesday, a short on Whirlpool (WHR) was stopped out at 5% loss.   Reshorted it Thursday, as the stock fell back below resistance.
  • Shorted 3 technically weak charts Thursday - Prudential Financial (PRU), Shanda Interactive (SNDA), and China Automotive Systems (CAAS).
  • Shorted OpenTable (OPEN).

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