Year 3, Week 39 Major Position Changes
Cash: 68.2% (v 52.2% last week)
17 long bias: 24.5% (v 44.1% last week)
3 short bias: 7.0% (v 3.7% last week) [Includes 1 'long dollar' position] [Includes 1 option position]
20 positions (vs 21 last week)
Quite a week...volatile, with a little bit of something for everyone. It was confusing to say the least. First, there was no Magical Monday... it started out that way, with the previous Friday's break to new highs (over S&P 1214) continuing in the first half of the day with a kiss of S&P 1220, but that level was sold. Then came Terrible Tuesday where suddenly Greek and Portugal mattered again. The S&P 500 broke the 20 day moving average for the first time since 1st half February - with the worst loss in a session in months - leading one to believe that after a cursory bounce, the market would begin to trail back down. The only day of the week that made much sense to me was Wednesday when indeed the cursory bounce happened... of course almost ALL of it happening premarket. Yet the S&P 500 did not close above the 20 day moving average for the second day, so it seemed destined for a textbook rollover. So what happened Thursday? A V shaped surge... crushing bears. And then the real surprise of the week was identical pain for the bulls Friday, in inverse as Goldman Sachs news strikes again. All in all, one of the strangest weeks in many a month and for those with a time frame greater than a few minutes tough to handle. The S&P 500 crossed over the 20 day moving average 3 different days this week, wrecking havoc on anyone with reasonable stop losses either long or short.
To close the week the S&P 500 again broke the 20 day moving average... which was the situation last Tuesday. It did not matter then... will it matter this time? We'll see after the (almost always) premarket mark up. S&P 1194 is the level to watch at the beginning of the week.
Last week I highlighted a chart of the 200 week moving average, which appeared to hold Monday as that is just about where the market reversed.
On the economic front, Greece finally got its bailout (thank you American taxpayer!) as widely expected by late last week. It is actually quite a busy week ahead highlighted by the 2 ISM reports (service and mfg) and Friday's job reports.
Monday: Personal Outlays & Income, Construction Spending and ISM Manufacturing. The latter has been the bell of the ball the past 4-5 months. While not making up much of the US economy (roughly 13% of economy and 9% of jobs) manufacturing still holds the heart of the stock market.
Tuesday: Factory orders
Wednesday: ADP labor report, ISM Services - the latter being much more important to the new age U.S. economy... it has started to finally pick up the past 2 months, let's see if it continues its trend.
Thursday: Productivity and Costs - productivity has been off the charts as the threatened US worker is willing work longer, harder for little more pay, or else face the unemployment rolls.*
*excluding federal government workers who never have such issues
Friday: The all important monthly job figures... I'd expect anywhere from 400-550K gains, of course much of it temporary in nature and coming from census workers. Another traditional 100K will come from the government's spin on small business job creation that they have no way to measure but believe in their heart to be! It will be a hoot to watch the politicians react to this month's figures - the calls of we delivered on jobs should be a doozy. If only we could run a census every 5 months in Cramerica... and maybe 8 concurrent at once, we'd have full employment.
We are still in earnings season but now we're moving away from the S&P 500 type names and into the smaller and more foreign firms this week and next.
For the portfolio we were whipsawed around like anyone else. I am simply glad I did not go overboard Tuesday on the break of support and bet against the non stop V shaped bounces or damage could of been serious. That said some individual names took some real damage and we need to make adjustments.
On the long side - I had piled into some TNA ETF and SPY calls the previous Friday on a breakout over S&P 1214. That looked great as the typical Magical Monday seemed underway, but once S&P tagged 1220 it reversed. Since nothing major happened other than a modest pullback I kept the positions on. Tuesday started slightly down but the severe drop happened suddenly in a 45 minute stretch mid day. So it was time for damage control since I was badly positioned. After falling to as low as S&P 1190, we saw a bounce to 1198, where I dropped half my SPY calls for a loss. When the market failed to make a material move up after that, I sold the other half of the calls and the TNA ETF. While sucking up losses, that was a good move Tuesday as the market broke down late in the day and a lot more unrealized losses would of been taken... and still seemed ok Wednesday, but then the V shaped bounce Thursday would of made those positions ok and if one had the guts there would have been a way to get out with less damage. Until Friday of course, when the market cracked yet again. Obviously volatility was wicked.
I was stopped out of 60% of Bucryus (BUCY) on a break of support - the stock continued weak the rest of the week, where I cut a bit more, and the rest will go Monday morning as the stock has broken down it appears. I added to Atheros Communications (ATHR) after it came down to fill a gap created on one of the best earnings reports of the past 3 weeks. I sold some Skyworks Solutions (SWKS) ahead of earnings to be safe - no need, the company had a nice report and was up in a bad tape Friday. I was stopped out of about half my Netlogic Microsystems (NETL) on an old limit order not well priced, as it reacted poorly to what I considered a good report. Just the random nature of markets to earning reports.
On the short side, I did almost nothing except put on some SPY puts as insurance late Friday when we broke support. This failed miserably mid week since the market danced to the upside even after breaking support, let us see if it fails yet again as we try yet another V shaped bounce.
All in all, these look like some days of serious distribution... but can a market that goes up 9 out of 10 days in premarket ever really sell off again? ;)