Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 21

Year 3, Week 21 Major Position Changes

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

Cash: 42.1% (v 78.4% last week)
28 long bias: 57.2% (v 18.9% last week)  [includes 1 option position]
2 short bias: 0.7% (v 2.7% last week) 

30 positions (vs 26 last week)

Weekly thoughts
A shortened holiday week was just exited, and ahead of us lies a shortened holiday week anew.  Thus far in 2009, "holiday spirit" has been on overdrive.  A week ago we wrote this:

Just as Thanksgiving week, Christmas week (to a lesser degree) is generally a time of good cheer and nonsense speculative stocks being run to the moon, (hello Chinese small caps - you too solar stocks!) as institutional managers are at home, and the retail daytrader takes over. 

Each session but one (7 out of 8) have been up Thanksgiving & Christmas weeks, and it took an event the size of Dubai to get that one loss Friday of Turkey week.  So despite 5 up days in a row coming into this week, with the constant "magic" happening in the premarket and first 15 minutes of each session, we should except continued good times - although we are sorely overdue for some pullback.  To preserve the new baseline of S&P 1120, one should expect the pullback to happen a bit higher ... gosh this all sounds so pre-ordained, as if scripted.... [2009 - One Strange Year]


Last week brought a spate of economic reports, some good - some bad (revised downward GDP, new home sales for example).  The good news was celebrated, the bad news was ignored.  Which is why I wrote last week:

Economic reports?  We'll have a few - but all anyone looks at anymore are charts...

It's all sort of become bemusing as the "free market" works its magic.  Maybe news will matter again sometimes in the new year.


Since actual fundamentals mean little - let us turn to the charts.  Starting with our main focus, the S&P 500 - we've been touting this huge base being built for many weeks.  Since almost all the base building has been over key moving averages one would suspect the move out of the "box" to be up rather than down, but there is no need to front run the move.   This should be quite a large move, I've been saying 7-9% (thumb in the air) and that would take us nicely to S&P 1200.  Which just so happens to be a number I am hearing from countless pundits.  Can it be that easy?  So obvious?  2009 will be market by constant "obvious" things following through - rather then the pattern many of us learned over the years - that is, the obvious has a bad habit of blowing up in your face.  Now, technicals seem to dominate everything else - and obvious patterns play out to a tee.  And it will continue, until one day it stops.


[click to enlarge]

As we said last week, until proven otherwise the new 'floor' is S&P 1120.  The old resistance (top of the box), becomes the new support.  Volume was pathetic (orange arrows) on the breakout, which would give great pause to anyone who has been in the market greater than 1-2 years.  But any veteran technicians who wish to have volume support their price movements, has been obliterated by the stock market of 2009.


The other reason this general area (S&P 1115, 1120) is so key is it marks the recapture of half the losses of October 2007 to March 2009.  While a meaningless statistic to you and I, the MBAs on Wall Street regard this as important, therefore as we all self reinforce random data points - it becomes important to everyone.  Thus a bullish point.  


Despite poor volume, we actually have even better breakouts in both the Russell 2000 (smaller caps) and NASDAQ.


[click to enlarge]

The NASDAQ is dominated by a few names, so if you can move those guys (see Apple action Thursday, see Google action last Wednesday) you can get the market where it "needs" to be, with relatively light firepower.  With a lot of institutional money all in these same few names (can we not expect a move in Amazon coming this week? Priceline?) there is a lot of motivation to make sure the key, big names are marked up for Dec 31st, 2009.  The action in the Russell 2000, is actually the most bullish - as these small caps have lagged much of the past few months; this broadening of the move up is important - albeit if coming in holiday trading which normally is chock full of moves in smaller companies.  That said, these are nice breakouts but quite overextended.  If we get another 3-4 days without any meaningful pullback going into year end, I'll be cutting exposure going into 2010 as even the hard core bulls would expecting some consolidation at that point.


As for economic data.... oops, we decided that was a moot point, not required to be analyzed by speculators, as of last week.  Well that shortens our weekly summary a bit; always a silver lining.  As for the portfolio, we went relatively "all in" Friday - even as we stand near the emergency exit (we have a permanent spot here).  While the volume is so very poor, we have a huge base built on the S&P 500, from which big moves usually ensue.  This is the first situation like this in 2+ years, so as we noted Friday - it's a worthwhile place to make a more concentrated stand.   If the S&P falls back below that 1120 level, we (and many others) will have some decisions to make.  


Some larger moves: (a) Restarted a position in Skyworks Solutions (SWKS) as stock appeared to break out of base - thus far the move has been , (b) after Human Genome Sciences (HGSI) appeared ready to break out of a long base, it did - and we bought, (c) sold half of Atheros Communications (ATHR) after a monster move took the stock back to August 2008 highs, we're ready to buy back on a break over that level (d) began a starter stake in DragonWave (DRWI), (e) sold almost all Braskem (BAK) after a two day, 9% move; identical situation to Atheros in terms of approaching a double top (f) restarted a position in Myriad Genetics (MYGN) - so far so good (g) sold our UUP Calls for a hefty gain in just over a month as the dollar ran into the 200 day moving average after a hectic move (h) went long on index positions first late Thursday, then again Friday. 


Charts to keep an eye on are the dollar (at resistance), gold/silver (at resistance - what breaks? the dollar? or gold/silver?) and for the portfolio as mentioned in the posts we sold, we are willing to add back to Atheros Communications (ATHR) if it can break over the August 2008 highs of mid $34s - thus far it was rejected as expected, and on Braskem (BAK) if it can get over recent highs near $17 - thus far it also was rejected.  But with a "melt up" on the horizon, the baby with bathwater situation would take everything up... we'll pounce if this happens.

To conclude the week, let's look at the one of the other sides of Ben Bernanke's plan to make "cash trash"... that is, his war on savers.  The same war Mr. Greenspan waged earlier in the decade - most focused on seniors.  Luckily for these men, they are outside the reach of voters, because this is one political block you don't want to mess with.  The