Indices rebounded from some selling pressure & closed green.
S&P 500 @ 1555.25
RSI @ 49.38
CMF @ 0.246
Internals were :
UP volume led by 2.91 to 1 in NYSE & 2.74 to 1 in Nasdaq
Advancing stocks led by 2.69 to 1 in NYSE & 2.29 to 1 in Nasdaq
Net new 52 wk highs were leading by 124 in NYSE & 23 in Nasdaq
VIX Down 14.75% @ 14.97
Oil @ $88.01
Gold @ $1395.60
Canadian $ @ 97.38
Stocks which were UP 1% or more included HMC, BBRY,
RDN,DNKN,GOOG,EXPE,LEN,BAC,CMG,LVS,M,
V,GMCR,MU,MON,FSLR,SBUX,EGO,MGA,MS,
MLNX,WYNN......
Here is portfolio weighting :
BBRY 35.06%
EBAY 28.96%
HMC 21.92%
JCP 14.06%
Exposure 85%
Next post by 2 PM on Sunday
BLOG does NOT give buy or sell.
Saleem
3 comments:
Hey Saleem,
It was a very volatile week in the markets and by the end, the conservative portfolio stance prevailed with a 0.7% gain versus the S&P's 2.1% loss. The only notable movers were TTPH (+13.9% from purchase) and the intraday BAC buy/sell (-3.8%). Here's the portfolio as it stands:
Long Positions (49.9%): PFPT MODN CSOD SPLK RALY MRIN TTPH APWC
"Short" Positions (16.3%): Long TZA (3x short $RUT, effectively 49.2% short)
Cash: ~34%
Starting the week off flat was a great choice as the market tumbled Monday to start things off. From there, it was positioning game the rest of the week. Friday saw the most moves as I picked up some enterprise software stocks and hedged with TZA. As I sit now, I'm not sure the portfolio is perfectly positioned given my macro views, but I'm a stock picker by nature and always feel that need to own individual stories.
At this level in the market, we have experienced the "standard" correction in a bull run. We came 2-3% off the highs and pulled back to support at the 1540-1560 level where we were most of March and then probed on April 5th with the March jobs number. Also, we successfully tested and bounced off the 50 DMA in the 1541-1544 area (continues to rise). So, if this is the end of the poor economic news, we can move sustainably higher from here. Alternatively, if the economic data continues to underperform expectations, we could break down precipitating a more dangerous decline.
So far the majority of the concern is based on weak economic numbers from Asia and Europe. Europe is facing the bite of the austerity enacted in recent years in the aftermath of their ongoing debt crisis. China is undergoing their transition from an export-based economy to a consumption one. This process is constructive in the long run, but will have many bumps in the road, including a forced overall slowing of headline GDP and slowing growth of basic material usage.
Despite a bit of sluggishness in US data also, investors are mostly willing to overlook this right now with the strengthening housing sector being the lynchpin to the improving sentiment and economic activity. My main concern is that housing will undergo a summer lull that leaves the US with no real growth areas either.
Another factor currently in play is the Fed stimulus effort. In this respect, I feel their ability and/or desire to incrementally increase stimulus is low. This leaves us with question marks if the economy does indeed slow.
On a positive note, we continue to see inflows from around the world looking for US stocks in a flight to quality, and many domestic investors are finding comfort in dividend stocks given the very low treasury yields. Although positives at the moment, both of these flows would unwind in a truly weakening scenario.
In summary, the market has worked off some excesses so the balance is better. My inclination is to still lean bearish because I feel like weak US data will surprise many, and I still feel like many bulls are clinging to the "everything will be fine" thesis. The risk to going more short is that if I'm wrong, the relative buying power of the portfolio declines rapidly as the portfolio value drops but the price of stocks increase. This leaves me with wanting only minimal short exposure although I struggle with the thoughts of really capitalizing on a bigger decline. As usual, there are always companies I like, and big growth trends like enterprise software make me want to be involved but merely hedge out the market risk with my ultra-short ETF. I will continue to try and be opportunistic as new situations are always presenting themselves.
Looking forward to more earnings!
Stocktrader
Hey Saleem,
An interesting development in my tech area is the major shift in the way corporations IT spend and that is forcing transitional years for many large cap technology companies as they adjust to the new environment. These stocks include ORCL, IBM, and SAP just to name a few. This shift from premise to cloud and also away from the comprehensive deployments in favor of smaller pieces puts many of the newest technology companies in great positions. This is benefiting companies like PFPT, SPLK, and CSOD.
We are also seeing a trend where companies reluctant to hire people due to uncertain demand environments or potential healthcare responsibilities will instead buy software to automate some of the processes. Companies like MODN and RALY are great examples of beneficiaries of this movement.
I know many of these companies are new and expensive, but the trend remains so strong that I feel many/all of them have many great years ahead and may also be takeover targets from those large players in transition.
Stocktrader
Hi Stocktrader,
Good recap of Macro picture...but we are facing seasonal headwind.
Many stocks will escape this downtrend which is where stock selection comes in....
I am sure you are factoring seasonality in your picks.....
We will see how our stock fares in
May to October timeframe.....
I know both of us are experienced & do lot of due diligence.
Saleem
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