TAPE continued its correction forcing S&P 500 to closed below 50 DMA. 10 yr yield closed @ multi year high of 2.829%.....
S&P 500 @ 1655.83, low 1652.61
RSI @ 38.74
CMF @ 0.034
Internals were :
Down volume led by 2.07 to 1 in NYSE & 1.09 to 1 in Nasdaq
Declining stocks led by 1.89 to 1 in NYSE & 1.14 to 1 in Nasdaq
Net new 52 wk lows were leading by 288 in NYSE & highs were leading by 16 in Nasdaq
VIX Down 2.44% @ 14.37
Oil @ $107.46
Gold @ $1371.00
Canadian $ @ 96.55
Stocks which closed green included BAC CSIQ SPWR LEN GMCR NFLX TSLA AAPL FB SINA NTES LRCX JDSU
FNSR RDN YHOO CMG SU PCLN RZA FSLR YELP
MGA MS TRLA Z.......
Here is portfolio weighting :
AUY 27.86%
KOG 17.62%
BAC 17.19%
ANR 14.61%
MU 12.52%
CLF 10.20%
Exposure 152%
Next post by 2 PM on Sunday.
BLOG does NOT give buy or sell.
Saleem
4 comments:
Hey Saleem,
Another confusing week ended with the portfolio only down -1.04% versus the S&P's down -2.10%. I find this an acceptable performance despite some regrets.
Winners: CLDX (+6.2%), TCK (+4.1% upon sale), AMAT TXTR TZA WLK +0-2%
Losers: CLF (-6.5% upon sale), RALY (-5.1% from purchase), CSOD (-3.8%), FB (-3.7%), KORS YHOO AA -2-3%, WLH YELP SODA PRU TRLA -1-2%, X MODN BAC SRPT FCX KOG -0-1%
I made many changes this week to the portfolio. I started out early in the week adding quality names like BAC PRU AA FB RALY, but on Friday did a major overhaul to shift the strategy to one of much more defense and taking on a hedge (TZA) as protection. I tried keeping only those stocks with an independent growth driver. Here's the current portfolio:
Long Stocks (53%): FB CSOD KOG FCX TXTR KORS AMAT CLDX RALY SRPT
Hedge (22%): TZA (triple short $RUT)
Cash (25%)
With the triple short nature of the TZA, and the still-high beta character of the stocks I did keep, I hope this portfolio arrangement keeps me near neutral overall exposure yet allows me to hold certain stocks I especially like. The available cash will be nice if opportunities do arise.
As for the broader market, certain technical and fundamental pieces are lining up that portend short-term trouble. The break below 1675 S&P violated a support level that held for a month, and roughly carves out a confirmed head-and-shoulders breakdown. You might also consider this a "failed breakout" above the May intraday high of 1687 since we only had three closes above 1700 and then fell back. There are also negative divergences on the MACD in both the daily and weekly charts for those May and August peaks, as well as the July 22nd & August 2nd daily peaks. We may be setting up for a test of the June bottom between 1560 and 1580 which will also correspond in 2-4 weeks with the S&P's 200 DMA.
So, what could cause this type of decline? I think it is precipitated by the results of several companies we saw this week, CSCO and WMT/M. CSCO's earnings report in May prompted a great backdrop for technology in recent months as they confirmed better order growth in many areas like enterprise, service provider, and public. All that seems to have tempered somewhat and even the CEO says things are growing, just not fast enough for his liking--it makes the whole sector ripe for profit taking. The indications from the consumer were also troublesome. Many retailers reported poor earnings and outlook and it seems the consumer has taken a pause approach at the moment. I think the "euphoria" of skyrocketing home and stock prices for a year+ encouraged major purchases as demand had been pent up for years following the crisis. Now that we have passed this bounceback spending phase, we may be in danger of overproducing houses and cars right now, and an inventory correction would hurt two of the sectors that helped us a lot recently.
As for the recent rise in materials' prices and stocks, a worldwide restocking occurred as economies in Europe and Asia emerged from long slumbers during which inventories got very lean. There is some risk that this price action does not indicate the true level of demand and I think watching things like copper are important indicators going forward.
Overall, I think the time is right to be defensive. We have lost the leadership stocks that led for so long, and the market is entering a politically delicate time (debt debate). It pains me to write anything negative as I love stocks, and I'm usually late to any bear party, but a 200+ pt down day that no bull seems bothered by is...well, bothering. I hope I have made good decisions and look for more indications as to future direction.
Hope all stay safe! :)
Stocktrader
Hi Stocktrader,
Good recap of your thesis.
The trouble with any thesis IS that something may overrule that summation.
Good luck with your hedged portfolio.
Saleem
Hey Saleem,
Yes--I agree. I just posted to your Sunday blog about my discomfort even with the above outlook. Being roughly neutral but having stocks keeps me involved but protected. I don't remember having been this confused for a while--I hope we get some clearer signs in days to come.
Stocktrader
Hi Stocktrader,
After any pullback we ended going higher & making new highs.
Every TAPE has its own unique personality....this one has rewarded optimism on a consistent basis.
Saleem
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