Thursday, February 25, 2010
I've traded poorly this last week and today was sloppiest yet. That said, the continuing lack of volume and traction following rally days, aside from exciting near-reversal sessions like today, have caused me to switch-up the attack here.
As long as it works (going forward, since today I was caught between two approaches), I'm going back to selling strength instead of adjusting neutral or net-long as the market begins flashing strength (which is how I'd been positioning since the market stopped making lower-lows early in the month).
While one could argue the downside is not following through either, I think that depressants are growing here, the volume on down-days is running clearly ahead of the anemic volume during rallies (implies no institutional commitment) and a market which works sideways-to-down in such a slow, deliberate fashion is apt to begin cascading lower before any substantial rally can begin.
In short, I'll short and sell-long on strength, looking to retain the better longs (since I need stronger longs should my thesis of a weakening market be ill-timed, wrong or irrelevant) and sell sell sell the weaker names and indices as they rally (especially if any sense of a buy-panic is present).
This is why I played rope-a-dope today as the market recovered. Yes, if we had managed a major-volume reversal I would have responded (I will definitely respond if we get something of a follow-through session...a significant gain on rising volume, three or more days following fresh lows in the majors). Otherwise, on a day like today, then in the morning I'm a net-buyer (or net-covering) and in the afternoon I am a seller.
Total Position: ~2.33-to-1 net-short, 78% invested
Currently Long (according to size): NTGR (7.3%); BEAV (6.9%); NETL (4.9%); ULTA (3.9%); CISG (2.9%)
Currently Short: TWM-long (Russell 2k Dbl-short, 11.6%); MS (8.1%); JPM (6.5%); GS (6.3%); FWLT (5.65%); CSX (5.2%); EPV-long (European Index Dbl-short, added today, 5%); DST (4.1%)
Futures Accounts: 10% Mar SP500 short, from 1089.25; 10% Mar Russell 2k short, from 622.10; 20% short Mar NDX, from 1795.00