Wednesday, October 06, 2010

Updated Position (no more money for nothing and chicks for free)

The good news: Extended leadership sliced lower in droves today, creating opportunity to enter the strongest names on an emotional slice down. That is the brief means with which quality momentum let's you in.

The Bad News: These names did not recover later in the day and bless their daily charts with long, bullish tails in their wake. Instead they only worsened, for the more part, finishing the day down significantly, and closing near their lows (CRM did manage a bit of a tail, but closed down 8%; not exactly a jump-up-and-down positive session).

In other words - they let you in all day long. Never mind the fact that there wasn't really a catalyst either. If you want to believe a butterfly can cause a tsunami, then sure - today's drubbing in leadership stocks was due to a negative pre-announcement from cloud stalwart EQIX.

The Ugly: The DJIA finished up 23 points, CNBC heads and Johnny Come Punchbowl Lately are giddy with the rush higher in laggard stocks and do not currently gauge the market as acting badly. They've stop focusing on the dull US economy for a minute and they're getting ready for Dow 11k. You know, you know - the Fed will do whatever they can now to get asset prices higher! Don't fight the Fed, right? After more than a decade the market just might be good again. Where did I put my money-market checkbook, anyway?

In and of itself, the late-comer enthusiasm is not such a negative. I don't mind if people are happy. But let's be real - leadership has behaved badly for two weeks now (especially on a relative basis). Today's full-on press lower might end up something of a crescendo short term (or not!), but the complexion of the market has worsened now. This follows a new raft of exuberance (not to mention the recent self-proclaimed triumph of genius emanated from a new skin of Twitter day-traders) and a new (new?) consensus the Fed is serious about taking the market higher. At the same time, real, new-money fuel is suddenly overwhelmed by leadership selling (the opposite of buying), coincident with retail investors rushing in to pick up lower quality, bargain stocks.

Don't get me wrong, this may not sink the bigger picture. This may be nothing more than a dramatic rotational slap and we'll stabilize, consolidate and ultimately lust higher yet again. Frankly, it doesn't matter to me. I'm paid not to care and I trade better that way. I've got a couple hundred sources telling me what's going to happen but still I prefer what is happening, over such reason. I have said I would push till it pops and for better or for worse - today something popped.

Again again again I doubt this is the beginning of me getting bearish, but it is the moment where I become defensive (over-weight discipline; stay home late at night; text only emergencies while driving, leave the week-old chicken in the refrigerator for someone else, etc.).

It is never a positive (in my headpan at least) when the back of the roller-coaster is rising still, and voices shrill while excited eyes point to high-blue skies, but meanwhile, the front of the cart on the other end is already accelerating downward.

I'll take a step back, for the moment at least. Let others make the money.

Follow Centrifugal to fade trades in real time

Total Position: Currently 1.56-to-1 net-long, 60% invested

Currently Long (according to size):
CRM (9.3%); VPHM (7.8%); EWS-Singapore (5.8%); CXO (5.2%); ULTA (reduced today, 5%); MCP (3.9%).
Sold long today: 8% ORCL; 7% NTGR; 6% NANO; 5.3% CTRX; 4% TRW

Currently Short: DISH (increased today, 7.2%); GMCR (5.9%); DELL (5.9%); MU (added today, 4.6%).
Covered short today: 7% CRUS; 5.7% FSLR (5.7%)

Futures: no current position

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