Weekend Bend

I'm doing work on industry groups this weekend; hopefully giving me an edge in how to play this beast going forward.

Longer term, I'm not too excited about the US market. Intermediate term, I'm of the mind that we're going to fledge higher, but not necessarily in a fine, clean fashion; just higher overall. Near term, I think selling/shorting strength and buying/covering weakness is best. The buy and hold days are likely over, as far as a viable, best strategy; as are the more recently lucrative, short and hold days. Volatility may remain high while actual progress more muted; churning stuff.

But importantly, for the intermediate period the problem areas of the market appear to have put in their lows. The moves higher in the Housing, Financial and Consumer industry-groups were not merely 'one-day-wonder' counter-trend short squeezes.

The reason this is clear to me: 1.> we saw three days of intense rally in these sectors (As opposed to typical 1-day wonder counter-moves), followed by 2.> not an immediate and significant give-back on Friday in these trouble-sectors, at the same time the broad market coughed-up more than a little of its gains (in other words, the trouble-sectors have suddenly started out-performing the general market). 3.> New 52-week lows within the NYSE have dropped from over 1000 on Tuesday's session (roughly 1/3rd of all stocks made new 52-wk lows on Tuesday) to under 100 on Friday's retracement-decline (which is roughly only 3% of all stocks). This is a huge swing; evidence that the Builders, Financial and Consumer groups are out of their depression; at least for now.

Here is a list of (most of) the troubled-groups and what percentages higher they closed on Friday, from their recent, intraday lows:

Building-Residential (homebuilders)..........................+37%
Building-AC/Heating....................................................+12%
Building-Cement/Contract...........................................+12%
Building-Heavy Constr...............................................+11.5%

Finance-Mortgage Svcs (FNM, FRE, CFC, etc.)..........+10.5%
Finance-Consumer Loans (CIT, COF, ACF, SLM)..........+17%
Banks-Super Regional (KEY, WB, USB, WFC............+16.5%
Finance-Investment Bankers (GS, MER, LEH, etc).......+12%
Finance-Savings/Loan (WM, etc.)..................................+8%
Money Center Banks (C, BAC, JPM, HBC, etc.)...............+6%
Insurance-Prop/Cas (MBI, ABK, SAF, ALL, etc.)........... +6%

Retail-Discount/Variety (DLTR, FDO, NDN)................+23%
Retail-Home Furnishings..............................................+18%
Retail Dept Stores..........................................................+18%
Apparel-Clothng/Mfg................................................. ...+15%
Retail Restaurants.........................................................+14%
Leisure-Hotel/Motels.....................................................+14%
Apparel-Shoe...................................................................+9%

So if it is true that 1.> we have seen the market lows and 2.> we age going to have high volatility in the near-term, then it boils down to identifying trading ranges; buying or covering-short at the proper entries and selling or shorting on strength; at least until we confirm a new uptrend; at that point (if we get it, it is wiped-out by any lower lows in a major index going forward) I will focus on the long-side entries and exits only; shorting only when/if nec. as a hedge.

In other words, volatility is high in the market right now, but we're not necessarily going very far in the near term. I'm looking to buy dips and sell strength (long, short, medium...); until this changes. This is why I dumped the Ultra-QQQQ and most of the rest of my (long) position on the gap-up Friday. But as it turns out, I really should have sold everything and turned around and went short.

Live and learn - adjust before you die.

I may or may not manage to post some long and short names lists before Monday. Good weekend!