Quicknote for Year End

I've been more awol than expected this week, and traveling again now today. As always, it is easy enough for me to update trades via Twitter, since it requires less time and energy vs. blogging. When I go missing here, I have so far kept up with updates over there.

I'm still holding a few smaller-cap longs (HMIN, CISG, HRBN and ULTA; 14% invested overall) and at this point expect to take them all into next week.

I did play several more, with the intention of selling by today. The year-end didn't work out so well, but no disasters either.

I don't like the idea of holding anything long into next week which has had an exceptionally strong 2009, as these have a tendency to sell-off early in the new year (historically). This was a mucky quarter for me (basically flat in a decent market), but the year over all was very strong; so I'm far from complaining.

Straight-up or straight down action next week would surprise me the least (and drama is possible in either direction). The common idea held of a short-term pullback early in the year is the scenario I agree with the least. I would argue we've had a pullback already, in most of the leadership names (although the NDX leaders did finish the year strong); so opening the new year and rallying strong from the get-go will make perfect sense; short-term.

Otherwise, I would be surprised to see early weakness, followed by strength; or if not straight-up, I would be wary of the potential for straight-down instead.

As always, we shall see. Keeping small here going into the year, so I can adapt easily.

Best luck in 20TEN!

Mavvy Christmas

Laying low, blog-wise (though I did a brief post at ES yesterday).

Mavericks is about to pump Santa. The Contest window is open and judging by the data, we're about 100 hours now from possibly 25 foot breaks; which would make this year's event well worth watching. I'm in SCal (unfortunately, since it means I can't get to Mavericks), and moving to the desert for the weekend and much of next week.

Cheers!

Quicknote on Action (chinese growth suspect)

The market indeed rocked higher, so I got that right.

Or wrong.

Chinese growth, where I accumulated most of my line, is acting poorly this week. Shanghai is at an almost two month low, down another 2.3% last night. So while US equities continue (so far) to fade the stronger Dollar and have worked back to highs, leadership growth in China is behaving a bit sick; especially in terms of relative strength.

Given that this has been the leadership in the market, it commands some attention. We might see strength in the China names between now and year end (cannot count out the strong seasonal period we're entering, unless/until it becomes clear the market is selling-off in spite of the calendar). But without renewed strength in the higher-growth Chinese plays listed in the US, I wont remain bullish for too long; China or elsewhere.

Total Position: ~3.5-to-1 net-long; 34% invested; Pure longs = 29%

Currently Long (according to size): CML (reduced today, 5.9%), AMZN (5.4%), HMIN (4.9%), CISG (4.1%), RINO (3.7%), HRBN (reduced today, 3%), ULTA (2.2%)

Currently Short (according to size): TWM-long (R2k Dbl-short, reduced today 5.1%)
(Note: inverse-ETF TWM represents being dbl-short the respective index)

Futures Accounts: No current position (see the Twittspitt for details)

Catalysts and Cattle Lists

Let's go ahead and say the least - this was a beast of a week in the markets. First let me say - I wasn't the first guy to turn bearish on stocks, but I do like my killing to be easy; especially since markets have a way of chop-dropping downward with greater velocity than they do in fact rise. So at the risk of refreshing my status to born again idiot, I will admit to you now I'm beginning to turn a lot like bullish.... More

Updated Position...

Total Position: 4.5-to-1 net-long; 45% invested; Pure longs = 39%

Currently Long (according to size): CML (9.3%), RINO (6.6%), HMIN (5.1%), CISG (4.3%), CAAS (reloaded today, 4.1%), HEAT (reloaded today, 3.9%), HRBN (3.8%), ULTA (2.1%)

Currently Short (according to size): TWM-long (R2k Dbl-short, reduced today 5.3%)
(Note: inverse-ETF TWM represents being dbl-short the respective index)

Futures Accounts: No current position (see the Twittspitt for details)

A Trader’s Guide to Hedging Strategies - Part III

A Trader’s Guide to Hedging Strategies - Part III posted earlier on ES Here.

The FOMC announcement is out and while the Fed is signaling the beginning of the end of zero-rate stimulus, the market's reaction is rather benign so far; while the VIX only continues to erode (down another 4% today). I've been scaling into a larger net-long position, although at this point I remain rather lightly positioned overall.

Total Position: 1.33-to-1 net-long, 34% invested

Currently Long (according to size): CML (increased today, 9%), HMIN (5.2%), RINO (4.3%), CISG (4.3%), HRBN (4.1%), ULTA (2.2%)

Currently Short (according to size): QID-long (NDX Dbl-short, reduced today 5.4%), AAPL (out for now, 0%)
(Note: inverse-ETF QID represents being dbl-short the respective index)

Futures Accounts: No current position (see the Twittspitt for details)

Updated Position

Total Position: 1.21-to-1 net-long, 45% invested

Currently Long (according to size): CML (7%), HMIN (5.2%), RINO (reduced by half today, 4.4%), CISG (4.3%), HRBN (4.1%), ULTA (reduced today, 2.3%)

Currently Short (according to size): QID-long (NDX Dbl-short, 7.5%), AAPL (10.5%)
(Note: inverse-ETF QID represents being dbl-short the respective index)

Futures Accounts: Short 10% Mar NDX future, from 1800.75

A Trader’s Guide to Hedging Strategies - Part II

A Trader’s Guide to Hedging Strategies - Part II
...just posted to ES Here.

Updated Position

Total Position: [Edit>>>] 1.40-to-1 net-long, 50% invested

Currently Long (according to size): CML (6.9%), DGW (increased today, 6.6%), HMIN (5.1%), HRBN (4.1%), ULTA (4%), RINO (new today, 5.7%)

Currently Short (according to size): QID-long (NDX Dbl-short, 7.7%), AAPL (10.4%)
(Note: inverse-ETF QID represents being dbl-short the respective index)

Futures Accounts: Short 10% Mar NDX future, from 1800.75

A Trader’s Guide to Hedging Strategies - Part 1

A Trader’s Guide to Hedging Strategies - Part 1 was posted just now to ES here.

Updated Position (building a position)

I've been back and forth between slightly net-short and slightly net-long this week, but I'm increasing exposure at the same time. If the market does indeed find a bid, I'll look to lighten the hedge and (theoretically) hold a nice portfolio of longs.

If the market fails, I'll be scrambling some; likely increasing the hedge first, then unloading problems as they are present themselves.

Total Position: 1.25-to-1 net-short, 35% invested
Currently Long (according to size): CML (5.9%), HMIN (5.1%), HRBN (4.1%), ULTA (4%), DGW (3.2%)
Currently Short (according to size): [edit, left-out qid] QID-long (NDX Dbl-short, 7.9%), AAPL (5.1%)
(Note: inverse-ETF QID represents being dbl-short the respective index)
Futures Accounts: no position

Updated Position (laying low still for now)

I'm still out of town, the market remains a little tricky and I'm keeping a relatively low profile for the time being.

I did cover half of my AAPL short on the further slice lower early today. Not because AAPL is acting so well, but because the rest of the market has remained more resilient than not. As a result I'm a little net-long again, but only 15% invested overall.

Not especially committed either way.

Total Position: 1.75-to-1 net-long, 15% invested
Currently Long (according to size): HMIN (5.3%), CML (4.5%)
Currently Short (according to size): [edit, left-out qid] QID-long (NDX Dbl-short, 4.4%), AAPL (5.1%)
(Note: inverse-ETF QID represents being dbl-short the respective index)
Futures Accounts: no position

A Trader's Guide to Contractions

A Trader's Guide to Contractions was just posted here at ES.

Chinese growth names are behaving quite badly now; coincident with an RS breakdown in Financials (including leader GS), AAPL (which has begun serious distribution of late, after failing to make new highs along with the NDX in November), various Retail and more.

I unloaded most of my position late today and will keep small for a bit while regrouping. I haven't played it so well lately, but I will say I find the action rather negative.

Total Position: 1.1-to-1 net-short, 20% invested
Currently Long (according to size): HMIN (5%), CML (4.4%)
Currently Short (according to size): AAPL (10.5%)
Futures Accounts: no position

Quicknote from a Dolt

I'm feeling better today, even though this was the worst session for me since fighting the tide, beginning last week.

Psychology in the markets is interesting and I have to play my own psychology sometimes. I cannot sit against the trend with conviction and feel good about it; not for more than a couple of sessions. I'd much rather be wrong and make money ;)

Wow, what cross-currents. If I hadn't been such a dolt, keying on the (million or so) toppy signs, I would have grabbed much more of these roman-candle blow-off moves in the growth names (Chinese mostly; but we have all noticed these by now, right?). I did catch a few, which hopefully saved me from the most unpleasant calls which play something like this: "How can I be losing money when the market has been so strong?"

I hate that call, which is why I fire myself from that client.

I also hate firing myself, so I am forced to do things I may not like, or may even think better of (like covering shorts in a blow-off move). But this is how you stay in the game.

I have only so much more game to stay in, so I'm not going to muck it up by standing in front of set after set. For the record, my mistake was not in covering shorts early today. My mistake was in not covering Monday (which failed to follow-through with selling begun Friday). After Monday, I was in front of the trade - not the best method for keeping your energy up and motivated.

Again, moving to the side is a fine strategy (and not used enough around here!), if and when you do not trust the trend.

One of the most interesting cross-currents is the institutional darling tag-team of GS and AAPL. Both exhibit an inability to rise, no matter what the tape looks like lately. I'm drafting a (Trader's Guide) piece featuring AAPL and will post it up later at ES; hopefully tonight.

RINO failed to close above the 2ndary price of 30.75 and I blew it out late in the session today. I know I've led you to believe I'm in love with this stock, but unless there is some good make-up sex in the very near future, RINO and I are over!

In fact, I hate all stocks equally. A healthy trait you should take from me.

Yes, I love a powerful, small-cap growth name that is beasting higher, but I cannot hold faith that such a small, unproven name ever comes back after posting a high-volume failure. Some of the best disasters begin exactly like this.

If I do play RINO long again, it will occur only like this:

-I will only buy that stock above 30.75, or...
-I will buy following a successful pivot (thrash-down + recovery)...
-Or finally, I may make a faith-buy below 25, but bench tightly then on the 50-day (currently 24.02 and rising).

Otherwise it is just another STEC-wreck to me.

Total Position: 1.8-to-1 net-long, 29% invested
Currently Long (according to size): DGW (11%), CML (4.5%), YONG (3.4%)
Currently Short (according to size): AAPL (10.4%)
Futures Accounts: no position

Quicknote on RINO 2ndary

Can't get into it now, but I'm playing the RINO 2ndary pretty much how I outlined it a while back - here.

30.75 is the 2ndary price and that is my benchmark, but on a closing basis. I will likely unload earlier than the close if it trades (and sticks) below today's intraday low of 30.11).

Quicknote (bearish interruptus)

Moved out of most positions today and left now with only two longs; very small overall position at the moment.

Somehow I got through this storm flat (thanks to longs like HEAT; and now DGW); my futures accounts did get nailed-ugly however. Gory details are available via Twitt-feed here.

I mentioned in a comment here last night, I'm not going to ask a question like how long can this market go on like this - instead I have to ask how long I can go on fighting it.

Total Position: 100% net-long, 13% invested
Currently Long (according to size): DGW (8.5%), CML (4.5%)
Currently Short (according to size): no position
Futures Accounts: no position

Learn While You Churn

The S&P 500 is now flat for the last 7 weeks; the XLF (Financials) is at the same level as early August; my fingernails have grown throughout, but I keep biting them back and they remain just as short as ever.

A true contrarian has been market-neutral for this period, but unless you've been a seller of straddles or something, that and a cup up coffee still won't buy you four bucks.

The bull market is frustration.

My advise for 95% of you (not me baby!) - unless you have something screaming at your insides, absolutely demanding you get involved, wait and be one-step late to the attack (and back-off abruptly if it doesn't then follow through; like today for the bears). Tops are a process and most of the easy money can be made by simply waiting to pounce; while firing too soon has a way of hampering your animal blood spirits.

If you're bullish and wish to play it that way, find a seat (if there are any still open) and wait for the market to post a proper breakout; hopefully remedying some of the uglier recent divergences while consolidating in the meantime.

For your sake.

Excitement is coming, but apparently not quite yet. We have acted nothing less than fairly awful for several weeks now (aside from some mostly-Chinese small cap growth names) and yet the market has resisted anything serious in terms of downside.

We shall see. I'm holding more short than long (again!), but I'm not really interested in a fight.

What's to learn you ask? The smartest trader in the world lately is the one who took a vacation; away from this arena.

Aggressive Accounts:
-Total Position: ~2-to-1 net-short, considering levered (2x's) TWM hedges
-52% invested overall
-Pure-longs = 20%
Currently Long (according to size): QSII (6.3%), DGW (5.3%), CML (new today, 4.4%), HEAT (reloaded today, 3.5%)
Currently Short (according to size): TWM-long (Russell 2k Dbl-short, reduced today, 11.9%), HBC (7.9%), SLAB (new today, 5.1%), XLNX (new today, 4.2%), TRLG (new today, 3%)
(Note: inverse-ETF TWM represents being dbl-short the R2k index)
Futures Accounts: - short 40% Dec NDX, from 1759.75 ave; short 10% Dec SPX, from 1091.75; relevant accts only

Other Accounts:
-Total Position: ~1.4-to-1 net-short, considering levered (2x's) TWM hedge
-38% invested overall
-Pure-longs = 20%
Currently Long (according to size): QSII (6.3%), DGW (5.3%), CML (new today, 4.4%), HEAT (reloaded today, 3.5%)
Currently Short (according to size): TWM-long (Russell 2k Dbl-short, reduced today, 11.9%), SSG-long (Semiconductor Dbl-short, 6.9%)
(Note: inverse-ETFs TWM, and SSG represent being dbl-short their respective indices)
Futures Accounts: NA

Slippery Slope (snowpack list of eligible shorts)

The UAE has saved the planet this weekend, coming to the aid of a troubled Dubai World (pictured above).

I for one am really pleased, since I couldn't understand how such a distant, seemingly insignificant default in the Mideast could ski-rope the global markets by the neck and pull it off the mountain.

Ha!

Personally, I don't care in hoot's hell what the catalyst is. If I sneeze and my arm falls off, then I know I'm coming down with a cold, sure. But that's got to be the good news, right?

Futures are higher tonight and the potential for a reasonable gap-up for equities is strong. My eyes are burning from screening a couple thousand charts the last 48 hours, but I'm emerging finally now with my new go-to list of eligible shorts.

I'll key on this as an attack-list throughout the week and key the groups especially which lead us lower on any given session. I'm not trying to short the strongest names in the market. Some of these still show reasonable, overall relative strength (RS), but those few are exhibiting some other negative divergence (and all of the groups below are declining notably in RS for the previous 1-to-6 weeks).

Why am I getting short this market? Do I see the next shoe dropping for the markets?

Ha and Ha! I'm getting short for a variety of technical and psychological indicators (and a hint of fundamentals, but fundamentals have been mostly negative for some time already; you knew that - which is why you were either on the sideline or else getting short some many months ago...let's not go there for your sake).

Severe downside? Oh sure, most definitely most maybe, it will perhaps be serious.

Or not. That's not my game this decade. This is the decade to let the market define the terms. I'm just a trader with smugs and few hugs (I sense you noticed I was getting snarky just now) and why the devil should I pretend to know how this chess board is going to play out six and sixty moves from now?

You keep me posted on that and we'll stay friends, okay?

Anyway, as always, this is not a list of here-and-now shorts, but an eligible list of my personal candidates. This week's screen is focused on the industry groups, both highly and poorly ranked, which have been dropping notably in terms of relative strength (RS). My selection process beyond that is based on divergences, liquidity and more.

Good trading - should be another fun weak(sic!)...

Banks-Money Center:
UBS
BK
HBC
C
MS
BAC
BCS
WFC
JPM
LYG
GS
DB

Finance-Investmnt Brokers:
RJF
IBKR (thin)
LAB (thin)
OXPS
SCHW
MF
NITE
BGCP
CS
BPSG

Finance-REITs:
KIM
LXP
PCL
IRET
FSP
REG
CUZ
DCT
CSE
ANH
UDR
CPT
AMB
DRE
WRE
MPG
FR
RYN
MFA
BXP
VNO
LRY
WRI
BMR
SPG
BDN

Finance-Mortgage Related:
FNM
FRE
OCN

Electronic-Semiconductor Equip:
WFR
ATMI (thin)
MKSI (thin)
FORM
AMAT
VRGY
LRCX
BRKS
KLAC
AEIS
CYMI
NVLS
VSEA

Electronic-Semiconductor Mfg:
ZRAN
IDTI
SIGM
CY
MCHP
XLNX
SPIL
IRF
CRUS
SMTC
NSM
ISIL
AMTL
HIMX
MCRL
ANAD
BRCM
LLTC
STM
DIOD
VLTR
STEC
ONNN
PMCS
TQNT
SLAB
TSRA
SNDK

Telecom-Wireless Equip:
NVTL
ERIC
CMTL
NOK
TRMB
QCOM
RIMM
HSTX
GRMN

Telecom-Svcs:
CBEY
ALSK
LVLT (penny stock)
TNDM

Elec-Component Connector:
MOLX
TNL
IIVI
VSH

Computer-Software Security:
VRSN
SYMC
MFE

Computer-Networking:
ELON
RVSN
PLCM
JNPR
CSCO
BRCD
RVBD

Internet-Software:
RNWK
GIGM
WBSN
ARBA

Commcl Svcs-Schools:
LRN
COCO
APOL
APEI
ESI
STRA
DV
LINC

Apparel-Clothing Mfg:
CRI
TRLG
ZQK (penny stock)
COLM
LIZ
UA

Retail-Clothing/Shoe:
HOTT
BEBE
WTSLA
JOSB
FL
CWTR
ZUMZ
PSUN
NWY
PLCE
SSI
BKE
LTD
ARO
SMRT

Oil/Gas Field Svcs:
NR
WEL
ALY
TRMA
DVR
HOS
TDW
SLB
KEG
HAL
HLX
GLBL
CLB
MDR

Oil/Gas Intl-Exploration:
EGY
NXY
TLM

Metal Ores-Gold/Silver:
AEM
JAG

Machinery-Metal Hdlg/Automation:
HURC
CASC
KTEC
PRCP

Funeral Svcs & Related:
STEI

Medical-Biomed/Biotech:
ITMN
RIGL
CYPB
ALTH
MDCO
VPHM
ALNY
PDLI
GERN
CRXL
ARNA
MATK
REGN
AOB
AMAG
ALKS
BIIB

Quicknote on Developing Action

I'll chime in briefly, since I believe a couple of important elements are now quite clear in the market.

I'm not so interested in the catalyst for this week's negative development (Dubai World) as I am the behavior of the market leading up to it. Action in recent weeks has been clearly distributive and sentiment in recent sessions reached extreme readings. With today's break, even though there is a notable bounce from the opening levels, we have what I would argue as an Intermediate term top now in hand.

This does not, again, suggest the degree of downside and I am not going to sell myself either way on that regard. I prefer to address it as it develops. I'm not against buying stocks on the way down if I am protected and action is favorable (leadership is behaving well, relative to the major indices; charts remain formidable; and signs of accumulation are evident).

I suspect you are looking at the bounce right now. Last night's extremes in the futures markets occurred with very little liquidity, setting up a gap-lower + bounce today; which cannot be surprising. The catalyst, which is not so important, is so far a perfect excuse to buy the gap-lower (sentiment and animal spirits have been very high; we had not yet broken-down in terms of price; many traders chasing performance can argue Dubai is not our problem and they had better buy the weakness).

Upside should be limited though, short-term and as such I believe today is your best bounce to counter. The last hour could go either way, but breadth is extreme enough negative that downside in that last hour, even though we have been only straight up since the open, should not be surprising.

I'm really not so concerned. I'm scaling into a short position here (which, among other things gives me a better ability to accumulate stocks lower if I am so inspired) and I think the levels for benching losses on these shorts is now readily defined (not so far away either, in terms of percentages). Thus the risk/reward equation is rather simple at the moment; for this trader.

Don't do what I do. But as long as we hold our defined highs now, I'm selling strength.

I'll update my position later. If interested you can review the trades live on my Twitter page in the meantime. Good luck out there - keep it simple and keep emotions in check.

Updated Position (very light into Wednesday)

-Total Position: 100% net-long, but only 15% invested

Currently Long (according to size): QSII (6.6%), TLEO (5.5%), DEER (3.1%)

Currently Short (according to size): no position

Futures Accounts: no position

Updated Position (1.5-to-1 net-long; for now)

Monday wrap-up was posted just now at Evil Speculator - HERE.

-Total Position: ~1.5-to-1 net-long, considering levered (2x's) TWM hedges
-55% invested overall
-Pure-longs = 39.5%

Currently Long (according to size): HMIN (5.8%), TLEO (5.6%), QSII (new today, 5%), CYD (increased today, 4.2%), DGW (4.3%), ASIA (4.1%), CRR (4%), RINO (3.3%), DEER (new today, 3.3%)

Currently Short (according to size): TWM-long (Russell 2k Dbl-short, 15.4%)
(Note: inverse-ETF TWM represents being dbl-short the respective index)

Futures Accounts: -10% Dec Euro, most recently from 1.4864; relevant accts only

Updated Position (+Back Pocket Leadership List of Longs)

My Back-Pocket Leadership List of Longs was posted earlier today at Evil Speculator - HERE.

Aggressive Accounts:
-Total Position: ~1.75-to-1 net-short, considering levered (2x's) TWM and QID hedges
-65% invested overall
-Pure-longs = 29%
Currently Long (according to size): HMIN (5.8%), TLEO (new friday, 5.5%), DGW (4.3%), ASIA (reloaded friday, 4%), CRR (new friday, 3.9%), RINO (3.4%), CYD (2.3%)
Currently Short (according to size): TWM-long (Russell 2k Dbl-short, 16%), QID-long (NDX double-short, 9.7%), AAPL (added aftrmkt friday, 5.3%), COF (increased friday, 5.3%)
(Note: inverse-ETFs TWM and QID represent being dbl-short their respective indices)
Futures Accounts: -short 20% Dec NDX, from 1764.75 friday; short 10% Dec Euro, most recently from 1.4864 re-entry friday; relevant accts only

Other Accounts:
-Total Position: ~1.4-to-1 net-short, considering levered (2x's) TWM, QID and SKF hedges
-57% invested overall
-Pure-longs = 29%
Currently Long (according to size): HMIN (5.8%), TLEO (new friday, 5.5%), DGW (4.3%), ASIA (reloaded friday, 4%), CRR (new friday, 3.9%), RINO (3.4%), CYD (2.3%)
Currently Short (according to size): TWM-long (Russell 2k Dbl-short, 14%), QID-long (NDX double-short, 9.7%), SKF-long (Financials double-short, 4.1%)
(Note: inverse-ETFs TWM, QID and SKF represent being dbl-short their respective indices)
Futures Accounts: NA

Night Gallery (butterfly dreams and superbee stings)

Updated Position (+Trader's Guide to Sipping Kool Aid)

A Trader's Guide to Sipping Kool Aid was just posted to Evil Speculator here.

I reduced overall exposure to under 50% today, while moving to slightly net-short (for now!). The Chinese growth names kept me from trouble today - tomorrow though, I don't know. Can't say i'm in love with the deteriorating action in the rest of the market.

Total Position: ~1.25-to-1 net-short, considering levered (2x's) TWM hedge
-44.6% invested overall
-Pure-longs = 25%

Currently Long: (according to size): HMIN (reduced today, now 5.7%), DGW (reduced today, now 4.5%), HEAT (reduced today, now 4.4%), HRBN (4.4%), RINO (3.5%), CYD (2.3%)

Currently Short: (according to size): TWM-long (Russell 2k Dbl-short, 16%), COF (new today, 4%)
(Note: inverse-ETF TWM represents being dbl-short the respective index).

Futures Accounts:
-reloaded 20% short Dec Euro, from 1.4922 overnight tonight; relevant accts only