Momentum Book Update

Run it up and knock it down.  It’s been a grind the last two months or so, and I would imagine that there is far more money being lost out there than we might believe.  We’ve had three big rallies since the flash crash, all of which have produced a lot of bottom callers.  The mood of the market seems to shift incredibly quickly these days as the market swings 7-8% in a matter of a week in both directions.  You would think that with this type of volatility market participants would be sitting in their hands.  That’s not what I’ve seen.  Longs are getting suckered in at the top of rallies.  I still don’t see massive short selling taking place.  It’s been a steady grind down for some of the retail, material, and homebuilder names.  Tech is still being bought, as it probably should, the fundamentals are still extremely strong, but just remember, in a bear market they eventually get to everything.

With my money, I’m still predominantly in cash.  A few small long and short positions here and there, but nothing that’s really going to move the needle.  I’m not a bottom picker, I don’t buy well off oversold levels for short term bounces like we’ve seen the past three months.  My wheelhouse is buying on that pullback off overbought levels for the continuation of the rally.  We haven’t seen a second leg since the top, and until we do, I’ll continue to stay extremely small and defensive.

I know this isn’t sexy, and for the readers of this blog, may be a little frustrating, but this is the strategy that has made me a successful trader.  I know what I do well, and I know what I don’t.  This isn’t my kind of market.

I took losses this week in STD, SNDK, DLTR, MSFT, and APC shorts, all relatively small.  I walked home with wins on NUE and GRMN on the short side.

I still hold my URBN short which is showing me quite a good profit now, along with my crude oil shorts in USO and UCO which are about even.

I continue to hold longs in PWER and DPS, and added a small position in EDU at the close Friday.  They report earnings on Monday and saw a good deal of call buying into the close.  I would be thrilled to be able to hold this one for a swing as it has been on my radar for quite some time, but because of the overall market I have not pulled the trigger.

Overall I lost about 10 basis points of absolute return.

If this is your market, you are successful at buying fear and selling strength, or shorting into the strength and covering a few days later, have at it.  There is a lot of money to be made there for those who have a shorter time frame.  I’m not one of them, so I’ll chill out here at the beach until this market can get its act together.

Nothing that I say or show on this blog should ever be considered investment advice or a recommendation to buy or sell any security.  The performance numbers that I post in the momentum book should never be regarded as representative of any specific client account managed by Surfview Capital, it is there solely for educational purposes and should be treated as such.

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