The market took the express train past the rally highs this week and provided yet another round of excellent swing trading to the long side.  While everyone was buying puts and inverse ETFs to protect profits from an organized pullback, the market marched higher, stopping them out one after another.  Are we seeing a repeat of July here?  It’s completely possible, the two sell offs look very similar, if we surge out of the gate on Monday I would venture to say that it’s likely we repeat the action from July.  Anything can happen on mutual / merger Monday, I almost bought a few very speculative options positions in some oil names just in case, but alas I ate another sandwich and chilled out.

The US Dollar continues to act weak, I’m expecting more of the same next week with major rotation into materials and energy names.  We had the run in tech last week, this week was all about retail, I think next week is energy’s turn.  I still have no exposure in either, but have several names on my list including $DRQ, $BEXP, $XTEX…

I picked up more than 230 basis points of alpha this week with an absolute return of about 3.4%, in other words, I killed it.    Unlike last week where I was disappointed not to have put more points on the board with the market surging, this week was a huge win as my heavy exposure earlier in the week paid off.  I took cash back up to 15%+ on Friday afternoon as I believe we will consolidate and pull back a bit here.  If Monday opens flat and sees strong buying on volume though, I will be a buyer of energy names.

Positions added this week include $VECO $NYB $TSTC and $EVR.  I had been watching $VECO for quite some time while I held $CREE (I added to my position this week), but an excellent entry was give on Tuesday that I could not pass up.  The $TSTC position is very small, 1/4 the normal size, it is a very volatile stock and could open up or down 5% on Monday.  If it opens strong I’ll be looking to add.  I bought $EVR on the large gap off the Goldman Sachs conviction buy list upgrade and the break of its downtrend line.  I love this company and the technicals on the weekly chart set up very well right now.

I did some selling this week as gains were heavy.  I cut my position in $IPXL $ARUN and $INCY in half.  I’ll look to add back to them if the market pulls back.  I sold $RVBD Thrusday and Friday as I had big gains and the position was extended.  $SBUX $HAS and $LUV were also cast off, frankly they all look great here.

Major winners this week include $CMG, which is about 1/2 my original position, $V which I’m heavy in, $VECO, $INCY, $SFSF, $GMCR which is now my biggest position, $MJN, and $PRAA.

There were no large losers this week.

As I said, I’m looking at energy and materials next week.

The dollar / equity correlation continues to fade in and out.  Net short positions in the Euro have reached all time highs, which leads me to believe that a $EURUSD squeeze could be the catalyst that fuels the next run in this market.  The Euro is in a bear market to be sure, trading below all major declining moving averages.  I’ll be looking for a counter trend rally up to the declining 50 day moving average as several momentum divergences are visible, especially in the RSI reading.

It was an excellent week for the momentum portfolio, I picked up a little over 70 basis points of alpha while holding 20%+ cash in a surging market that was up 2.87%.  I struggled to keep myself from selling positions all week, but was able to hold off and enjoy the great momentum.

Major wins this week include $ARUN, $CPLA, and $PCLN which gapped up on earnings and continued to run.  $CREE, $CTXS and $DLM also saw very strong weeks.

The only disappointment this week came on Thursday after hours when $LOPE reported earnings and was smacked around.  I held on as there was no ability to get out after hours on the thin issue and sold out Friday afternoon a few cents above where I entered last week.

I sold 1/3 of my position in $ARUN on Friday afternoon as it surged 15%.  Partial profits were also taken in $DLM on Wednesday as it surged past 12.50.

I’m getting a little bored in $IPXL, another 3 days or so is about all I’m going to give this position to move.  It continues to hold the 20 day moving average and the setup is still strong.

I have zero exposure to the energy and materials sectors and the patterns are too messy right now and the $USDX continues to climb.  The portfolio is still heavily weighted towards technology and service names.

On a low volume pull back early next week I’ll be looking to put some of that 20% cash position to work.

It also seemed as if the market makers took the week off.  Spreads have been super wide the last few days producing wild intraday swings without the normal liquidity.  It’s possible that this week was just a bear flag, a respite from the selling, and that in the coming weeks we will move back down towards the 200 day exponential moving average and the bottom of last Friday’s hammer candle.  The chart below should be your guide, if we lose the green ascending trend line I’ll be far more negative on the market.

If and when we break through Thursday’s high, 109 is going to be a massive test for this market, it marks the location of the declining 20 day moving average.  I would also be taking off exposure at that point, and wait for more clues.

The $QQQQ had a strong week, tech outperformed by a decent margin.  The Nasdaq sits right under the 20 day moving average and the all important 44 dollar level.  A move above 44 and asset managers who are light on tech could start to panic a little bit that their exposure is too low, a move up towards the highs in a quick fashion would not surprise me.

As for my long only momentum strategy, we had a great week picking up some serious alpha, 175 basis points in fact.  I sold a bunch of my materials exposure on Wednesday brining my cash position up to around 35%.  I added positions into strength on Thursday and early Friday morning.  Cash in now under 24%, and as I said above, I’ll take off some exposure into strength early next week and wait for more clues.  A few days a consolidation above the 20 day moving average would get me all in with tight stops.

Two major losses and one major mistake this week.  I took a position in $SWM Wednesday afternoon without checking for earnings.  $SWM reported Wednesday after the close and got mauled.  The damage was bad, but not catastrophic as I pulled the rip cord Thursday morning for a bad loss.  I took a similar earnings beat down on Thursday afternoon in $BWLD but luckily got stopped out after hours before the damage got too severe.  I almost pulled the plug on $CMG as the food service industry looked real ugly across the board after hours, but decided to hang on and keep my stop where it was.  It paid off as $CMG showed great strength on Friday with a major breakout.

Positions added this week include $RVBD, $IPXL, $MR, and $LOPE.  I also added to my position in $ARUN.  Positions sold include $TIE, $BUCY, $ANR, $BWLD, and $SWM.

I have no financial, energy, or materials exposure at this point in time.  I’ll look to focus on materials if the $USDX shows signs of making a short term top in the next few days.

As I’ve been saying for a few weeks now, bring your positions sizes down and shorten your time frames.  Being flexible in your thinking and willing to change sides in the matter of a few hours is extremely important in this market environment.

Aaaaaand this is where things got interesting.  Materials have been slaughtered during this sell off and there are some monster players out there who still believe in the gold / hyper inflation trade.  It was only a matter of time before the decided to step in and buy what they must see as value.  Gold $GC_F was the first to make the turn having bottomed out in a capitulatory move before noon.  Crude was also down a ton before noon as it failed some important support levels.  After a little bit of churning the volume picked up and major players came after the gold miners $GDX.  Gold Corp. $GG ended the day up greater than 6%.  This was major buying but guys with deep pockets, they sent in orders to the institutional desks and told them to keep buying until the close, it was relentless.  The $SPY closed green and we now have one major hammer candle to think about this weekend.

Is it time to go all in and buy what you perceive as value, no I don’t think so.  The longer term technicals of this market are now quite ugly.  The 20 day moving average has crossed below the 50 for the first time since the March 09 low.  This is a sign that rallies should be sold into until further notice, just as a 20 day moving average trending above the 50 is a sign to buy the dips.  There most likely is a bounce coming though, and it’s possible that we could go into a period of several months where the market does not trend but chops around.  Until the 200 day moving average is broken, I believe you should be playing mean reversion now, do not be buying or shorting breakouts or breakdowns respectively.  Below the 200 day moving average and all bets are off, we could see a complete meltdown, I’m not kidding.  Look for the US Dollar $USDX to pull back in the coming weeks, it’s overbought after breaking through that big bull flag from a few weeks ago.

I stayed above 40% cash for most of the week as I did not trust the rally attempt on Tuesday until that major level of resistance was broken.  I did sell a few things on Thursday at the open but should have sold more in order to pick up more alpha on the downside.  I dipped in Friday afternoon as the market turned, buying positions in $ANR $TIE and $NTCT as well as more $DV.  This is a little bit of style drift for me, $TIE and $ANR are both support plays off very oversold conditions, not momentum moves.  I will most likely be selling into any major strength in these two names over the next week or two but believe there is a nice bounce in store.

Over all I made up some good ground through my large cash position and I’m poised to take advantage of any further strength in the market next week.  It’s very important to be extremely nimble in this environment unless you have chosen to move primarily into cash in order to play for a further sell off.  I think we are going to see some tradable bounces and will be quick to sell into them.

Stocks that I own and still look very nice to the long side with good momentum include $DV $CMG $NTCT $CREE $ALGT $VRX $PEGA.  I will be looking to add to $VRX and $PEGA on any strength next week.

I’m stalking a few other stocks including $PFCB and $GRA for entries.

The food service names have held up amazingly well through this sell off, frankly I have no clue why.  Possibly because of lower commodity prices, but who knows, they still show great momentum and I’m very interested in adding another name or two.

The major theme here is that if the market has found an intermediate term bottom, I don’t believe we are set to rocket back up to the highs.  The market needs to to base out and collect itself.  Wait for stocks to show good basing patterns and give good risk reward entries before you load the boat back up to the long side.  If we fail Friday’s low, run for the hills.

I cast aside $NTAP, $TSL, $HL, $CGA, and $RINO this week.  Notice that three of those names are China plays.  The Chinese market isn’t acting right and it’s better to step out of the way while that deleveraging plays out.  The small cap Chinese market was overheated and too many people were making too much money, someone needed to be punched in the face.  I took some pain by not taking profits while they were there.

$LZ was on fire until Thursday when it was obvious that it could not buck the market trend for any long, I took nice profits and reduced the position to 1/3 size.  Winner of the week for sure.

I took some profits in $CREE, how could I not.

I bought the dip in materials this week by adding positions in $RGLD and $ANR.  I’m not feeling too much pain and believe we are going to see a major bounce there.  I also added to $RBY.

I started positions in $PEGA and $SBAC and added to $AAPL, $ARUN, $CPLA, and $RAX.  I love the education sector here, it’s relatively uncorrelated to the market and institutions are making big bets on the government pouring money into retraining people through online schools.  I’ve also been begging the market for a chance to step into $SBAC, a cellular tower company, I’ll add to it on any market strength, I want a big position if the market allows.

Business service stocks like $RHT got slaughtered this week as investors sold the excellent $IBM earnings.  I still like it up here.

I’m loving the international banks here as investors flee US banks in fear of government regulation.  My pick $IBN is still squeezing into the apex of a large triangle.  A failure and I’m out, but I believe it breaks north and catches fire.

Next week is huge with $AMZN and $AAPL reporting, as well as the Apple tablet announcement.  Look for support on the weekly charts after a puke like the one we had this week, step into solid trends, the market isn’t just going to fall apart and collapse.

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$TSL and $CREE got smacked around pretty good today.  I bought more $TSL into the fear on Wednesday and then again Thursday, both great entries showing me positive P&L for the day, but adding to my losses as it is now trading below both levels.  I still like the trend, and this is the solar leader.  Profit taking is a normal, but I will be very quick to cut ties.  It closed exactly on the 50 day moving average today, anything below today’s lows and I’m gone with my nice profit.  The same goes for $CREE.

$AMZN and $PCLN continue to lag the market as no one is going to be buying these into earnings with the massive run up they saw after the last set.  Expectations are high, but I believe will be met and the stocks will once again be bought.

My materials and China exposure really hurt this week, I’m fine with the former, not so with the latter.  I believe gold is going higher, but needed a rest, I’ve been posting the chart with my expectation of the price action.  We need another month or so before gold $GC_F takes off again, and I’ll continue to build my position in materials.

$V looks great and should break out of its bull flag any day, I’m loaded up there.

I don’t think anyone has enough exposure to healthcare right now, which is why it’s still going higher.  I would like to have more, but still feel that we are going to see another leg to the tech rally, so I will keep the major part of my exposure there.

I sold out of $JCG and $GOOG this week as the trend in both is bending.  No need to be in $GOOG right now as it is a battle ground stock.

I also cut $GS today, it isn’t acting how I would like into earnings.

I added positions in $APPL and $EVR.  How can you not be long $AAPL into the iSlate announcement in two weeks, it’s a game changing product and the chart looks very healthy.  I think people come out of the wood work to buy this stock.  I’ve traded $EVR in the past and I’ve got a good feel for it, I love the weekly chart and think it’s ready to go again.

I also added a position in $ALGT this week.  40% of the float is short and the pattern looks great.  It’s not a high beta name so it gives me some refuge from the market if we do see a broader sell off.

Remember that this overview does not cover my complete activity or every position, just some stuff I’d like to highlight.

I still see so many names I want to own exhibiting great trends.  Bearish patterns like the one we are seeing in the indices currently have been broken by the bulls time after time during this rally, I believe that will continue to be the case.  Breakout and breakdowns have both failed, we are churning our way to 1200 $SPX, continue to buy the dips and lighten up on the rips whenever things feel too euphoric, I know I did a little to much this week and paid the price.

I’ve stayed away from the steel sector as I don’t believe we are going to see continued strength from them beyond this push.  I focus the portfolio on stocks that I believe will trend positively for the intermediate term, not just a week or two.  The real money is made by sitting, not trading.  I have not had exposure to coal, and I’m dissapointed about that.  I had a good opportunity to take a position in $MEE at the end of last week but balked, which was obviously a mistake.

My entry on $ARUN this week was perfect, already in the green by almost 5%.  I took off some exposure to $GS as it has traded straight up for a week now.  It was a heavy position, it is now a bit lighter.  $VRX finally woke up this week, patience really paid off there, I continue to like it going forward.  $TSL and $CREE continue to just move up, there’s no other way to describe it, these two stocks are unstoppable.  I have greater than a 55% gain in $TSL and have been peeling off bits along the way, which I guess has been a mistake because I haven’t found a place to reload the boat.  My two retail positions $JCG and $DECK are performing well.  I’m stalking $URBN which is giving a decent entry right here right now.

I will ruminate on the tech exposure this weekend, it may simply be too high.

Ok, enough with that metaphorical crap.  Look, I had a bunch of gold and agriculture stocks on my radar going into today, the market isn’t allowing me to get long there right now.  I’m not a knife catcher, I’m anything but, I play momentum and trend.  Materials gave it up hard today as the $USDX bounced.  The gold miners $GDX ended down 4.2% with the larger materials sector ETF $XME giving up greater than 3%.  The US Dollar now stands at a very important level, on the precipice of breaking its downtrend and hopping above some major moving averages.

As you can clearly see, the $USDX made a run today pushing up against the upper trend line and strong horizontal resistance.  It failed to take those important levels in the afternoon, which held the market from getting completely demolished.  Each time we have seen this pattern since June the dollar has caved.  Is this the time it breaks through?  I’m not in the business of placing bets, I’m a trader.  I’m going to sit tight here as the dollar gasps for air.  If I wanted to be very aggressive I would put on a whole bunch of material longs tomorrow on the open with tight stops, but frankly that isn’t my cup of tea.  If the dollar fails tomorrow, sit back and relax, then look for a rebound.  If the second run at these levels doesn’t break through, look for a lower high to be put in place, and when it begins to fail for the second time, smash it by getting long the material and energy names.

I’ve got a few names in the play book if that patterns plays out.  $DE, $EGO, $RIG.  I still also like $BX from the long side if the financials can get their stuff together.

So what does the play book look like if the $USDX really starts to run?  I am stalking a short entry in $X, it just keeps banging away at that head and shoulders neckline.  If it breaks 40 we could see some major damage done in that name.

The regional banks look ready to roll over here regardless of what the dollar does.  I am stalking short positions in $ZION, $BBT, and the regional bank ETF $KRE which has put in a large symmetrical triangle as show on the chart.  The resolution of this pattern will say a lot about where the market is going over the next 4 months or so.  We would normally say that these types of patterns are resolved in the direction of the primary trend.  Problem is, the primary trend is not quite evident here.  The $XLF most likely saw a bottom back in March turning the primary trend positive.  We could still see a large giveback of the gains since then, but overall, those lows aren’t likely to be violated.  I am not so convinced in the regional banks as the moving averages aren’t quite as bullish here off the March bottom.  If the market rolls over this is where you really want to be positioned short for some mass destruction.

I took a long position in Aruba Networks $ARUN as it broke resistance at 9.50.  I like the longer term trend here and the long consolidation pattern it has put in here since July.  It is currently battling with a flat 100 week moving average which is about to be crossed from the bottom by the 20 week, a bullish signal.  $ARUN also has not given up the same ground as many of the other mobile internet stocks over the past few weeks.

Stopped out on two long positions today, $APWR and $PCX.

Headed out to the Ranger game, failed at bribing the immigration officer to revoke Redden’s work visa and strand him in Canada, so he will be in the lineup tonight sucking per his usual game plan which consists of playing like a pussy.