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.

As you can see below, investors took materials and tech to the woodshed.  The trend in most, but not all momentum names is busted now, it will take some time for issues to base out and give goo low risk entries to the trend.  If we see a quick bounce back from the high momentum names, I feel it will be shorted into relentlessly.

Some stuff I sold out of this week: $NFLX, $AMZN, $AAPL, $IBN, $IAG, $MHS, $RHT, $RGLD, $CERN, $EGO, $CTSH, $ATHR, $LZ, $ANR.

The Netflix sale is really the only one that haunts me, not holding into earnings was a huge mistake and an emotional decision based on the overall market and my portfolio, not the fundamentals or technicals of the individual issue.  I fell victim to the emotion of just not wanting to be exposed to risk, when I should have traded the stock.  This should be a lesson to you all, not to be overwhelmed by the performance of your portfolio or the overall market when making a decision regarding an individual issue.

Some stuff that I still like.  The education names have held up very well, $DV even had a monster breakout this week.  I’m holding $CPLA and believe we could see a massive breakout on the weekly chart imminently.  $V still looks good and I’m happy to own this name until the weekly chart breaks or the government takes their candy away.  I don’t see either happening in the near future.  I’m looking to add to my $SBAC position on any strength.  The tower operators may not be the best businesses in the world, but hedgies are chasing them to the ends of the earth off the idea that $T and $VZ need to jack up their networks to deal with the onslaught of mobile devices requiring massive amounts of data transmission.

My cash position is now above 40% and will likely stay that way for the next few weeks.  Stocks need time to heal, and catching falling knives is not my game.  I’ll also be limiting the number of positions I have on, there are still some good trends out there, and new leadership, but I don’t believe I can spread myself out to 30 positions in this market while momentum names are getting picked off one by one and shot.

This is a long / short market now, trade accordingly.

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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Materials were firmly rejected from that important long term level and have now spent the better part of three weeks regrouping.  We aren’t breaking through any time soon, but I believe based on this, and many of the daily charts, that you can buy this dip in materials with a close watch on the US Dollar.

The materials trade has not been one for the faint of heart.  It’s been a buy the dip market, traders playing breakouts have had their asses handed to them time and again, especially in the gold miners $GDX.  You’ve got to buy terrible looking patterns at their most bearish that stay within the intermediate term trend, which is up.  Remember that big big boys are playing in this space, and most mom and pops will lose money as their positions get whipped around.

The $USDX is threatening to break through the 200 day moving average which would be a very bullish sign for the greenback.  This is going to keep a cap on gold $GC_F and other materials, but I don’t believe it’s going to prohibit the materials sector from exhibiting strength.  This is of course unless the $EURUSD completely falls apart and we have a full blow European debt crisis on our hands in the form of a Greek default.  I don’t see this as likely.

I’ve posted below a bunch of charts from the materials space which are showing decent setups right now to the long side.  These come from my momentum watch list, but are not necessarily the strongest of the bunch, just the ones showing the best setups tonight.  Have at it.

ANR showed good strength today closing above the 20 day. I like the coal industry here as there is no chance in hell a clean energy bill is going to get passed, although I would like to see one. I think you can get long this name with a stop under today's low.

slammed into the 50 today but held, stochastics are in the basement, get long at the open with a very tight stop.

AUY hit the 200 day and bounced hard. That 200 day also represents an ascending trend line. You know the drill.

BUCY not in the materials sector but is very correlated. Great bull flag here above the 20 on light volume, get long and strong.

Backtest of the descending resistance line, looks real good here.

Very interesting pattern developing here, same triangular consolidation.

Trend line and 50 day, man up and buy the dip.

I don't see many great setups in the energy space, but this flag looks awesome, my favorite energy play right now.

Still in a big flag, buy the dip and run like hell on any further weakness.

Loving MEE here, nice wedge, nice trend line, get some.

Same chart as MEE.

Backtest of the breakout level, good support and on the 50 day, I'm adding to mine in the morning.

200 day, buy the dip, it looks ugly but it's the only way.

Nice flag above the breakout, going much higher.

Similar to PCX and MEE, I like it with a stop below the 20 day.

Pure momentum, love this stock, stop out below the 20 day.

$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.