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.

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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$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 do trade commodities, but I’m sure as hell not an expert when it comes to the fundamental aspects of certain commodities markets.  Take for instance, the grains.  Would someone please explain to me WTF is going on, and why we just saw a massive dump over the past two days.  The major components of $MOO, also known as the holy trinity of cow shit, $MOS $POT $AGU are getting slaughtered.  It only takes one look at this chart to realize why, it’s the $JJG, a basket of grains.

Now, the volume here means nothing in an absolute sense, this ETF means nothing when it comes to moving the grains markets, unlike say, the awful natural gas trading vehicle that is $UNG.  But on a relative basis, there’s obviously something going on here, this isn’t just any sell off in this basket of commodities, someone holding this ETF wanted out, and quickly.

If you don’t have the ability to see futures charts on your trading platform, I highly recommend you take a look at this cool new Finviz tool.  The whole agriculture space is getting whacked, and it still looks bearish.  I own a piece of $CGA, but honestly, I feel it’s more correlated to the rest of the high flying Chinese stocks than the underlying commodities.  As for $POT $MOS and $AGU, amongst others, I’ve decided to sit it out from here unless we see a rebound in grains prices.  There are too many other trending stocks to be getting whipped around in these.

On to the broader market.

I told ya’ll that Tuesday afternoon’s run up was a trap, and so it was.  Mr. Market punched those buyers in the balls this morning by returning to Tuesday’s lows, after which it proceeded to rip higher, closing close to yearly highs.  I didn’t like it, I didn’t like it one bit.

I wanted to see the market puke, I wanted to see some fear, I saw none.  When it became evident that we weren’t breaking Tuesday’s lows, I stepped in and did some buying, reloading on the profits I had taken in $TSL, adding to $V, $MHS, $DECK, and adding new positions in $ALGT and $INFA.  I didn’t want to step in and buy today, I wanted stuff lower, even if that meant taking more pain in the process.

I sold out of $GOOG today, near the highs, with a profit.  I see no need to be involved in this battleground stock right now, there are too many great others.  I will look to reenter at higher prices, and that doesn’t bother me, I want to see the trend stabilize.  I also sold out of $EDU at a small profit, it just wasn’t moving and I was too loaded in Chinese high flyers.  I also sold out of $JCG for a profit, the trend is bending there.

I’m seeing a lot of rotation once again into healthcare and financials, but woooo nelly was that a rip your face off rally in tech today.  The 20 day moving average continues to be the place where you need to buy stuff, just do it.

I’m a little lost here now with the market having filled the gap down from Monday to Tuesday.  I think we’re in no man’s land and waiting for the next signal.  I will sit on my 10% cash cushion and hope to buy things lower, knowing that if we do explode to the upside I will out perform.

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.