Setups to the long side are abundant right now, on Tuesday night I posted a handful, I could have posted at least double that number.  The first batch of leading names broke out on Wednesday.  The market did what the market does, and tried to shake out buyers like me on Wednesday afternoon with a nasty move lower into the close.  I was undeterred.  Thursday and Friday confirmed my belief that the market is getting a bit healthier.  More stocks broke out on Thursday and the rest Friday.  Friday in my mind was a classic follow through day with higher volume on the $COMPQ.

The naz is now back above its 20, 50, and 200 day moving averages.  That 50 day moving average is flat and the 20 is rising.  The only thing left to confirm that we are back in an intermediate term uptrend is some consolidation without bids evaporating.  In a perfect world, bulls would love to see Monday and Tuesday be extremely quiet, giving back maybe 20 basis points each day.  Three days of a slight drift to the downside would be even better.  If that happens, I will be loading up to make some real money.

What do we not want to see?  A huge gap up on Monday morning or a big distribution day.  Here’s the play book.  If we gap up big I will be a seller, not a short seller, just a seller.  Short term we would be very overbought and I am not going to risk giving back great gains over the past 3 days.  I won’t be a seller on the downside until we see a distribution day now.

I’m now about 40% long, but I do have a few short positions, so overall it’s further towards 30% or so.  Garmin $GRMN is a dying company, what exactly do they make that anyone wants?  Everyone has GPS on their smart phone now, who really buys those car navigators anymore besides the rental car companies?  The chart is broken as well, it’s flagging out, I fully expect another leg down there unless this market just rips.  Either way, in a market that still feels a little iffy, it’s nice to have a few shorts.  In fact, I am a much better short seller when I have a good deal of long exposure, I have no clue why this is the case, but I’m pretty sure the performance numbers would bare this out.

Ok, this week I took long positions in $FNSR, $ISLN, $OVTI, $RBCN, $SWKS, $WPRT, $CMI, $VQ, $TIE, and $ARBA.  You’ll notice two main themes going on here.  The first is tech, obviously.  Tech will be the sector to lead us out of this downtrend or the market isn’t going anywhere.  The fundamental story in the semi space is still on fire.  I saw YOY revenue growth rates in certain semi reports that were pushing 50%, and that’s after a year earlier that was up 100%.  The point I’m making here is that we are no longer in “recovery mode” for semi revenues, we’re now in a crazy strong secular growth phase.  Trend traders take note, you should have large exposure to tech.  The other theme is industrial.  Frankly I don’t know why the industrials are running, but $CAT and $DE are leading this market out of the hole and I want to ride that train.  Those two stocks are a little too low beta for me though, so I’m going with $WPRT and $CMI.  I will be adding HEAVILY to these two positions if we get some consolidation early next week.

The positions I took this week are still relatively small.  My largest position is only a little more than 5% of my book, and the average is about 4%.  These weren’t quite test positions, but they don’t represent balls to the wall exposure.  As I said, I’ll be upping the size on constructive consolidation next week.

I added a short position in $RIG this week.  The chart is broken, they have major issues regarding their liability for the well explosion, and none of it is going away any time soon.  As I said I’m short $GRMN, and I’m still short crude oil via short $UCO.

Best performers this week were $ISLN which was up 20% on Thursday after a great earnings report, and $PWER which continues to be a monster.  $WPRT also led to the upside on Friday and I’ve got decent size there already.

Worst performers this week were my crude oil and $GRMN shorts.

I put up 300 basis points of absolute return this week and lost 40 basis points of alpha, I’m perfectly fine with that.  I’ve got a huge lead on this market for the year so far and I have no reason to be anything but patient with adding exposure to the long side.  If I do get comfortable though, I will be going after high beta names, it’s time to make some money.

If we are at the cusp of a new uptrend, look for those weekly charts which have been consolidating well over the past few months.  These are going to be the stocks that you can swing and make the real money on.

Good hunting.

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.

These videos were all made using the new Chart.ly screencaster.  If you are new to this blog, please remember to check my Chart.ly page on a daily basis as I post most of my individual setup technical work in real time there, it’s just a much easier platform to use to share ideas in real time.  You can find the link to that page on the navigation bar above.

I began building short positions on Friday afternoon.  I will continue to build shorts up to the declining 50 day moving average.  I believe we test 1040 SPX at least one more time.  If we cut through it hard we could see a quick capitulation move.  If we bounce hard, consolidate for a week or two at higher levels, and see some institutional participation, this market could rip.  For now I will play the short side as we still have all of the trend indicators pointing negative.

Look for the US Dollar to move higher next week as it is very oversold on many of the important oscillators I watch.  The long bond will also be interest, it continues to trend on the intermediate term time frame to the upside, and has pulled back to an important breakout level.  The doji top put in a few weeks ago was quite obvious, and I said as much here.  Now we will find out if it was a real intermediate term top, or just a short term break in the momentum.  Honestly, I’ve got no edge either way, we will wait and see.  Watch this asset for clues as to whether risk has come back into the equity market along with European bonds.

The big money is not made by coming and going, but by sitting.  Right now, it’s not possible to sit, so stay small or be out.

The new quarter started at the bottom of this market, and thus I’ve seen pretty poor relative performance.  I trail the SPX by 460 basis points after about a week and a half of trading.  I’m flat in terms of absolute return.

New positions this week include longs in PWER and DPS.  The PWER chart could not look any more beautiful.  Long term this stock could be a big winner and is doing every it needs to right now to set up that scenario.  In bear markets though these types of setups often fail.  I like it as a great hedge for my shorts, if this market rips this stock is going to fly.  I added to my short in USO along with building a short position in UCO, the double long ETF.  The only reason I’m fooling with the double long is because I couldn’t get a borrow on any more USO.  Other short positions added this week are URBN, STD, SNDK, DLTR, and MSFT.  Remember, I don’t trade on the short side like I trade on the long side.  Get in, get out, move on, these are shorter term trades, a few days to a week or two at most.

I took some profits this week in PWER, and a loss on a short in AMZN.

Overall, I’m 20% short, and will probably build that to around 30% over the next few days.  There is an underlying drift to the upside in this market the last week or so, but it is coming on lighter and lighter volume.  Rising wedges are dangerous patterns which often produce big breakdowns.  I think we see one next week at some point.

Look down on the right hand side of the performance sheet to find the short positions.

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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