And so it seems that I may have been a bit trigger happy.  We tested the 20 day moving average on Monday and bounced strongly.  Looking back, I should have been a buyer into the close on Monday and not a seller.  The market tested that rising 20 day moving average again on Thursday and bounced even stronger, I should have been a buyer off that bounce as well.  And on Friday, the market broke out to new highs.  Make no mistake, a failure at the 20 day moving average now which was tested twice last week will be big.  But taking a step back and looking at the larger trend, last week’s action seems to constitute a very very bullish short term consolidation that was needed.  At 1,217 the market sits only about 1% from the long term resistance level of 1,228 and the 61.8% Fibonacci retracement level.  Given that fact, I am in hit and run mode now, very weary of this market running into major resistance any day now.  I’ve been out of this world bullish since the very beginning of this rally in mid March, but I just believe it’s time to take risk off the table now.

For the week the momentum book was up 110 basis points but lost 110 basis points of alpha.  I went from 26% cash at the end of last week to 41% cash by the end of this week, although cash levels were much larger earlier in the week, I did some buying mid week.

Positions added this week include $TTI, $SLW, $APA, and $DISH.  I also added to $DRQ and $MJN.

Positions sold this week include $MSPD, $ATHR, $CREE, $PCLN, $SWKS, $NEP, $PCX, GMCR, $UTHR, $LZB, and $SWC.  The last three in that list were hit and run trades that took place intra week.

As you can see, I sold out of technology last week.  My long held position in $CREE is now gone, I was out before the earnings drop.  I feel like I just let my best player walk due to free agency because he was overpriced and not worth the money.  I’ll hope he has a bad year and can buy him back at a lower price because his long term prospects are very bright.  I goofed on selling $ATHR into the earnings number, there was no reason to do so other than overall long exposure.  $MSPD, $NEP, $PCLN, $SWKS and $GMCR were timely sells.  I will be back in $PCX shortly I believe, that sell was unwarranted.

As you can see my long exposure to materials and energy is getting significant.  I now have very large positions in $TTI, $DRQ, $APA, $SLW and $IVN along with a long position in $UGA gasoline.

I missed most of the retail melt up, probably my greatest mistake of the year so far, but I did get a piece.  My positions in $TRLG and $NUS have paid off nicely, I took some profits into the end of the week.

I will continue to focus on energy and materials here as I believe over the intermediate term the risk reward there is better.  I think we’ll see technology, retail, and financials (which I have pretty much completely ignored) take a rest as things which hurt when you drop them on your foot lead the market.

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.

That said, we’ve come quite a long way, and gains to the long side are significant.  Let’s take a closer look at Friday’s action to see if now may be the time to take some risk off the table.

Futures Friday morning pointed to a weak open, this coming after what felt like an overheated market given the strong volume to the upside on the Nasdaq during Wednesday’s session.  I began to take risk off the table on Thursday afternoon, selling partial positions in several names.  After a weak first hour of trading, the market was hit with news of the SEC charging Goldman Sachs with fraud.  After getting hit hard on high volume, the $SPY found support at the uptrend line and the 119 support level.  And like every other dip during this rally, it was bought as $GS stabilized and rallied back up to VWAP.  Both Goldman and the market could not break through VWAP as they were rejected twice during the afternoon session.

In the larger scheme of things, how bad was the damage?  Well, the S&P 500 was down a little more that 1.5%, and didn’t break the uptrend line or any major levels of technical support.  Given those facts, panic was not warranted, I took a deep breath stepped away from the screens into the close.

On the other side, we were within 1% of my ultimate target for this rally, S&P 500 1,230.  The market was hit with bad news leading to a high volume sell off while extended to the upside at the end of a long rally.

At 25% cash, I’ll be looking to unload more stock if the market fails to hop back over the declining 5 day moving average and 1,200 $SPX level.  If the market breaks the uptrend line and the $SPY 119 support level I will be taking my exposure levels under 50%.

I still see plenty of good setups to the long side, this market is still healthy, until major support levels are broken, including the 20 day moving average, continue to take your entries, trade the chart in front of your face.

For the week, the momentum book was up 20 basis points and booked 40 basis points of alpha.  Given that momentum names often get hit far harder than the market at tops, I’m pretty satisfied with my performance last week.

Positions sold this week include $DV, $INCY, and $VLTR.  I also sold partial positions in $TRLG, $ATHR, $CREE, $MSPD, $NUS, and $MJN.

The only position added this week was Skyworks $SWKS on Friday afternoon.

Positions that outperformed this week include $MSPD, $NUS, $TRLG, and $CREE.

Positions that underperformed include $NEP, $MJN, $GMCR, and $UGA.

My weighting in materials and energy is now upwards of 40% with technology clocking in at 30%.  I still believe oil services and miners are setting up for a major run, and I am positioning myself accordingly with large stakes in $DRQ, $IVN, and $PCX.  The semis are on a roll and I’ll continue to be heavily long that industry until the trend bends.

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.

d

The market opened extremely strong with energy and materials leading the way, but the clamps were quickly placed on the market as $RIMM began to tank.

Although $RIMM is only a little more than 2% of the $QQQQ, it still weighs heavily on investors minds for some odd reason.  It’s not really a bell weather stock anymore, it’s growth has slowed considerably due to its inability to innovate.  If you want the rest of that rant just watch yesterday’s video.  Anyway, $AAPL on the other hand is more than 16% of the Qs, 16!, while no other stock is greater than 4.5%.  How this is the case I have no clue, but it’s true, which means that Apple really is the Qs.

And because of $RIMM, the $QQQQ broke some important levels today, ultimately closing flat.  Technical damage was done though with the uptrend broken and the 48.10 level breached.  There is major distribution going on here no doubt, the question is, will energy, materials, and financials be able to hold this market together while tech lags?

Each of those 6 green arrows represents a major bout of selling and distribution.  The $SPY did manage to hold the support level at 117.10 today and did recapture the all important 117.50 level into the close, as well as holding the uptrend line.  Technically the broader S&P 500 is still healthy short term and looks to go higher next week.

I loaded the boat this morning at around 11:30 after the first pullback, buying a large position in $DRQ, more $NUS, and a position in gasoline via $UGA.  By the end of the day all three were well in the green, especially $DRQ which landed me greater than 3%.  I’ve been wanting a piece of that stock for a long time.  I did sell a 1/4 of my $VLTR position which broke out huge this morning.

I may be a little bit more paranoid than is warranted here because I am completely loaded, 2% cash now, but my guard is up for a quick strike on this market by equity holders with big gains to protect like myself.  If next Monday opens strong this market should be clear for 1200, if we open weak, especially in tech, I may begin to lighten up.

Remember the market is closed tomorrow for Good Friday, happy Easter to all of the gentiles out there, I will have a Cadburry Egg in your honor for sure.

I’m just under 20% cash and will go all in if the market holds up over the rest of this week, mutual fund Monday should be in full effect for the first Monday of the new quarter next week.  The equity markets are closed on Friday, so if you’re looking to position yourself, make sure to do it Thursday afternoon.

I’m looking at coal names $PCX and $MEE for breakouts next week.  $DRQ has also made its way back into buying territory and shows a nice pattern.  $NUS is setting up, pay attention over the next few days.  $SBAC looks good as well, that falling wedge pattern is about to play out to the upside.  Keep $ARST on your radar as well, I took a very small position yesterday.

Overall, this market looks healthy but needs time, go watch a movie or something, I think I’ll see hot tub time machine tonight.

Anyway, I’m selling stuff into the close today, we are overbought and I have large gains from the past few weeks.  My cash is above 10% now and I’d like to get it towards 20 by the end of the day, if not higher.  I’m cutting stuff that hasn’t performed and stuff that is way extended, like Ford $F was this morning, I had nice gains and it got the axe.  I’ll look to get back in there on a pullback.  $RAX was an example of the former, it just wasn’t performing, it’s gone as well.

Instead of selling whole positions I’ll probably just lighten up in a bunch, I like my book.  Two specific names that are poised to break out are $V and $NTCT, you can buy them here.

I am a little dumbfounded by the action in $AAPL, what caused that large gap this morning?  Anyway, if it consolidates above the highs I will look to take a position, the weekly chart looks too good not to be involved in this one.

Crude $CL_F is on its way now, look to buy dips.  As well, I will be looking to rotate into energy names on the next market pullback.  Let’s all say it together now…… Drill Quip $DRQ is my favorite name.  Very good, you are dismissed.

The $USDX is approaching my first major level of 74.31.  Maybe that is where we see a larger bounce that sells the equity market off, maybe not.  You have to continue playing the the downtrend channel here until the 5o day moving average is broken and holds on a retest from the top side.  Don’t go trying to be a hero by picking the bottom and getting short, you’re more likely to get your face ripped off.

Equity market leaders are falling off the wagon though and breadth is decreasing.  Fewer and fewer stocks in my universe of almost 1500 issues look healthy every day.  To cap it off, the small cap index $IWM is not confirming new highs along with the large cap $SPY.  Why are investors moving out of riskier, more leveraged smaller cap names?  These companies are more directly exposed to the US economy, a sign that investors may be getting a little apprehensive about throwing in their lot with a recovery they don’t really believe in.  Large cap names like $WMT and $MCD have taken off recently signaling that investors are rotating into safer less leveraged names.

That said……you must continue to trade the market you see and not the one you believe should exist.  If we break through to the upside here, it could signal a capitulation in the US Dollar in which case all hell will break loose to the upside in commodities.  If we get a bounce in the dollar, my bogey on the $SPX to get short is 1020, below there and my spartan sword is out.  I’m also watching for a break in the MACD on this chart for a break to the upside.

I’ve been deadly silent in my trading book lately, barring a major break look for this to continue.  I’m hugging my $GLD position like a teddy bear and still love the action in $NFLX.  Other than that, I’m sitting on my hands until further notice.

I took off a little more exposure in the momentum book today selling some energy related shares of $DRQ and $OXY.  My cash position is now north of 22%.

I’ll be blogging a little bit from Bogotá this week, other than that, hasta luego!