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.

On Monday we saw $RVBD and $CMG surge past breakout levels.  I’m especially happy that I didn’t panic after hours in the $BWLD carnage and dump $CMG.

Tuesday saw the beginning of a major run in $CPLA as earnings were solid and the shorts are now getting squeezed.  $CTRP, a long time portfolio holding also made a move.

And Wednesday saw major wins in $DLM, $RAX, $CPLA,$LOPE and after hours $PCLN which traded as high as 131 or so.

I’ve been vigilant about cutting stocks that weren’t making moves they should have been, such as $MR, and taking profits into extended holdings like $VRX and $DLM.

Having been patient during this recent run and keeping a good deal of cash has helped.  I have the confidence that if the market pulls back here between 1 and 2 % as I believe it will, I’ll start adding to my positions further.  Joe Fahmy makes an excellent point when he says that you have to protect your confidence is market downturns, or markets going against your strategy in either direction.  This can be done in several ways, but for me, holding a little extra cash and fewer high beta names when the market isn’t quite right is how I like to operate.  Yes, the small Chinese issues have made huge moves the past few days, but in a market that hasn’t completely proven itself yet after a considerable smack, I’d rather sit those out in favor of less correlated names in the food service, education, and airline industries.

I still like big cap tech here, but the market needs to pull back and chop around for a few days to work off some short term overbought indicators.  Be patient and watch for a strong bid on the next sell off.  I’ll be looking to put all my chips on the table if that happens.

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.

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.

f

$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.