Week 35 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs. I cannot short individual equities.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 14.0% (vs 27.4% last week)
56 long bias: 75.6% (vs 48.5% last week)
7 short bias: 10.4% (vs 24.1% last week)

63 positions (vs 62 last week)
Additions: Ultrashort Consumer Services (SCC), Lennar (LEN)
Removals: Google (GOOG)

Top 10 positions = 36.2% of fund (vs 35.8% last week)
37 of the 63 positions are at least 1% of the fund's overall holdings (59%)

Major changes and weekly thoughts
The markets started the week celebrating a $19 billion write off by UBS, and a sizeable dilution by Lehman Brothers to it's shareholders... in the "forward looking" mechanism of the Street, these are "past issues", and the latter especially showed that there was interest in buying stakes in the investment banks at the right price. You can't really blame people, because now these investment banks have the same access to the Federal Reserve balance sheet as commercial banks, with almost none of the same regulation. Nirvana. The market continues to hold steady the rest of the week, celebrating the weekly unemployment figures increasing past 400K for the first time, as well as a worst than expected jobs number (which is still massively understating the situation), along with a 0.3% increase in unemployment. All great things to this market, because that's the "past" and we need to look forward 6 months when everything will be "better". I forgot to mention 142,000 of this month's jobs were by the birth/death model (Jan 27: Monthly Jobs Report & Birth/Death Model) - meaning if the government weren't totally guessing at how many "new businesses" are being created (in a contracting economy), job losses would in March would of been 220K instead of 80K. But when you can plug any number you want into the employment report, you can create any magic figure you'd like. Anyhow, the bottom line as investors is bad news is now being shrugged off, so we have to remain temporarily bullish.

I entered the week very cautious with my highest combination of cash/short exposure since inception last August and it cost me on Tuesday as the market went ballistic on the above mentioned "great news". Since we were able to make a new high, I decided to reverse course and cut back short exposure/cash and move materially into long positions - adding nearly 30% long exposure as the week went by. In this topsy turvy environment where hope means more than fundamentals I am relying more than usual on technicals. Looking at the broad index (S&P 500) we broke above a key "moving average", the 50 day, for the first time in 2008, on Tuesday. Further for the first time in 6 months we made a higher high than the previous high (from last week). So 2 bullish technical conditions.



On individual stocks, as I've said all week, I'm seeing bullish setups for the first time in a long time in many names. Simply said, these are stocks that have been under their major moving averages but broke above during the week - when this happens I generally am going to always be adding exposure, no questions asked. I am showcasing 3 charts below, from unrelated sectors, who all show the exact same technical condition.







These are 3 names; there were probably 20 names in the fund which showed similar setups this week. Which showcases to me, that once the market showed any signs of stabilization, many names in the fund were the type of stocks people were flooding into. Compare this to a lot of retailers, financials, and homebuilders which despite frantic moves in the first few days of the week are still below key moving averages.

Now where from here? I continue to remain cautious due to the economic backdrop. For the overall S&P 500, I do not want to see 1350 broken. That does not mean the index even needs to make a substantial move up, simply treading water is fine by me.