As we inch ever so close to all time highs in the Dow, the CNBC hype machine has been in nauseating overdrive, almost attempting to will this market to a new all time high. The Dow making a new all time high makes for a nice headline but for our purposes it provides another gauge for the health of this market. No question that this market has been passing every test thrown its way (Dow and S&P clearing multi year highs; Nasdaq clearing resistance of 200 day moving average) up to this point. I was skeptical about the validity of this rally throughout August, but the buy volume that accompanied the move up after normal trading volume resumed after the Labor Day weekend is enough to convince me that this rally is for real and should be played accordingly. (Note: I don’t and won’t make predictions on just how much the market will rally – I’ll stick to predictions of tonight’s Seahawks/Bears game:: Seahawks 20, Bears 13).
I know, "played accordingly" is rather vague. My strategy for the next few weeks remains the same. I’ll continue to foregoe heftier profits in exchange for profit protection up at these lofty levels. . The continued rise without a significant pull back has just not allowed me the perfect entry to get aggressively long. Even if this market continues to defy gravity and push higher above the Dow all time high, I’ll continue my conservative approach by maintaining a signficant cash position. Only until we get a decent pull back of 2 – 3% will I get aggressive and begin using margin. I’m just playing the probabilities.. and the probability of a pull back continues to outweigh the probabiliy of another leg higher.
::: Model Portfolio Update :::
In the last Weekly report 2 weeks ago I mentioned that it was one of the busiest weeks I’ve ever had in terms of transactions in the Model Portfolio. I scrambled to cover shorts and get long in a matter of days. Since that time, I have chose to ride this market with what I have and not get overly aggressive on the long side. I’ve mentioned on several ocassions over the past few weeks that the market needs to consolidate these gains and the more we trend up with no consolidation, the likelihood of a more severe pull back increases. With that said, I closed three long positions in Perficient (PRFT), Akamai Technologies (AKAM) and Cenveo (CVO). PRFT was purchased at the breakout and an add on position was added later to capitalize on continued strenght in the stock. The entire $20K position was sold due to increase in insider selling and a higher volume intraday reversal on Sept 26th for small gains of 2 and 5%. AKAM was sold on Friday to lock in an 18% gain because the stock is nearing the top line of its upward channel. CVO, a quick strike profit play several weeks ago (quick strike profit plays are stocks that are technically superior and typically held for short periods – more of a swing type trade), was sold for a small loss of 6% after it began to further deteriorate below the 50 day moving average with heavier sell volume.
For the coming week I’ll continue my conservative strategy and sit on a sizable portion of cash. Only until we get a sizable, orderly correction will I begin to get 100% long and consider using margin (I have not used any margin since very early in the year). In the past 2 weeks, the Model Portfolio has gained 2.6% and is sitting on gains of 17.6% year to date, more than double the return of the S&P500.
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::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Silver 7.02%
2. Railroads 4.90%
3. Farm & Construction Machinery 4.85%
4. Heavy Construction 4.75%
5. Personal Computers 4.70%
6. Foreign Utilities 4.55%
7. Gold 4.25%
8. Oil & Gas Equipment & Services 4.20%
9. Lumber/Wood Production 4.05%
10. Cement 4.00%
– Top 10 Worst Performing Industries For the Week –
1. Medical Practitioners -4.85%
2. Farm Products -4.30%
3. Semis – Memory Chips -4.20%
4. Information & Delivery Service -3.30%
5. Cigarettes -3.00%
6. Sporting Goods -2.65%
7. Home Health Care -2.10%
8. Medical Instruments & Supplies -2.00%
9. Lodging -1.90%
10. Internet Service Providers -1.85%
– Top 5 Best Performing ETFs For the Week –
1. Ishares Brazil (EWZ) 6.00%
2. Central Fund of Canada (CEF) 5.20%
3. Templeton Russia & E. Europe (TRF) 4.90%
4. Market Vectors Gold Miners (GDX) 4.60%
5. Asa Gold (ASA) 4.45%
– Worst 5 Performing ETF’s –
1. Ishares Telecom (IYZ) -1.15%
2. Ishares Hong Kong (EWH) -1.10%
3. Turkish Invest Fd (TKF) -.80%
4. HLDRS Broadband (BDH) -.70%
5. Japan Small Cap (JOF) -.50%
** IPO’s Worth Watching for This Week **
The number of IPO’s coming to market will increase dramatically over the next few weeks, so keep an eye on this space!
1. Breitburn Energy Partners (BBEP): independent oil and gas partnership focusing on the acquisition, exploitation and development of oil and gas properties. The company has assets of producing and nonproducing crude oil reserves in the Los Angeles Basin of California and the Wind River and Big Horn Basins in Central Wyoming. Set to start trading Wednesday.
2. Danaos (DAC): Greece based shipping company operating about 27 container ships through a number of subsidiaries incorporated in Liberia, Cyprus or Singapore. The company charters its vessels to many of the world’s largest liner companies. Trading set to start Friday.
3. Light Sciences Oncology (LSON): An early stage company developing a product called Light Infusion Therapy, used for the light activated treatment of solid tumors. The company is not close to profitability. Trading set to start Thursday.
4. Rosetta Genomics (ROSG): Israel based development stage company seeking to develop and commercialize new diagnostic and therapeutic products based on a recently discovered group of genes dknown as microRNAs. It’s another biotech company with no profits currently. Trading set to start sometime this week.
** Upcoming Economic Reports (10/2/06- 10/6/06) **
Monday: ISM Manufacturing, Construction Spending
Tuesday: New Motor Vehicle Sales, Retail Sales, Job Cut Announcements
Wednesday: ISM Non Manufacturing, Factory Orders, Petroleum Status, Mortgage Apps
Thursday: Money Supply, Monster Employment Index, Jobless Claims, Public Debt
Friday: Consumer Credit, Employment Situation
** Latest Blog Entries – In Case You Missed Them!**
– SelfInvestors Blog –
Where’s the Big Money Flowing? A Look At My System for Tracking Sector/Industry Rotation and Strength (Sept. 25th)
http://investing.typepad.com/tradingstocks/2006/09/wheres_the_big_.html
** Look for a new Breakout Stock Highlights article to be posted in the next day or two- while the number of breakouts have slowed, there were several high quality breakouts in the last couple weeks I’ll be highlighting. Don’t miss it!
