With the exception of Wednesday’s high volume reversal, the market played out fairly predictably from a technical standpoint.  The dead cat bounce gave way to significant selling, albeit short lived as buyers and short covering lent some support in the short term.  I’m always looking for clues into the psychology of traders.  It’s the only way we can make a reasonable estimate of future price performance.  At this point, it’s reasonable to assume that traders are still seeing significant dips as buying opportunities rather than a reason to continue to head for exits.  For this reason, despite this dip, the tone of the market continues to feel a bit on the bullish side in my opinion.  Take for example the reaction to a significant rise in inflation.  Considering that the PPI was well ahead of expectations and food prices have spiked higher, extinguishing hopes of a rate cut, the selling was moderate on Thursday and Friday.  We certainly can’t ignore the magnitude of the market plunge on Feb 27th, but perhaps this correction won’t be as severe as that sell off first indicated.  I’m still looking for the major indices to touch their 200 day moving averages before it’s all said and done.  Even then, it would be considered a healthy move, clearing the excesses for a sustainable move up for the rest of the year.  Let’s see what kind of clues the market reveals to us next week.  The housing numbers on Tuesday and Friday will be important.. probably more so then the Fed rate decision on Monday which by all predictions will remain unchanged.

::: Model Portfolio Update :::

With Wednesday’s key reversal I scaled back on my Nasdaq Ultra Short (QID) hedge position and covered a short in Charlotte Russe (CHIC) for a 12% gain, but with 3 new short plays added and a 15% hedge in QID remaining, the portfolio remains a short dominated one.  However, that may change soon depending on the action of this week.  The reversal Wednesday may have indicated that this correction won’t be as severe as once thought so I’d like to get to a more neutral position over the next week or two.  It’s possible I’ll add another long trade or two to get there. 

On the long side, my last QSP trade currently in the portfolio was closed out for a decent gain of 9%.  The stock continued to look bullish, but after Tuesday’s distribution I was unwilling to take on the risk of letting a gain slip away.  Overall, the portfolio dipped a bit last week, off .5% for a YTD gain of 6.5%… still well ahead of the S&P500 performance of -2.2%.  Current allocation is 23% long, 40% short and 27% cash.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Manufactured Housing: 6.30%
2. Tobacco Products: 4.80%
3. Internet Service Providers: 4.80%
4. Industrial Equip & Components: 3.15%
5. REIT – Hotel/Motel: 2.20%
6. Grocery Stores: 2.05%
7. Information & Delivery Services:  2.00%
8. Wholesale Other: 2.00%
9. Food – Major Diversified: 1.75%
10. Personal Computers: 1.65%

– Top 10 Worst Performing Industries For the Week –

1. Technical Services: -15.40%
2. Recreational Goods – Other: -6.55%
3. Residential Construction: -5.60%
4. Small Tools & Accessories: -4.35%
5. Home Improvement Stores: -3.65%
6. Auto Dealerships: -3.45%
7. Drug Related Products: -3.35%
8. Lodging: -3.10%
9. Building Materials – Wholesale: -3.05%
10. Investment Brokerage – National: -3.05%

– Top 5 Best Performing ETFs For the Week –
 
1. HLDRS Broadband (BDH)  3.15%
2. Herzfeld Caribbean Basin (CUBA) 2.50%
3. Ishares Australia (EWA) 2.45%
4. Ishares Silver (SLV) 1.85%
5. Central Fund of Canada (CEF) 1.65%

– Worst 5 Performing ETF’s –

1. Turkish Investment Fund (TKF)  -4.70%
2. Morgan Stanley India (IIF) -4.60%
3. India Fund (IFN) -3.80%
4. SPDR Home Builders (XHB) -3.65%
5. US Oil (USO) -3.35%

:::  IPO’s Worth Watching for This Week :::

No IPO’s on my radar this week.

::: Upcoming Economic Reports (3/19/2007- 3/23/2007) :::

Monday:        None
Tuesday:       Housing Starts, Building Permits
Wednesday:  Fed Rate Decision, Crude Inventories
Thursday:      Initial Claims, Leading Indicators
Friday:            Existing Home Sales

::: Notable Upcoming Earnings Reports I’ll Be Watching This Week :::

Monday:  PetroChina (PTR)
Tuesday: Factet Research Systems (FDS), Oracle (ORCL),
Wednesday: China Mobile (CHL), Morgan Stanley (MS), CitiTrends (CTRN)
Thursday: None
Friday: None

::: Latest Blog Entries – In Case You Missed Them! :::

– SelfInvestors Blog –

1. Trust the Charts, Stay One Step Ahead; Stock of Day – Smith & Wesson (SWHC)http://investing.typepad.com/tradingstocks/2007/03/trust_the_chart.html

2. Key Reversal – Bulls Put Up a Fight http://investing.typepad.com/tradingstocks/2007/03/key_reversal_bu.html