Last week the stars were aligned for another rise in the market. Strong earnings reports indicating a strong consumer, manufacturing remains robust all while inflation remains in check. Add some positive comments out of the Fed and you have a recipe for more market green. However, last week was just a little taste…an appetizer before the meat of earnings and economic reports flooding the market beginning this week. In addition the market faces much stronger resistance areas than the areas I discussed in the last report – the headline number Dow 12,000 and the April highs of the Nasdaq around 2375. Perhaps this is the week that the market digests recent gains? The market is still showing few signs of slowing down, but with the Dow butting up against 12,000 and the Nasdaq inching closer to its April highs, CPI and PPI data in addition to high profile earnings out of Apple and Google maybe.. just maybe this is the week that consolidation begins. I would certainly continue to play cautiously up at these levels and look at significant selling in the market to add to existing positions or initiate new ones.
::: Model Portfolio Update :::
The Model Portfolio regained its footing this week but still lagged the overall market, rising just 1.1% with gains tempered by a couple short plays I continue to hold. It’s frustrating not to fully capitalize on the move in the market the past two weeks, but I have no regrets and know that the time will come to get significantly aggressive on the long side and begin leveraging with margin. That time is not now.
During the past week, I initiated 2 new short positions and 4 new long positions. One long position in GOL Intelligente Airlines (GOL) was sold for a small 2% loss following a high volume drop below support of the 50 day moving average. Considering the stock still has support at its 200 day moving average around 32, I considered holding the position. However, given the huge selling volume and earnings coming up, I opted to unload this lagging position. No other positions were closed out during the week. With last weeks rise in the portfolio, the YTD return stands at 17.6% with current allocation of 64% long, 28% short and 8% cash.
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::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Building Materials Wholesale 8.29%
2. Copper 8.25%
3. Industrial Metals & Minerals 7.30%
4. Metal Fabrication 5.55%
5. Sporting Goods Stores 5.45%
6. Gold 5.40%
7. Semiconductor – Specialized 5.15%
8. General Contractors 5.00%
9. Steel & Iron 5.00%
10. Technical & System Software 4.95%
– Top 10 Worst Performing Industries For the Week –
1. Catalog & Mail Order Houses -7.75%
2. Long Distance Carriers -6.30%
3. Health Care Plans -3.20%
4. Specialized Health Services -3.15%
5. Investment Brokerage -2.45%
6. REIT – Hotel/Motel -2.15%
7. Personal Products -2.10%
8. Regional Airlines -1.80%
9. Processed & Packaged Goods -1.65%
10. Confectioners -1.35%
– Top 5 Best Performing ETFs For the Week –
1. Turkish Invest Fund (TKF) 12.50%
2. Ishares South Africa (EZA) 7.45%
3. PowerShares China (PGJ) 6.70%
4. PowerShares Clean Energy (PBW) 6.25%
5. Templeton Russia & E. Europe (TRF) 5.50%
– Worst 5 Performing ETF’s –
1. Korean Fund (KF) -2.25%
2. Ishares South Korea (EWY) -1.85%
3. Lehman 20 Yr Treasury (TLT) -1.25%
4. HLDRS Internet (HHH) -.90%
5. Japan Equity (JEQ) -.75%
::: IPO’s Worth Watching for This Week :::
There are lots of IPO’s coming to market this week, but only one is worth watching on Friday.
1. ExlService Holdings (EXLS): Provider of offshore business process outsourcing services for the banking, financial services, and insurance sectors. ExlService is a small but profitable and growing company. Set to start trading Friday.
::: Upcoming Economic Reports (10/16/06- 10/20/06) :::
Monday: NY Empire Manufacturing Index
Tuesday: Industrial Production, PPI, Retail Sales
Wednesday: Housing Starts, CPI, Real Earnings, Petroleum Status, Mortgage Apps
Thursday: Money Supply, Leading Indicators, Philly Fed Survey, Jobless Claims
Friday: None
::: Notable Upcoming Earnings Reports I’ll Be Watching This Week :::
Monday: None
Tuesday: CBOT Holdings (BOT)
Wednesday: Alliance Data Systems (ADS), Apple Computer (AAPL), Etrade (ET), Raymond James Financial (RJF), SEI Investments (SEIC), CyberSource (CYBS), General Dynamics (GD)
Thursday: Google (GOOG), TradeStation (TRAD)
Friday: none