With early indicators forecasting a soft landing in the economy and crude and other commodities continuing their precipitous decline, the environment was ripe for more buying from the bulls last week. With another leg up, we inch ever so close to those all important multi year highs in the Dow and S&P. Add to that housing data, producer price index inflation data and another Fed decision on interest rates and you have a whopper of a week on the horizon. No doubt this week is critical and may determine the fate of this market for the rest of the year. Put your hard hats on and get to work. It’s important to prepare for both sides of the market at this point.
Be sure to keep an eye on my MidDay Market reports this week.. I’ll be watching price and volume movemnents like a hawk and keep you updated on important market moves this week.
::: Model Portfolio Update :::
Last week was one of the busiest weeks of trading in the Model Portfolio that I can remember, having to shift from a short dominated portfolio, to a long one.. I got caught leaning the wrong way this week and paid the price. For the week, the market went one way (up) and the Model Portfolio went the other (down 1.2%).
While the short plays hurt, the biggest hit occurred in my lone silver play Silver Wheaton (SLW), which went from big time bullish break out and leader of the portfolio to massive breakdown at the drop of the hat. A sizable gain turned to a loss on the trade. Highly frustrating, but it happens (hopefully not very often). Along with SLW, two other long positions were closed during the week – Time Warner Telecom (TWTC) (Quick Strike Profit Play) for a small loss and Knight Capital (NITE) for a small gain. TWTC was sold because I felt like it was stalling.. it was eventually sold when it broke through the 35 day moving average on Sept 11. NITE sold off sharply due to a report on Friday that trading volume had decreased from the previous month AND the year ago period. With heavy selling volume in the morning and no sign of a bounce, I wasted no time in taking a small profit in the position.
On the other side of the coin, I scrambled to close 4 of the 5 short positions as all were showing considerable strength. Penn National Gaming (PENN) was covered for an 11% gain, while SIAL (-5%), CHRW (-6%) and ATHR (-4%) were covered for losses. To replace the shorts and closed long positions, 6 new long positions were initiated (2 on Monday, 4 Wednesday).
Current allocation of the portfolio is as follows: roughly 7% short, 23% cash and 70% long. With multi year highs fast approaching I may be decreasing my long exposure on any signs of weakness. The Year to Date performance of the portfolio dropped 1.2% for the week and stands at 15%.. still more than double the return of the S&P500.
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::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Electronic Stores 12.50%
2. Major Airlines 9.55%
3. Investment Brokerage 9.40%
4. Industrial Equipment 9.30%
5. Processing Systems & Products 8.60%
6. Home Furnishing Stores 8.30%
7. Residential Construction 8.02%
8. Home Improvement Stores 7.85%
9. Jewelry Stores 7.50%
10. Housewares & Accessories 7.45%
– Top 10 Worst Performing Industries For the Week –
1. Silver -12.48%
2. Gold -9.00%
3. Copper -7.20%
4. Oil & Gas Equip & Services -5.65%
5. Long Distance Carriers -5.35%
6. Independent Oil & Gas -4.55%
7. Oil & Gas Drilling & Exploration -4.55%
8. Industrial Metals & Minerals -4.40%
9. Heavy Construction -3.70%
10. Nonmetallic Mineral Mining -3.25%
– Top 5 Best Performing ETFs For the Week –
1. SPDR HomeBuilders (XHB) 9.00%
2. HLDRS Internet Infrastructure (IIH) 9.00%
3. Ishares Broker – Dealer (IAI) 7.30%
4. Ishares Networking (IGN) 6.00%
5. PowerShares Dynamic Semis (PSI) 5.70%
– Worst 5 Performing ETF’s –
1. Ishares Silver (SLV) -11.00%
2. Market Vectors Gold Miners (GDX) -10.25%
3. Asa Gold (ASA) -8.62%
4. Central Fund of Canada (CEF) -7.10%
5. StreetTracks Gold (GLD) -5.35%
** 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. DivX (DIVX): Certainly the most anticipated IPO’s of the week and possible one of the most anticipated of the year. DivX offers products and servcies to improve the media experience, such as compression-decompression software library. It’s still a very small company with just 27 million in revenue in the first 6 months of the year, but one that is rapidly growing. Trading set to start on Friday.
2. CommVault Systems (CVLT): Provider of data management software applications and related services. The company’s products enable its customers to deploy solutions for data protection, business continuance, corporate compliance, and centralized management and reporting. The company is profitable and showing very good growth. Trading set to start on Friday.
3. Home Diagnostics (HDIX): Manufacturer of blodd glucose monitoring systems and disposable supplies for diabetics. The company believes its blood glucose monitoring systems offer diabetics performance and features that are comparable to or better than its comptetitors at substantially lower prices. The company is profitable and growing quickly as profits have more than doubled in the past year. Trading set to start on Thursday.
4. Riverbed Technologies (RVBD): Provider of innovative and comprehensive solutions to the fundamental problems of wide area distributed computing. The company believes its Steelhead appliances can enable its customers to improve the performance of their applications and access to their data across WANs, increasing transmission speeds by 5 to 50 times and, in some cases, by up to 100 times. This is not a profitable company and one that continues to burn cash. Trading set to start on Wednesday.
5. Hawkeye Holdings (HWY): Third largest ethanol producer in the US based on production capacity as reported by the Renewablee Fuels Association. It owns 2 of the largest ethanol production facilities in the US. The company is experiencing very good growth over the past year. Trading set to start on Friday.
6. Hiland Holdings (HPGP): Engaged in gathering, compressing, dehydrating, treating, processing, and marketing natrual gas, and fractionating, or separating, natural gas liquids.. Trading set to start on Wednesday.
Others to Watch: Porter Bancorp (PBIB) on Friday & Warner Chilcott (WCRX), a specialty pharma company starts trading Wednesday.
** Upcoming Economic Reports (9/18/06- 9/22/06) **
Monday: Treasury International Capital Inflows, Current Account
Tuesday: PPI, Housing Starts, Retail Sales
Wednesday: FOMC Interest Rate Decision, Petroleum Status, Mortgage Apps
Thursday: Money Supply, Philly Fed Survey, Jobless Claims, Leading Indicators
Friday: None
** Latest Blog Entries – In Case You Missed Them!**
– SelfInvestors Blog –
Big Drop In Commodities Gives Market Momentum, But Major Resistance Looms (Sept. 12th)
http://investing.typepad.com/tradingstocks/2006/09/resistance_loom.html
** Look for a new Breakout Stock Highlights article to be posted tomorrow at the blog – there are several high quality breakouts in the last couple weeks.