Weekly Wrap

The Portfolio

The portfolio got a reprieve from hitting another all time low this week recovering slightly and erasing the losses of the previous week. I continued to trade the system in individual stocks and using ETFs to capture themes in commodities and the broad market. My position in coal stocks, via ICO, continues to stabilize with slight bias to the upside even as the price of natural gas continues to plummet while oil continues its very volatile trade. The volume this weak was anemic and will probably be the same for the next week or two, that would lead to volatility without major impact on the long term trend. XCO have stabilized a little bit but continues to be a broken stock. I reduced my position size this week and had sold covered calls against part of the position earlier, so I continue to be cautious on this stock with little patience for more downside from here.

I do not anticipate much change in the rest of my positions. DOM, an energy trust is going ex-dividend this week and running up in anticipation of the dividend. I have a limit order to sell if the run-up continues. The stock yields around 12% and I do not intend to let it go completely. However, these stocks have been dropping after the dividend, in addition to the natural drop due to the dividend distribution. So the current plan is to either sell it on strength and buy back in few days, or just hold on to it if it does not hit my limit order.

The Market

The S&P 500 was down for the week though it finished strong on anemic volume. I would've rather it closed below the 50 day moving average or above the high from August 11th so that we can establish a clear direction. I am still of the opinion that we head lower from here but that the July lows hold. As such I continue to hold my short ETF, SDS, with an eye to close it in the next few weeks. I hold the same opinion about the commercial real estates and thus I am holding SRS for a short term trade.

Small caps and tech continue to behave well, building a base here indicating that they will lead the next leg up in the market.

Oil is going through crazy volatile trade. Back in the first week of June when we had crazy volatility I said that this is an indicative of a top very similar to the top in the Chinese market. Oil did not disappoint me as indeed that was a top similar to the Chinese market's topping process from back in the Fall of 2007. The volatility here indicates a strong directional move to come. My personal opinion is that we run up a little bit more before we drop another 20-30% in oil. However, a weak close below last week's lows would indicate that we are going straight down. It looks like some hedge funds are duking it out trying to drive each other out of business. Best to keep position size small here and monitor the situation till it resolves itself in one direction or another.