My non-index shorts have not been much of a help the past few weeks; I've either been stopped out for quick 1-3% losses, or my gains have been of a similar nature. I am intermediate term bearish until/unless the S&P 500 can regain a lot of lost ground, but am hesitant to do much with the indexes here except on an intraday basis AFTER the morning knee jerk reaction to the data series we will have coming our way.
Hence, shorting bad individual charts remains preferable. I just need to find some that will work this time around. Time to try a new basket.
Symantec (SYMC) is choice #1. It spiked with the Intel (INTC) purchase of competitor McAfee (MFE) and five of the past six session it has snuffled up to that 50-day moving average, so there is a clearly defined area to stop out from. I am short a 2.5% allocation. (Click to enlarge)
Any company private equity has larded with debt as it raids for cash is a pleasure to short. (one of the most eye opening stories about how Wall Street is all about enriching the few at the expense of the many was this BusinessWeek article from 2006. I encourage all readers to check it, and this one from the NYTimes, out to see how private equity is doing a good job at helping to ruin America.)
But I digress! This is only a technical short. I will make an attempt at Burger King (BKC), which has struggled with the 50-day moving average the past few months. A move over yesterday's highs will be a good place to stop out.
Homebuilders have rallied sharply the past two days on the exact same logic as the weekly jobless claims, i.e. "it can't get worse than this!" This might be true to a degree; the housing figures we have seen the past 48 hours are once-in-a-generation bad. So now I suppose they can rally on "2nd derivative improvement." That was also the logic in 2007, 2008, and 2009. I don't buy it.
Toll Brothers (TOL) -- welcome to the jungle. My stop out should be obvious: a move over the 50-day, which has been the ceiling for many months. The biggest risk in housing stocks going forward, in my opinion, is the government in its desperation will roll out yet ANOTHER tax credit. I expect one in 2011, actually, but if the Dems do one ahead of the November elections they will get hammered.
So there we have a 7.5% allocation short in those three names, all at low risk areas with stop losses in a close range. Now we'll wait to knee jerk react to all the news coming in the next six days. Don't forget, Ben Bernanke waves his magic wand tomorrow as well.
Disclosure: Short all names mentioned in fund; no personal position