Well, I agree and disagree. I have been shorting the Qs as well, but covering for gains and shorting again within its trading range. I have done better with the Qs than DIA because the DJIA keeps powering ahead with few pull backs. I did cover DIA once for a profit, but the latest run has gone straight up. I would think that makes DIA more vulnerable to a correction, but maybe I'm wrong.
A few comments on our long positions. I am not directing these comments at anyone in particular, and sincerely hope that nobody gets that impression or gets offended. The market has made big gains the last couple of months. Our long positions have been open for an average of 67 days. Here's how various indexes have done from 11/1/03 to today, Actually if you go back to the beginning of October, which is approximately 67 days, these indexes have done even better.
DJIA: +3.7%
S&P 500: +2.5%
S&P 100: +2.9%
NYSE Composite: +4.3%
Nasdaq Composite: -0.6%
Nasdaq 100: -1.2%
Russell 2000: +2.0%
SOX: -4.4%
Z Portfolio open positions: -3.1%
This says that we are holding stocks that have poor relative strength versus nearly every index. If we were holding semiconductor stocks, I'd say that we were doing ok, and had just bought the wrong sector. That isn't the case because our stocks are underperforming even the Nasdaq Composite, which probably most closely matches our stock selection.
Let's look at our stocks closer. Here's how our open positions break down by sector. The number in parenthesis is the paper gain/loss for stocks in that sector.
Technology: 44.4% (-19,569)
Healthcare: 24.4% (-420)
Capital Goods: 11.4% (+1,424)
Utilities: 9.0% (+1,795)
Services: 3.8% (+3,075)
Financial: 3.5% (+196)
Fund: 3.5% (-1,030)
Total: 100.0% (-14,529)
Note: Multex categorizes AMZN as services (Specialty Retailer) and LEXR as consumer cyclical (Photography). I included them in technology because I think that most people consider them technology companies. Those two positions aren't big enough to skew the results even if one disagrees with including them with the technology stocks.
This data concerns me for two reasons. One, we are heavily weighted in technology stocks that already represent more than 100% of the loss in our open positions. Two, if the Nasdaq continues to correct (or underperform other indexes), does it stand to reason that our open positions in aggregate will go further in the hole (or continue to underperform)? Even if the Nasdaq recovers, does it make sense to move this money into sectors that have better relative strength? I'm not suggesting that we sell all of our technology stocks. One thing that could happen is that technology stocks could outperform sectors that have better relative strength today. In other words, the sectors that have been strong the last two months may not be the best sectors for the next two months. I am bringing this up only to get some discussion going. Maybe if everyone sees the data above, it will bring out some things that we wouldn't have seen otherwise.
I'm signing off for the night. Y'all have a nice evening. I can't wait until I get my Internet service back in January! |
