What a week

Wow, that was a crazy week. Equity markets plunged, snapped back, and in the end had slight gains. Fixed income and currency markets were somewhat similar, as were many commodities. My portfolio ended the week with a 3.7% gain, which is not bad given the volatility. At Wednesday close I was up about 12%, but most of that evaporated in the massive rebound on Thursday and Friday. Looking back on the week, I was both unlucky and lucky (let's face it, luck is an important component of short-term returns). On Wednesday evening I closed out my long gold equities position for a nice 25% one day return. Gold looked like a nice buy on Tuesday, but I had no idea it was going to spike like it did. I also closed my short EAFE (EFU) position near the high.

On Friday, I had bad luck. I wanted to re-enter my short EAFE equities position. My first quote on EFU was about 108.50, and after 15 mins of system problems with my broker, I was finally filled at about 113.50. This is about $20 less than I sold the same position for earlier in the week, but it also turned out to be the high for the day, as the price slowly slid to about $105. The result was even more annoying as I broke one of my rules -- do not trade in the first hour after the markets open. Sometimes lessons have to be re-learned.

Overall, however, I amhappy with how my portfolio performed, and I am happy with my positioning for next week. Apparently, Thursday/Friday's rally wasw the biggest gain in the DJIA since October 1929, in the middle of the great crash (in 1929, the market subsequently sold off another 25% or so). Classic bear market rally. Although the bulls are back in the limelight, after that sort of rally, I do not see the markets gaining again this week. The technicals are also still bearish. SPX bounced nicely off its previous support at 1260. MACD is still negative. The only two sectors up this week were the two that were most oversold previously -- energy and financials. Despite the massive gains on Thursday/Friday, neither day had >90% of stocks up. Volume was not great.

The fundamentals also remain the same. Sure, we are not going to have a financial meltdown now, but that was never priced into the markets. The economy is just as bad as it was last week, and the government/Fed bailout is not going to have much impact at all in the short-term.

To be clear, I am not predicting a crash, and we may not see a break of last week's lows. But the market is almost certainly going to go lower again before it moves higher.

I am generally happy with my positioning. I -may- re-enter my short energy equities position Monday as the stocks have rallied considerably over the past few days. But, at this point, I do not feel particularly strongly about anything else.

MARKET POSITION: EQUITIES - short SPX (5 units); short S&P/TSX (3 units); short EAFE (3 units); short real estate (2 units); cash (5 units)