What a Week! What’s Going On?

The market really got clocked, down 7 - 10% for the major US indices. However, GCM's portfolios held up perfectly as we have been in cash for nearly 3 weeks and avoided most of this mess. The small "market" short positions that are held added value as well. For the week, we ROSE about 2.5% and dodged a major bullet.

The week started out badly with a near 8% drop on Monday. Lots of backing in filling after that but by weeks end nearly every major US index was at a new low. Late session breaks in the S&P and confirming declines in the Russell 2000 (and Mid Cap, Dow, etc.) are certainly troublesome. But what is most troublesome is the failure of the market to rally in the face of the House passing THE bill. If they can’t muster a rally off of that then what’s next?

We’ll stay in cash, hold those small short positions, and be patient for what may be a great buying opportunity. But for now we are in a good place!

Stay tuned…and have a nice weekend! Please contact me for further or a more personal discussion about how Geller Capital can help with your investment portfolio.

Excuse That Momentary Lapse of Reason

OK, so I did say there were some reasons to consider going long but I also said I was staying out of it. That's where we've been for several weeks and where we are now, mostly cash with a small short bias in some cases. Yes, some of those big banks look good and they should: the Gov't bailed them out and they are going to make sure they stay afloat and (become more) profitable. But the rest of the market looks terribly weak. Advances/declines & highs/lows look lousy and indicate poor demand for stocks. To boot, several indices went to new lows today: Mid Cap, NASDAQ, Small Cap, and Utilities to name a few. The S&P and Dow are close but holding. So far the volume isn't extreme and some might say that this break is not a "major" one. To that I say "nonsense". So much damage has been done on low volume and I expect that to continue. We have yet to see that massive wipe-out day which might indicate an end to the selling.

The Small Cap break may be significant because that index had held its ground around 650 since January. It finally broke through to a new low today. Usually when an index holds a level as this one did - 4 times over 10 months - it is deemed significant. However, leading into today's break to new lows, the Small Cap had already fallen 15%. It may be unrealistic to expect another major decline from here without some backing and filling. After such acton it may be that the index slides again or fakes out and rallies. But I expect more weakness and that decline could play catchup to the S&P 500.

With the market down so much with the House vote in front of us I think it may be smart to think of the upside. The market seems to be discounting failure. And why not? Our leaders seem to have failed us from many corners and why should they succeed with this massive proposition? But when everyone is leaning on the market it often surprises...just a thought. (I keep trying to think of reasons to go long...) If the House turns it down again, then all hell should break loose.

Stay tuned - it will get more interesting.

Changing Sentiment?

In my last post I wrote "the fact that we aren't much lower suggests that the street may be thinking that this could be much worse. Maybe the Govt's steps are working in that we are not falling apart. Its something to think about." Here are some things to think about:

- As the market possibly capitulated these past few sessions it is worth noting that the bank stocks and other financials that got us into so much trouble were trading to the higher end of their ranges. See BAC, JPM, & C. I was not bullish on these stocks but they do look potentially bullish.
- Market weakness the past few sessions did not make a new S&P low. Bad economic news and concerns about the House vote may be discounting things that are not as weak as anticipated.
- The Russell 2000 has not made a new low since March 2008. This is the fourth trip to the 650 range and if we hold that expect a nice rally.

However, the market still acts poorly. Its not difficult to think about the S&P500 between 900 & 1050. I have little reason to take money from cash to go long. Maybe that's reason enough...