HFL Portfolio Recap: 8-11-2010

The Hedge Fund Live book had a nice day relative to the action we saw in the broad markets.  The S&P 500 and the NASDAQ Composite got clocked to the tune of 2.82% and 3.01%, respectively, but, our book was able to hold on and close the day down 1.16%.  The hedge performed nicely as expected,  generating about $25,000 in profits as the S&P futures closed the day down 3.13%.  The rest of the top five winners came from the short side with WFR closing down 4.21%, BBVA down 7.77%, F down 3.95%, and SMRT down 3.22%.  All of the shorts reacted well today except for RIMM which continues to trade higher after we covered the majority of our short at the recent lows.  RIMM was one of the two names today along with WDC.

The top five losers on the day were CREE, AAPL, XIDE, GOOG, and IMAX.  CREE closed the day down 13.27% after reporting beating earnings estimates yesterday after the close.  AAPL got beaten back to the $250 level today and ended up closing the day down 3.55%.  XIDE was down 7.59% today and has quickly traded back to five dollars after trading at 6 for the last week.  GOOG was taken back below the 500 level today and closed down 2.38% at 491.58.  Last was IMAX closing down 5.18%.

The NASDAQ futures are trading down 1% in after hours trading after CSCO posted inline earnings but issued light guidance for Q1.  CSCO CEO John Chambers was skittish on the company’s outlook and the economic outlook in general.  CSCO is trading down 10% right now so keep an eye on CSCO and the rest of the big tech names tomorrow for market direction.

Industrials Wrap-Up: Flat on GE, BA, TPC

Today the industrials book had its worst performance since inception on July 6th 2010. The book finished down an abysmal $10,232 for a (7.26%) return on capital. Leading the way to the downside was ATLS Energy, our largest position which closed down over 4 percent. Today’s action put the stock below the critical support from the 200 day moving average. While many stocks have traversed their daily moving averages, ATLS had particular difficulty breaking above its 200 SMA. Now that it has proven to be a better level of resistance than support, the once constructive chart now appears ominous. Furthermore, we took down the book by approximately $80,000 and sold our core positions in Boeing, TPC, and General Electric. As is the case with ATLS, days like today are very deconstructive from a technical perspective. Selling these names until they confirm a move in either direction might be the best strategy right now. Finally, I only made one discretionary trade today and closed the day with a P&L of $48. I followed my plan of trading small size and booking profits and was pleased with the results.


As the kids like to say, my generation is more like holy shit! I sit here at 5:20 pm with the S&P emini futures down a full 9.25 handles and the NAZ futures down a full 23 handles and we just re-opened. Already a tough market today CSCO did nothing to help after the close and the market is absolutely puking right now.

Needless to say this is not a good thing for those that are long. Please refer to my long list of blogs saying to get short, including todays that ended with “Get short or Get Killed”. This market has a bad feel right now and after a high volume day, and a day that got absolutely no lift in this market, to get these futures down again is a bad sign.

Happy Trading!

Patience in a Volatile or Quiet Market

Yesterday we covered our short FXE in the financials book when it was down about 80 bps. Right now, the FXE is down 2.12%. Lesson learned: sit on  your hands when you have a gut feeling and don’t leave the trade just to book some profit.

Below is a drawing, or should I say doodle I did when the market was quiet yesterday. Typically, the saying is to sit on your hands when you’re in a trade with your risk parameters planned  or simply when the market is dead. When this is the case, why not release some stress and take a ball-point pen in hand and draw freely. I come from a family of doodlers, as my mom’s artistic background has influenced us to subconsciously draw in our free time.  While not quite Picasso, I find my doodlings to be pretty wild. I’ll be taking bids through tomorrow on the below picture. Thank you Zach for snooping around my desk and leaking the art to show the meaning of patience in a dull or stupid market.

Buy Sell, Pour Me Another Drink

good, bad, ……buy, sell…….things are getting better………things suck……….this cycle has been going on for quite a while……..double dip, moderate improvement……………………up,down…………..i love this ride, i want to get the hell off this ride………….pour me another drink, i guess i have to wait a bit longer for the next leg up of the rally.

So about these Hedge Funds….. by Rahul K.

A rush darting through my veins, and the epiphany thereafter – I knew that I was at where I’ve wanted to be for a long time. Rather than another interviewee sitting at a desk analyzing the various methods of a hedge fund, I felt more of a member of a team playing a game which was larger than life, and you bet I was enjoying it. My day at HFL was definitely one of the more captivating days of my life. Sitting at a workstation for an hour and a half in front of two mundane yet heavenly computer screens solidified my passion for finance more than ever. The only part that was disappointing- the screen was practically all red.  

Hearing about the various components involved in stock trading was enthralling, although parts of it sounded like random jargon. I was impressed by how everyone was kept informed for trades by the company’s practice to report about crucial news in their various assigned sectors to the rest of team. One article of interest was that Boeing’s Dreamliner production was shifted back for a while possibly until 2011, which meant that for me, “time to book a seat on that A380 baby”! Another piece that went around was that P.C. sales started to suffer from their first decline in eight years, which was okay because I prefer a laptop anyway. Then, unfortunately I was removed from “the seat”, because it wasn’t just any seat, and it was more disheartening than I had ever imagined, but the interview had to proceed.

Moving into the conference room, I met two people. Why call them people and not traders, or interviewers? I call them people simply because two people are what I saw. My interviewers- Jeremy and Marc couldn’t have been more realistic in presenting themselves during the interview process. I wasn’t asked stupid, pathetic, and redundant questions of no use, but was seen beyond my credentials as to what type of a person I am.

Why would it matter what I do on my personal time some may ask?  Why does it matter if my favorite movie is Hangover? Why does it matter if I never saw Revenge of the Nerds, and some old movie called Aliens, “which I actually just searched up and must say looks quite interesting”?  The answer- a person’s personality and his ability to connect with a team is a driving force in moving a team ahead. Quite frankly, I found the interview less of an interview and more of a regular conversation with two people that I look up to, which in my perspective was the best method to assess a candidate.  I believe that the optimum way to describe my overall reaction and first impression of my day at HFL has to be, beyond description.  

 P.S. Someone spilled coffee on my shirt and tie Marc. I hope you’re happy.

Interview Experience by Danielle L.

My interview today was certainly unique and unprecedented, to say the least.  Knowing that I was applying to work at a “hedge fund,” I assumed that my interview would be similar to every standard interview that I had heard about or experienced.  I imagined the questions that I would be asked, the responses that would be expected of me and even the suits that the interviewers would be wearing.  Immediately upon entering the office, I was pleasantly surprised to learn that my assumptions were far from reality.  I entered a large room, where I was instructed to sit in front of one of about twenty computers, arranged around a large conference table, and to simply listen and watch my surroundings.  Several interns (“freshman”) were working and speaking, into headsets, with experienced TFG employees, and I spent several minutes speculating and trying to get a feel for how the company worked.  After a short while, I was approached by Jeremy Frommer, who briefly skimmed my resume and stated that he would be interviewing me, after warning me that “the company is a tough place to work and a harsh environment.”  Marc Schwartz led me up two flights of stairs to the roof, where Mr. Frommer and his cameraman met us shortly thereafter.  Mr. Frommer’s assistant proceeded to video-record the entire interview, as we sat in the heat and discussed many unconventional interview topics, including how to improve my resume, guns, travel, movies, finance, TFG interns and cigarettes.  Throughout our discussion, I felt comfortable and relaxed, was genuinely intrigued about the company and its operations, but st respect and appreciation for the two men who had dedicated their time to speak with a financial neophyte.  After about an hour spent at TFG headquarters, I left, smiling and optimistic, having fully enjoyed a process that most people dread and are forced to suffer through.

Profit Potential

Every day the Market presents opportunities for profit that may or may not unfold.  The key is to recognize that potential and trade accordingly.  Ideally, I try to take the trade when I see it, get out quickly if it does not materialize, or scale in and out to optimize profits as the price action dictates.  Amazon (AMZN) provided a good illustration of that principal twice yesterday.  Early in the trading day, as the HFL Head Trader pointed out at the time, a falling AMZN came into a key price level; the 200 Day Simple Moving Average on the daily charts.  Although AMZN’s momentum was downward in a falling Market, it represented a POSSIBLE level of support that might provide a significant Profit Potential.  The upside to the previous day’s high (an arbitrary level within reasonable context) was $2.50.  Even with a fifty cent stop out, the opportunity was a five to one ratio.

 This key level held, within 5 cents, and became the Low of the Day.  The reversal started an uptrend that continued through the rest of the day until AMZN approached another key level at R4.  At the time, another POSSIBLE opportunity for profit, this time, a Low Risk Short.  AMZN was on an R3 Pivot Sell Signal at the time, rising towards R4, which was only 4 cents above that target High of the Day from the day before.  In this case, the Profit Potential did not become a Profit Reality.  Instead, the price essentially held and was flat for the remaining 15 minutes of the day.  However, the Profit Potential was there.

These two opportunities demonstrate that although the potential for profit may not always materialize, putting yourself into position to capitalize when it does, while protecting the downside if it does not, can be rewarding.

The S&P will NOT rally today

The last 3 session the S&P has managed to rally off the lows each time, closing at respectable levels. Unfortunately that is not going to happen today. There is too much pressure on this market and having watched the 5 hours (instead of sleeping) the market has barely made a whimper of a move higher.

I will be agressively shorting rallies today and perhaps holding these short if the selling maintains all day. I try to be flexible about my trades so anything is possible but I believe that this could be the start of the next move that test the super important 940 level on the S&P. Before that 1060, 1044, 1032 and 1008 are critical levels and should be stopping points on the way down.

Even though I am a technician, I do not see the fundamental backdrop for a good market. Earnings were solid but each economic indicator that comes out seems to disappoint traders, England is lowering growth forecasts as well as China. The overriding poor economic news is going to drag this market lower and there is not a thing that Bob Doll and all the other permabulls can do about it.

Get short or get killed!

The Dog Days of Summer

And welcome back (bear) traders!  Following yesterday’s unBEARably quiet day in the market, today’s session was met by all the returning traders, bracing themselves for the FOMC statement ahead at 2:15p.  The Spooz closed down just 60bps, which eased whatever fear that may have been instilled in my after the initial weakness off the open.  We are still up for the month of August and the daily chart of the Spooz suggest that the bulls and bears are still duking it out right above the 200 day moving average.  The light volume we’ve been seeing gives favor to the bears; however, the fact that we are sitting above the 200 day moving average evens out the fight between the bulls and bears in my mind.  I don’t think we will see a real clear direction until the dog days of summer are over.  The summer is just buying time for investors who, like fund managers sitting on the sidelines, have no idea what to do.  So I will wait it out.  I cannot give much credence to light volume rallies so I have no choice but to wait for the end of the summer when everyone is back on their desks and hence forced to face the reality of having to make a decision.