Portable Alpha Daily

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Tuesday, March 06, 2007

A Correction Correction?

Don’t hold your breath. Last night’s modest recovery in Asia was nice, notably because our Model ETF portfolio has maintained its 25% allocation in Asian funds via EWJ and ITF. But has anything really changed with regard to the catalysts for last week’s sell off? Is there any reason to believe that the “correction” is over? In my opinion, absolutely not, which is why I’m maintaining our bearish stance, and maintaining the high cash levels and hedging our long funds with smaller inverse allocations.

In fact, I think we’re entering into the dreaded range-bound market, the only market phase I whole-heartedly loathe. We might see modest rally’s throughout the week only for the traders to take profits on Friday, say around 2:00. It’s quite frustrating for quants like us since analytical models can rarely stay ahead of the very short-term up’s and down’s. The only option is to basically sit tight and wait for the market to emerge from it’s range, which might not happen until Q107 earnings season starts about a month from now. Oh joy.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since December 8th.

Asset Allocation – AAS Model Portfolios have 50% cash allocations and mixed long – short allocations.

Beta Exposure and Portable Alpha Generation
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top Rated Major Market Derivative – No buy recommended major market investments

Top Rated Style-Box Derivative – No buy recommended style-box investments

Top Rated Sector Derivative – No buy recommended sector investments.

Today’s Top “Buy” Recommended Stocks

Vulcan Materials Co. (VMC 10/31/06)

The Goodyear Tire & Rubber Co. (GT 8/24/06)

Hyperion Solutions Corp. (HYSL 2/16/07)

Weyerhaeuser Co. (WY 1/3/07)

Blue Coat Systems Inc. (BCSI 3/1/07)

TXU Corp. (TXU 2/23/07)

Temple-Inland Inc. (TIN 12/5/06)

Ryerson Inc. (RYI 12/7/06)

Belden CDT Inc. (BDC 1/19/07)

Career Education Corp. (CECO 1/10/07)

Today’s Top “Sell” Recommended Stocks

New Century Financial Corp. (NEW 6/13/06)

Fremont General Corp. (FMT 12/29/06)

Meritage Homes Corp. (MTH 12/18/06)

Beazer Homes USA Inc. (BZH 1/25/07)

Daktronics Inc. (DAKT 2/14/07)



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