• Thanks for reading my diary and enjoy your evening.

I am exiting the day about 20% net short the market (without including my sizable bond short).

Thanks for reading my diary and enjoy your evening.

• How much to buy?

My mavens on the floor of the exchange see only $40 million to buy at the close.

In terms of sectors to buy financials are at $50 million, and information technology is at $35 million. Sectors to sell include energy at $50 million and industrials at $27.5 million.

On individual stocks, DuPont (DD) and Verizon (VZ) both have $50 million to buy while AT&T (T) has $50 million to sell.

• Here is a list of earnings reports that I will be closely monitoring.

Again, below are some of my portfolio holdings or monitored stocks (and their earnings expectations) that will be reporting over the next week.

Earnings of Interest

Source: Bloomberg

View Chart »View in New Window »

And here are the potentially important profit reports out after the close (with which I am not involved).

Tonight's Earnings

Source: Bloomberg

View Chart »View in New Window »

• A moment of silence was observed at 2:50 p.m. EDT to honor those affected by the Boston Marathon bombings.

At 2:50 p.m. EDT this afternoon, a moment of silence was observed in memoriam of those lost and injured at the Boston Marathon bombings.

Boston strong!

• I'm back!

After covering under $155 earlier today, I am back shorting SPDR S&P 500 ETF Trust (SPY) in a more aggressive way at $156.35.

• It has a poor reward vs. risk on the long side.

I am adding to my Yahoo! (YHOO) short now.

It has a poor reward vs. risk on the long side, imho.

• Run, don't walk, to read Tim Collins' piece on divergence.

Good piece on divergence by Tim "Not Judy or Phil" Collins below.

I plan to expand on his theme in my opening missive tomorrow.

• Here's a whiff.

Breadth as of 12:45p.m. EDT:

• S&P 500 -- 239 advancers to 252 decliners
• NYSE -- 745 advancers to 1,085 decliners
• Nasdaq -- 833 advancers to 1,239 decliners
• Russell 2000 -- 607 advancers to 1,252 decliners

Volume on the S&P is 8% lower than the  past 10-day average, even with the past 30-day average and 22% lower than Friday's volume for this time of day.

• The company announces a special dividend.

Northwest Bancshares (NWBI) has announced a $0.12-per-share special dividend.

• It's a trader's market.

For emphasis: We are in a trading-sardine market, not an eating-sardine market.

See my opening missive, which describes my tactical response to this backdrop.

• Perhaps where there is smoke there is fire.

I continue to add to Northwest Bancshares (NWBI) with a price limit of $12.38 after the weird price action in premarket trading.

Perhaps where there is smoke there is fire.

• I am exiting the position at $154.95.

I am covering my SPDR S&P 500 ETF Trust (SPY) short from this morning at $154.95.

• I am not surprised.

Existing-home sales for March missed consensus expectations.

I am not surprised as last Wednesday I suggested that housing would take a pause.

Back in early March 2012, I adopted an out-of-consensus and upbeat outlook for the U.S. housing market, suggesting that the residential real estate market would likely embark upon durable recovery that could last throughout the decade.

Recently, I have written that there would likely be a pause in the U.S. housing market, even though a continued recovery in the out years is likely.

The significance of this observation (if correct) is that the domestic recovery is now heavily reliant on housing to sustain growth. Without it, a more dramatic deceleration (from consensus) in the rate of real GDP (from the inventory-replenishing first-quarter 2013) is likely.

Data over the last month suggest that my concerns of a pause in the U.S. housing markets might be realized during the important spring selling season:

• In March, multifamily housing activity is improving while single-family housing starts are falling, a cautionary near-term signal. (Here CNBC's Diana Olick discusses the issue of multifamily vs. single-family construction.)
• Meanwhile forward-looking building permits last month began to weaken.

Ace real estate observer Mark Hanson chimed in this week in support of my view: 

In breaking down today's starts numbers several things popped out. Obviously, the headline is that multi-family carried the data series, which is correct.  But what got lost in the noise is how weak SFR starts were on an absolute basis ex the Southern Region: 

1) Lower-end Southern region responsible for 66% of March YoY growth in SF start volume

2) Ex-Southern region starts were only up 4k houses, or an increase of a paltry $1.2bb in resi investment YoY

3) Northwest region down 8% YoY to 2nd lowest level on record

4) Western starts were up 3k units YoY while Midwest starts were only up 1k 

Bottom line:  The "US housing market recovery full-blown consensus opinion" -- and obscene equities market gains in the homebuilder stocks and alike -- is centered on a revival of single-family house sales and prices that people live in;  builders fat and happy with more demand than in years;  and forecasts straight up and to the right out as many years as analyst want to model. But that isn't what the data says.

In fact, March Starts data continue to confirm the structural demand deformity of the US housing market -- and avoidance of bubble-year de-leveraging in favor of can-kicking through loan mods and foreclosure "laws" -- that has been lost amidst the flood of malinvestment by new-era institutional housing market investors into rental SFR's and multi-family. After 6 years of ZIRP, 4 of QE, and 1.5 of Twist which brought about the lowest mortgage rates ever, SF housing starts remain 'stuck in the mud'. 

1) March 2006 to 2013 starts data...only 4k houses nationally ex-the Southern region.

2)  SF Starts remain stuck in the mud. There is zero evidence of "escape velocity" or a "durable" recovery when looking at these region data in the context of "post-crash".

• Green Mountain Coffee Roasters shares are breaking down.

Green Mountain Coffee Roasters (GMCR) reports on May 8, and the shares appear to be breaking down now ahead of that release.

• Strange.

I have no idea why Northwest Bancshares (NWBI) was trading up $1.00 in premarket trading.

It was quite strange.

That said, I just paid $12.38 for some more.

• I have no plans to buy the weakness.

In "Imagination at Work," I dissed General Electric's (GE) results and opined that the shares would move lower despite the market's immediate positive response to the recent earnings report last week.

I see GE as dead money and I have no plans to buy the weakness.

• I had no clue why futures were higher in the first place in premarket trading.

I pressed my SPDR S&P 500 ETF Trust (SPY) short all morning, as I had no clue why futures were higher in the first place in premarket trading.

• Unfortunately, I am not long Microsoft.

If I were long Microsoft (MSFT), I would sell it into the news.

Unfortunately, I am not long Microsoft.

• Always consider your own time frames and risk profile/tolerance in determining the suitability of exposure.

"We are not permitted to choose the frame of our destiny. But what we put into it is ours."

-- Dag Hammarskjöld

Late last week, I mentioned that we are likely to face a lot of volatility in 2013:

Volatility and disorder are likely a more constant state in a global economy that is experiencing a new normal that remains on tenterhooks, still experiencing the deleveraging and tail issues stemming from the last down cycle and, as a result, only experiencing a fragile trajectory of growth.

To me, it's not good volatility; it's the outgrowth of uncertainty regarding economic growth and an unhealthy dependency on the policy of our monetary (Fed) and fiscal (our leaders in Washington, D.C.) authorities.

Regardless of whether volatility is heightened or reduced (or good or bad), among the three most important elements of one's trading and investing should be your time frame, appropriate exposures and risk tolerance/profile.

We all have different quotients of the above factors.

I will deal with two of the three factors this morning: time frames and exposures.

To begin with, I view the market as a continuum in which one's time frame is an essential part of trading and investing.

As a matter of principle, I rarely have a gross exposure (adding my long and short gross exposures together) that exceeds 100%. On average, when I am bullish, I am typically as much as 65% net long (deducting my shorts from my longs as a percentage of the portfolio), and when I am bearish I am typically as much as 45% net short (deducting my longs from my shorts).

In hedge fund circles, these exposure ratios place me in a conservative minority.

Depending on where we are in the market continuum determines the percentage of my portfolio that is committed to longer-term investments (both long and short) vs. shorter-term trading rentals (again, both long and short).

Under a normally trending (and upwardly sloping) market (and dependent upon my degree of confidence), I would have as much as 67% (when fully invested) of my portfolio in investment holdings (with a majority of longs), and I would have as much as 33% of my portfolio in trading rentals (again, a majority of longs).

But let's add two more market scenarios and characters -- namely, a range-bound market and a downwardly sloped market -- to the normally trending and upwardly sloping market getting us to three market scenarios.

Again, I change my exposures (investing vs. trading) dependent on the outlook:

1. Range-bound market. If I conclude that we are likely to be in a range-bound market, I would be more inclined to trade stocks, increasing the percentage of my portfolio committed to trading and reducing my exposure to longer-term commitments. In this case, I might be only be as much as 40% committed to investments and perhaps as much as 60% in opportunistic rentals, with a mix of both longs and shorts.
2. Upwardly sloped market (normally trending). If I conclude that we are in an upwardly sloping market, I would be more inclined to be a long-term investor in stocks. In this case, my portfolio might be as much as 60% to 70% (dominated by longs) in investment positions and 30% to 40% in trading-oriented positions (again, dominated by longs).
3. Downwardly sloped market. If I conclude that we are in a downwardly sloping market, I would be more inclined to be as much as 60% to 70% in investment positions and 30% to 40% trading-oriented positions. In theory, my portfolio, reflecting a downwardly sloped market, would be dominated by shorts, but, in reality, it's not practical, as the asymmetric risk/reward of short sales would reduce the overall commitment to shorts even in a correcting market phase. While I would likely be net short in both investment and trading positions, my degree of confidence in the market outlook would dictate that net exposure.

Let's now dig deeper into time frames.

To simplify, here are my definitions of time frames (note: yours may be different):

• A short-term trading position (rental) can be as little as a few hours or as much as several weeks.
• An intermediate-term trading or investing position is typically a month to 12 months in duration.
• A long-term investment position is typically greater than 12 months in duration.

It is important to recognize that sometimes very short-term positioning seems to contradict a market thesis -- I see this clearly in subscribers who ask perplexing questions in the comments section -- but adopting a near-term positioning that is at odds with an intermediate-term view may not be that illogical.

Let me explain.

I may do this in response to a number of different stimuli. Maybe the market has temporarily overshot to the downside and has become oversold. Perhaps the reason for the market's slide is not justified or an external shock (e.g., the Cyprus chill, a terrorist attack, geopolitical risks/events, a failed or surprising election outcome in Italy, etc.) contributed to the drop, and I expect the conditions to be remedied/addressed.

Or it might simply be my lame attempt to game or react to Mr. Market's volatility.

As an example, I started out last Monday by outlining an intermediate-term bearish thesis. I was short SPDR S&P 500 ETF Trust (SPY) but covered my short hedge a few days later at about $154.90 -- after the market's bad schmeissing earlier in the week. (I began to reshort late Friday at approximately $155.50.)

As I see it, my job is to be transparent in analysis (of markets, sectors and individual stocks) and also to be transparent in my entry/exit points. Along the way, I try to provide other lessons -- for instance, in risk control, as your investment/trading batting average does not necessarily link to superior returns.

But what must be recognized is your risk profile and time frames are likely different than mine (or anyone else's), so when I chronicle my investments and trading rentals, it is important to have the proper perspective discussed in today's opening missive so that you can better understand my tactics and strategy (which may or may not be appropriate to you).

Always consider your own time frames and risk profile/tolerance in determining the suitability of exposure and how you weigh your involvement in trading vs. investing.

• I recently covered my Caterpillar short.

Serial overpromiser and underdeliverer Caterpillar (CAT) misses and guides lower -- something the company has been doing for years.

Mr. Market knew that the company would miss again.

Caterpillar's shares have ridden the roller coaster down.

I suspect it is close to being washed out in the high-$70s.

I recently covered my Caterpillar short.

• Rumor has it.

Yesterday I tweeted a rumor from my gnome that Apple's (AAPL) Tim Cook might be cooked and heading for the exit door.

Here is some more on the subject.

• I am rebuilding my short.

I am continuing to reestablish my SPDR S&P 500 ETF Trust (SPY) short (at $156.03) that I had previously covered early last week.

• GE and Apple are under analysts' microscopes.

JPMorgan downgrades General Electric (GE) to Neutral.

As I mentioned on Twitter yesterday, Citigroup echoes the new consensus view that Apple (AAPL) will miss and guide to a much lower second quarter than has been expected.

Let's take a peek at the markets.

Overnight and this morning, Mr. Market appears to have made a continuation bet:

• S&P futures +9;
• European markets +;
• euro +;
• crude +0.70;
• gold +36; and
• the 10-year U.S. note yields 1.72%.

Several observations:

• Thus far, first-quarter 2013 revenue is weak, and profits are only slightly better, owing to cost-containment measures.
• Profit margins are beginning to mean revert.
• Businesses are retrenching, and hiringsand capital spending are constrained. (See IBM's (IBM) results reported on Thursday night).
• It is clear as day that consensus 2013 S&P 500 forecasts are too optimistic.
• Italy elects an 87-year-old president.