Last week, significant damage was done to the technicals of approximately 1150 stocks (about 1/3rd of all the stocks I cover at HEDGEfolios.)

For the last month or so, I have had minimal difficulty going through all the charts.   That changed.  This weekend has been one of the most challenging I can ever remember and rivals a few weeks during 2008.

Since mid-October, I have been bullish on the short term.  Now I am very cautious.   Unless the bulls show up in convincing fashion in the next few days (if not hours!), this could get ugly.

PLEASE PAY VERY CLOSE ATTENTION TO YOUR PORTFOLIOS.

HEDGEfolios stock performance for 2008 (through 12/31/08 close) was up 30.51%.

Over the same time period, the S&P 500 index was down -38.47%.

At the end of December, the HEDGEfolios universe consisted of 3,287 stocks.

Commentary: 2008 was the toughest year for the stock market since 1931 and considering the record volatility, I am happy with the consistent performance of HEDGEfolios which delivered a gain of 30.51% for the year.  Other than November, HEDGEfolios advanced each month at a slow, but steady pace.  It might be easy to assume that this outperformance and low variability in monthly returns were a result of maintaining more DOWN signals than UPs for most of the year.   That assumption would be wrong.  The HEDGEfolios Timing Indicator had a bullish reading 38 weeks (73%).  Furthermore, the average number of UP signals each week was 65% and the year ended at 83% UPs.  While I was happy with the overall results, I certainly could have done better.   I went bullish too early in mid-October and consequently, only 32% of all UP signals at year’s end were winners.   Furthermore… each year I attempt to reduce turnover and during 2008, I failed at that goal as turnover increased to 565% compared to 430% in 2007.  Good luck with your investing in 2009.

Here is the chart of 2008 HEDGEfolios performance versus the S&P 500:

Prior Years’ Performance:

• 2007, HEDGEfolios performance was +21.78% vs. + 3.55% for the S&P 500 index
• 2006, HEDGEfolios performance was +25.54% vs. +13.62% for the S&P 500 index
• 2005, HEDGEfolios performance was +19.99% vs. + 3.00% for the S&P 500 index
• 2004, HEDGEfolios performance was +31.19% vs. + 9.00% for the S&P 500 index

Disclaimer: Nothing in my performance quoting is intended as an advertisement or in any other way meant to encourage anyone to subscribe to HEDGEfolios. These performance figures have not been audited or verified by an outside party and are NOT in compliance with the CFA’s AIMR Performance Presentation Standards. They don’t net out any transaction costs such as commissions or management fees and are not a total return calculation as I do not include dividend yields or any compounding factor. These performance figures cover a hypothetical portfolio of the entire HEDGEfolios stock universe with an equal weighting of each security. The calculation is simply the cumulative total of all gains and losses from the signals during the period in question.