|
The Stock Trading Advisor’s “From
the Trading Turret”
From: R. A. Christy
Editor, ‘From the Trading Turret’
President/CEO, Christy Investment Group
http://www.christyinvestments.com
Date: February 6, 2008
I know that this time of year brings many mixed emotions
for fans of all sports. The NFL season just ended and baseball is
gearing to spring training and college basketball is working its way
toward March Madness. While some are sad to see football end, others are
looking forward to the rest of the year.
Just as the sporting seasons change, so do the seasons in
the financial markets. While this is less predictable, the market does
rotate from periods of high risk to periods of low risk. As painful as
corrections can be, the ensuing period is often one of relatively low
risk and above average upside potential.
The primary indicator that I use to determine the overall
level of risk in the market is Bullish Percent. This indicator gives me
a pretty good idea where we are risk-wise in the market and whether it
is rising or falling. It also lets me know when we are of Offense or
Defense.
For the past month and a half, we have been on Defense
focusing on wealth preservation. This position has helped us withstand
the day to day volatility and to weather the storm.
We did this in a number of ways. First, we trimmed
positions in sectors where we had an overweighting. We utilized various
stop loss tactics and we took on 2 different short positions [General
Motors (GM) and Under Armour (UA)].
Earlier this week, the NYSE
Bullish Percent flipped to Offense. Below is a graphic of the NYSE BP.
For those of you not familiar with Bullish Percent, Xs represent rising
prices and Os represent declining prices.
During the sell-off in January, the Bullish Percent
dropped to level not often seen. The move into Xs at this point gives us
the opportunity to pick up equities at one of the lowest risk levels
that I have ever seen.
Is this the bottom? Only time will tell. If you turn on
the TV or radio, all you hear about is how negative the news is. From
the nightly news to the newsstand, all of the talking heads are touting
that the worst is yet to come.
The latest Newsweek cover shows a long road with
the title of “Road to Recession” on it.
The Economist is out with a
headline that says “It’s rough out there”.
These are the types of images and headlines that send the
masses into a selling frenzy. One thing is certain – we see the most
negative news at market bottoms and when indicators such as Bullish
Percent are at such low levels.
The last time we saw magazine covers like we’re seeing
now were back in 2002. BusinessWeek’s “THE ANGRY MARKET” in big,
bold red letters with a picture of a growling grizzly bear on it is a
prime example.
These types of headlines shouldn’t worry you nor should
they affect the way that you manage your portfolio. The markets are
forward looking and by the time a recession is officially declared, the
markets have most likely bottomed and have started their next leg up.
Market conditions (great buying opportunities) like this
come around only once every three to four years. Think back to the
market bottoms of October 1998 and October 2002 and the buying
opportunities that came also.
To be honest, I have no way of knowing how this will play
out going forward. I also don’t know if the bottoming process will be
orderly or a violent “V” shape.
What I do know is this – the
indicators point to OFFENSE and that this is the correct course of
action to take. I am not a predictor, but a reactor and it’s time to put
the defensive playbook on the shelf and to pull out the offensive
playbook.
In the image above you will notice some of the offensive
plays that are appropriate for right now. Last week, in the accounts
that are “option approved”, we went long the S&P 400 Midcap Index. We
bought the MDY June 135 Calls in anticipation of higher prices.
This kind of position allows us to increase exposure
without tying up a large chunk of capital. Over the next couple of
weeks, we’ll close out our “shorts” and begin redeploying our cash
position into the sectors showing the most strength.
If you haven’t reviewed your accounts in a while, now is
a good time to do so. Make sure that your account is in the Offensive
(wealth accumulation) position.
If you have any specific concerns you would like to
address, including any individual strategies, just send me an email and
we can discuss them. Also, we are at a major turning point and if you
know of someone who would enjoy reading this, please forward it to them.
That’s it for now. Look for another Turret in a couple of
days with a list of the best sectors in terms of risk.
Robert A Christy
The Stock Trading
Advisor
P.S. Please fee
free to forward this to your peers, friends and associates you think
would benefit from its contents. They will thank you for it - and so
will I!
**********
The Stock Trading Advisor’s ‘From the
Trading Turret’ is an OPT-IN
e-letter only. Sign Up to receive your own free copy of The
Stock Trading Advisor’s ‘From the Trading Turret’:
http://www.christyinvestments.com. Please be assured we do not spam or give
personal information to third parties--ever.
**********
About 20% of e-mail is never received due
to spam filters.
If you have a spam checking program
installed on your computer, please be sure to add
rac@christyinvestments.com to your "safe list."
**********
R. A. Christy is a professional stock
trader, money manager and author. Mr. Christy is the President CEO of
Christy Investment Group, Ltd., a registered investment advisory firm.
He is also the Managing Partner and Portfolio Manager of Plato Advisors,
LLC. At the time of publication, Mr. Christy may from time to time write
about stocks in which he, Christy Investment Group Ltd or Plato Advisors
LLC has a position. In such cases, appropriate disclosure is made.
Under no circumstances does the information in this column represent a
specific recommendation to buy or sell stocks. Mr. Christy appreciates
your feedback and invites you to send it to
rac@christyinvestments.com.
The Stock Trading Advisor
c/o Christy Investment Group
P.O. Box 625
Alpharetta, GA 30009-0625
To unsubscribe or change subscriber
options, please contact us:
online:
http://www.christyinvestments.com
by email:
info@christyinvestments.com
by fax: 1-678-302-4348.
© Copyright 2008 RA Christy
|
