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From: Robert A. Christy
Editor/Publisher, ‘The Intelligent
Trader’
http://www.christyinvestments.com
http://www.intelligent-trader.com
Date: July 28 2008
This weeks’ ‘Long and Short of It’.
First the Bullish Percent numbers:
BPNYSE Xs @ 36%
OFFENSE
BPOTC Xs @
30% OFFENSE
BPSP500 Xs @ 40%
OFFENSE
Batman Retakes Gotham
I am a fan of the caped crusader. The
movie opened last week to great reviews and is set to become one of the
biggest ever. Just the thought of Batman cleaning up Gotham City has
sent the market into a tizzy. Our Bullish Percent indicators have
flipped and the OFFENSE is back on the field. This means that risk has
abated and we are moving away from the risk preservation mode into the
capital appreciation mode. This doesn’t mean that we’re going headlong
into this and becoming fully invested. We still need to pick and choose
our spots and take what little advantage the market gives us. Bernanke’s
role as the Joker is Oscar worthy.
I mentioned last week that the talking
heads were clamoring about the bottom and trying to call the exact
turning point. That was before the end of week thumping that awaited us.
Now they are back in full bear mode. This is why they are journalists
and I’m not.
Nobody rings a bell at the bottom – it’s
a process and we really don’t know where the bottom is until we look
back and say – “that was the bottom”. Remember - investing in the stock
market is not about being right! It is about making money.
SECTORS
On the sector front, the average level
has risen a bit from 27.65% to 31.62%. This is a classic BUY Point &
Figure BUY signal and there are 18-20 sectors showing improvement. The
four best sectors look to be DRUGS, BIOMED, WASTE MANAGEMENT, AND REAL
ESTATE. Field position is exceptionally good here and this is where we
are going to concentrate our buying efforts.
ON THE SHORT END
Christopher Cox, the head of the SEC, has done some
tinkering with the short selling rules. So far, this is limited to 19
financial stocks that are at the center of this sub-prime mess. I don’t
like this one bit. The ability to sell short has been with us since the
beginning and is one of the biggest reasons for the 1929 market crash.
Back then, there were no rules and if you could raise the cash, you
could literally reduce the value of a company to zero. Just ask Joseph
Kennedy how he made all those millions for his family.
When FDR wanted to put an end to it, he chose Kennedy to be the
first head of the SEC. FDR’s logic was that if you wanted to catch a
crook, you needed a crook to do it. (Hey, I don’t make this stuff up)
So, Kennedy was smart enough to know that the shorts provided a service
to the market which is taking the other side of the trade. What he also
did was to institute margin requirements which meant that the short
seller now had some rules that he had to follow. He also put into place
the “uptick rule” which said that you couldn’t sell something short
until the “bid price” moved to the next higher price. This made shorting
more difficult.
A couple of years ago, the “uptick rule” quietly disappeared when
the first exchange traded funds (ETFs) came onto the market. I said at
the time that this would disastrous because big players – mainly hedge
funds could drive the market using these new index investments. My
concern wasn’t that they would drive the market higher, but that they
would drive it down. Remember the Nasdaq crash? Guess what the driver
was? For the record, ETFs started trading in 1993 and became main stream
in 1998.
OUR NEXT PRESIDENT
Wall Street is already reacting to the
prospect of an Obama presidency; this according to some folks in the
know. The overall reaction, by the way, is not positive. For some reason
known but to God investors don't particularly like the idea of higher
capital gains taxes and increased taxes on the American investor class.
TRANSNATIONAL PRESIDENT
Rich Lowry's latest column suggests that Barack Obama could be our
first "transnational president." He lets us in on a little secret – this
is a candidate who prefers global norms to those of his own nation. The
"citizen of the world" stuff he spoke about in Berlin was not a good
thing. Look, I don’t like any of the candidates in this election and if
“none of the above” was running, that’s where I would cast my vote. I
want a president whose absolute number one priority is protecting this
country and promoting American, not world values. I want a president who
is tuned in to the American voter. I want a president who is willing to
make the hard choices for his country. America does not need a
transnational president, it needs an American president. Suffice it to
say that I wasn’t that impressed with last week’s world tour.
Becoming a Short Term
Trader
I’ve had a number of calls and letters
lately asking about short term trading. I’m making some notes now and
will share those once I have my arms around the subject. I will say
this, if you have an interest in short term trading and want to trade
along side me, just send me an email expressing your interest and let’s
see if we can work something out. I have several people who drop by
during the week and we trade the FOREX markets as well as the stock
market.
That’s about it for now.
Robert Christy
The Intelligent Trader
P.S. Despite the sub-prime sell-off, the
credit crunch, and high oil prices, The Intelligent Trader continued to
deliver outstanding profits for subscribers in 2008. In 2007, we
finished the year up better than 17% --that's more than 3 times better
than the S&P 500 up only 5%. It’s been tough going so far this year, but
at the halfway point, we’re positive and the market isn’t. I’m looking
forward to the second half of 2008 with even higher expectations-despite
the risks most investors will face in the months ahead. If you’re not
yet a subscriber to The Intelligent Trader, I think you should give us a
try because I’m sure that will help your bottom line.
P.S.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!
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Robert Christy is a professional stock
trader, money manager, author and speaker. 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 Crabapple
Capital Group, LLC and the editor/publisher of The Intelligent Trader, a
subscription based long/short trading service. At the time of
publication, Mr. Christy may from time to time write about stocks in
which he, Christy Investment Group Ltd, Crabapple Capital Group, LLC or
The Intelligent Trader 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.
Robert Christy
The Intelligent Trader
c/o Christy Investment Group
P.O. Box
625
Alpharetta,
GA 30009-0625
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