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The Intelligent Trader's - Long and Short of It
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From: Robert A. Christy Editor/Publisher, ‘The Intelligent Trader’ http://www.christyinvestments.com http://www.intelligent-trader.com
Date: August 24, 2008
This weeks’ ‘Long and Short of It’.
Bullish Percent numbers:
BPNYSE Xs @ 44% OFFENSE BPOTC Xs @ 36% OFFENSE BPSP500 Xs @ 48% OFFENSE
The Stocks
Labor Day is just around the corner and the numbers have not changed since my last missive. The OFFENSE remains on the field. The average sector’s field position is 37.29% which is a pretty good place on the field to run a few plays. Even though the big numbers did not change, 20 sectors did change – 18 sectors were up and 2 were down. The 2 sectors that slipped were Gaming and Wall Street.
Overall, 31 sectors show their Bullish Percent charts in Xs or on OFFENSE and 17 are in the Favored or “green zone”. As I let you know earlier, Finance and Healthcare are the 2 latest to move onto offense. The 3 best looking sectors are Chemicals, Electronics, and Machinery/Tools.
I have added the following names to our watch list: AEIS, AWR, BKI, CBST, FMD, WLK, MATK, LAZ, WMGI, ESRX, RIMM, ILF, SU, and IR. We’ll take action on them if and/or when they give us a BUY or SELL SHORT signal.
My Friends – the Analysts
Fannie Mae and Freddie Mac have been in the news a lot over the past couple of weeks. The fact that there are up to their ears in a mess comes as no surprise. What comes as a surprise is this – the majority of analysts who follow these two names still have them rated as a BUY. In fact, their target prices are more than double their current prices.
The over riding question here is this – why would anyone still own these 2 stocks? Also, why would anyone want to own them given the fact there is still a cloud hanging over them? And last, what are these analysts looking at to convince themselves that these stocks are still attractive after losing 2/3 of their values?
The options market is telling us that the worst may be over, but it’s not over yet for this group of financials. The volatility and the volume in names like Lehman and AIG suggest that some big money has gone from hedging to speculating that another shoe is about to drop.
Yogi Berra says it all – it’s tough to make predictions, especially about the future.
The Dollar
The Bank of England meets next on September 4th and most currency traders do not expect any change to policy. The BoE is the most proactive and nimble policy making institution among the G10, so it will be interesting to see if they don’t just nip things in the bud by cutting rates 25 bp.
Even if the rates are not lowered on the 4th, they will be lowered at some point. The primary theme in the currency market is that the rates among the highest yielding currencies in the G10 are going to come down as global growth slows. The high price of crude, even though inflationary, will not change the scenario. In the long run, high energy costs will take their toll on any economy because growth will slow as consumers are forced to curtail their discretionary spending.
The Election
The Democratic Convention kicks off this week in Denver and the market may take a snooze as a result. Barack Obama stepped up and surprised some folks with his selection of Senator Joe Biden as his running mate. I had the final three correct, but this selection at first, took me by surprise. My thoughts on Biden are this: (1) he is a long time Washington insider and does not represent change in any way shape or form; (2) he is very strong in international affairs and this offsets Obama’s inexperience in this area; and (3) he is a lose cannon with a quick tongue.
After giving this some thought, I think this is a great pick because Obama has been reluctant to take off the gloves and mix it up. Biden has nothing to lose, so we can expect a lot of fireworks. This guy is as subtle as a train wreck, but if it comes down to winning in the trenches, you want a street fighter on your side. The Biden pick is to Obama what Cheney was to George Bush.
The feelings coming out of Camp Clinton is that once again Hillary has been dissed. They were under some misguided impression that that she was on the short list for VP. There was never a chance that she (and her husband) would be on any short list. Also, they are a tad upset over the timing of the text message release. It was released at 3 am. Remember when Hillary brought up the point that she was up to the task of taking the call at 3 am? Is this a coincidence? I don’t think so.
The Republicans are up after Labor Day and McCain has his work cut out for him. The Biden selection will force the Senator from Arizona to take a risk or two to come up with someone who can hold their own against Biden.
Other Notes
The University of Chicago is ready to open the doors to the Milton Friedman Institute this fall. The focus of this institute will be on economics, especially those espoused by the Chicago School. Opponents are protesting and are concerned that it is being too one sided in that it only deals with free market economics.
When I was a student at Grove City College, my primary economics professor was Dr. Hans Sennholz. Sennholz was a student of Ludwig von Mises (Austrian School of Economics) and also a free market proponent. I bring this up because in the late 1970’s, it was believed that only two economists in the world really understood monetary policy. The two were Sennholz and Friedman and they disagreed.
That’s about it for now. Let me here from you if you have any questions.
Robert Christy
P.S. Are you interested in trading along side me? There are 2 ways to do so. The first way is through my stock trading service, The Intelligent Trader. For just $249 you get a front row seat and the chance to get up close and personal with the market. Just click to learn more. The other way is through my dynamic forex trading service. If you have an interest in trading and/or learning about forex, just send me an email. In your email, please let me know when would the best time to get in touch with you.
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@intelligent-trader.com .
Robert Christy The Intelligent Trader c/o The Christy Investment Group P.O. Box 625 Alpharetta, GA 30009-0625
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© Copyright 2008 Robert A. Christy
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