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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.intelligent-trader.com http://www.christyinvestments.com
Date: July 27, 2009
The Numbers
The numbers continued to flip this week and the Offense is on the field for most of the market. The risk numbers continue to rise across the board especially in the individual sectors. Obamacare dominates the news this week and things could get touchy as Congress readies itself for the August recess.
Bullish Percent
Sector Bullish Percent
About the only thing you can say about the market over the past 2 weeks is extraordinary. Talk about Christmas in July! All appears well – too well in fact.
With that said, I am concerned about what’s going on. The indicators have flipped and we find ourselves back on Offense, but our field position is dicey at best. In football parlance, I’d say that we’re 3 and out.
Earnings season has been full of surprises, which tells me that most of the analysts were ultra conservative in their estimates.
Traders are telling me that the S&P is fixated on the 1000 threshold. That’s the ‘make or break’ number for this rally. The optimists are running in the streets with the bulls and if we’re not careful, someone is going to get gored.
So while listening to the talking heads opine late Friday and Saturday, I started putting together a list of things that could go wrong.
· The market is overbought and due for a correction · Earnings really aren’t all that great because increases are coming from cost savings and not top line revenue growth · Earnings season won’t last forever · There is nothing really out there to act as a catalyst to drive the market higher · How much of this advance is short covering? · How much of this advance is new buying? · How much of the buying is mom and pop buying? (I dare say too much)
The next question is obvious – what’s the next big thing?
I have no idea. I am willing to go out on a limb and say that the short side is looking pretty good. Right now, I am short T-bonds (TBT) because I think rates have no where to go but up. I am also building a short position in the S&P 500 (SDS) (1/2 position – so far) and NASDAQ (no position as of today).
Jack Cashin, head floor trader at UBS, and a former colleague at PaineWebber wrote a piece some years back about what it’s like coming out of a bear market. When we eventually make a bottom, which can not be in advance), we can expect some violent upward moves. This is due to institutions covering their shorts and getting long the market. It’s a double whammy. These violent jerks shake out the non-believers who run to the safety of cash.
The next step occurs during the inevitable corrections. The talking heads and the feeble-minded analysts will start screaming to ‘buy the dips’. As confidence grows, the market continues up even though every indicator in the book suggests that we’re in no man’s land. Also, merger activity picks up as people start to see the cloud’s silver lining.
Sounds like the market we have right now.
The bottom line is this – as a trader I scour the stock and currency market each and every day looking for the best possible trade set-ups. I could care less whether it’s on the long or the short side. I do care that my trades have the best possible profit potential and the least possible amount of risk.
Do I want this to be the next bull market? Of course I do. I love making money. But that’s the point. Opportunities abound in this market – some on the long side and some on the short side. We want to be long the strongest sectors and short the weakest (see above).
The trick is finding out which is which and taking action on them.
Remember – if we’re to be successful, we need to trade the market we’re in and not wish for the one we want.
Please note:
Chris Kellner (my GCC intern) and I have made a lot of changes over the past few weeks. We have revamped completely the website and have made it easier to navigate. We’ve changed the member’s site to include a daily page where we will be commenting on anything that affects our portfolio. The updates will be audio, video, or written.
The new website isn’t ready yet and I’ll be dealing with that once I get back from Las Vegas (annual Forex Expo).
We’ve also redone our blog (http://intelligent-trader.blogspot.com) to make it easier to update and navigate. Chris has managed to install all the bells and whistles we need to keep in touch with all of our friends and clients.
You can now also follow the Intelligent Trader on Twitter (yes – stcktradr does tweet) and Facebook. If you want to chat face to face, we’ve installed video cameras and you can get in touch with me via Skype (stcktradr).
Lastly, Chris is sending out an email to everyone this week regarding your ‘free’ subscription to The Long and Short of It. Due to the plethora of new spam laws, we’re moving all of our email distribution to aweber.com. To continue receiving our free e-letter, just click the link on the email to confirm your subscription. That’s about it for now. Let me here from you if you have any questions.
Robert Christy
P.S. We continue to make changes and upgrades each month at the Intelligent Trader. In addition to our blogs, you can now sign up and follow us on:
Twitter: stcktradr Facebook: The Intelligent Trader and/or Robert Christy (Atlanta area) Skype: stcktradr
P.S.S. The currency market (forex) is the place to make money this year. If you’d like to know more about how you can participate in this, just send me an email and I’ll send out the information to you.
P.S.S.S. Please fee free to forward this to your peers, friends and anyone you think would benefit from its contents. They will thank you for it - and so will I!
The Intelligent Trader's ‘Long and Short of It’ is a free OPT-IN e-letter. Sign Up to receive your own free copy at: http://www.intelligent-trader.com or http://intelligent-trader.blogspot.com. Please note: We do not spam or give personal information to third parties-ever.
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Robert Christy is a professional currency trader, stock trader, money manager, author and speaker. Mr. Christy is the President CEO of Christy Investment Group, Ltd., a fee-only 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
The Christy Investment Group P.O. Box 625 Alpharetta, GA 30009-0625
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© Copyright 2009 Robert A. Christy, The Intelligent Trader
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