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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: August 23, 2009
The Numbers
The numbers this week remain unchanged EXCEPT for the Basic Materials sector which has moved into the O column. This sector is now on DEFENSE.
Index Bullish Percent
Sector Bullish Percent
The market started slow last week, but ended a positive note. Everyone who wants in this market is in and the indicators reflect that.
The Dow gained about 1.6% last and the S&P 500 closer to 2%. One of the more ridiculous talking heads proclaimed on Friday that “we’ve hit “pre-Lehman collapse” levels”. I have no idea what he meant.
I still think this is a sucker’s rally. I see nothing going around me to convince me otherwise. A lot of newsletter folks are saying that the bear market has ended and a new bull market has begun. Risk is high and the market is overbought.
Investors need to think twice about putting money into this market. Traders can continue picking spots as long they don’t get carried away.
I am trying to trade without any preconceived bias. My gut tells me that I need to be either short or in cash, but my head says to stay long and to ride this as far as it will take me. I have tightened my stops and have purchased a few put options to lock in gains on two of my stocks. The Bullish Percent numbers will tell us when to bring out the defense. Tread lightly and don’t take this market for granted.
Sentiment.
I don’t usually talk about sentiment, but it was something I wanted to talk with Chris “the intern” about. Sentiment drives people to do silly things. Right now the talking heads are like the Pied Piper. Those who listen will follow them over out to sea.
Stocks have rallied for the past five months and right now people are way too bullish. The slope of the ascent is formidable and it’s been more than 70 years since we have seen anything this steep. The fantasy is that this will go on forever.
The market is trading at a level right
now that implies a strong economic recovery is in the offing. It also
implies that the growth we have seen is coming from earnings growth. In previous issues, I have said that this rally is not based on earnings. The earnings surprises that we have seen have come from cutting costs, trimming fat and becoming more efficient. Revenue expansion comes from spending and we are not seeing any spending.
At current levels, people are using their imaginations to justify buying stocks. What I find troubling is how my thinking has also gotten creative. I don’t believe in this rally one iota, but the long side is where the profits are. My short positions (COF, SDS and TBT) are killing me, but I am hanging in there. I’ll head for cash and more shorts when the party ends.
I often wonder how many people out there are like me.
Investment decisions need to be made based on sober and rational analysis. The worst decisions are emotional ones. Bubbles form during emotional times. At the worst possible time psychologically, bubbles burst. When bubbles burst, markets crash.
That’s about it for now. Let me here from you if you have any questions.
Robert Christy
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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.
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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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