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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: September 20, 2009
The Numbers
Major Index Bullish Percent
Our indicators remain above 70% and in HIGH RISK territory. Common sense suggests now is not the time dive headfirst into this market. If you’re in, stay in – if you’re itching to get in, it may be prudent to wait for a better entry point.
Major Sector Bullish Percent
Sub-Sector Bullish Percent
The bullish percent indicators continued their climb up the charts this week telling us that the rally isn’t over yet. Most of the phone conversations I had this past week were about shorting stocks. Everyone wants to know – is it time to short stocks?
The stock market is up more than 50% since the March lows. A number of economic indicators are suggesting that the worst is behind us and Bernanke is even proclaiming that the recession is over.
Everywhere I look, people are telling me that manufacturing is coming back, earnings are positive and the banks have recovered. Even the investment bankers are thinking that big bonuses are once again just around the corner.
The talking heads in particular are gunning down anyone who dares question the voracity of the move.
Two things still on the table that just don’t have me convinced that the worst is over. First is that our monetary policy is overly expansive. The Fed seems quite content to turn on the printing presses whenever they feel the need. This rampant liquidity is sure to spawn a new wav of inflation.
The second has to do with more and more government spending. The deficit is out of control and Obama’s real intentions are more about control than they are about helping the American people. The current spending levels can not be sustained and no amount of lip service is going to slow it down. The administration is not telling us the truth – plain and simple. The end result of this factor is a dangerous spike in interest rates which will slam the brakes on any economic growth we might muster.
When we look back over the past year, one thing will be painfully clear and that is this – all of this intervention will have greatly weakened our economic system. Given the current level of commitments we have already burdened ourselves with, we need to address the obvious – we are never going to pay down the current deficit – not in this generation or the next one.
I don’t think it’s wise to point fingers at anyone system. Everyone in government is complicit and more intrusive government is not the answer to our problems. The only way to solve the current crisis is to wipe the slate clean and start over. The problem is that this is never going to happen.
As long as the Fed has its hand on the throttle of the economy, we are pretty much at their mercy. Greenspan flooded the world with money to staunch the bleeding during the dot-com bust. Bernanke has pretty much done the same since he took the reigns. The end game is inflation and it will be worse than what is expected because no one has the courage to put us through the ringer that Paul Volker did in the late 1970s.
For proof, just look at the price of gold, silver and oil. Bernanke is on record saying that he will tighten up once the economy recovers. I am highly suspect of that because Obama will never let him get away with it nor will the Democrats in Congress.
The other side of the coin is this – if the economy turns down making a double dip likely, the Fed will pump even more money into the system.
From my perch, I just play the cards I’m dealt. Right now, I’m long a number of solid names and have some pretty tight stop losses in place. I have a small short position in the S&P 500 and am looking to strengthen that when the indicators tell us to. (Long SDS) I am also short interest rates (Long TBT).
I think the next bubble will occur in commodity prices. I added the PowerShares DB Agriculture Fund to the portfolio last week. (Long DBA) I’ll nibble in the oil patch when conditions improve. (Note: I am also long KGC and SLV)
For now, we are LONG but really skeptical. We have a few shorts and are looking to add more once the indicators flip to Defense.
Stay tuned it’s going to more interesting.
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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