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-------------------------------------------------- From The Trading Turret --------------------------------------------------
From: Robert A. Christy Editor, From the Trading Turret President/CEO, Christy Investment Group http://www.christyinvestments.com
Date: April 12, 2006
Current Field Position: Offense
BP NYSE: Xs@67.75% BP OTC: Xs@57.27% BP Option: Xs@65.91% Sector Bell Curve: 63.05% Favored Sectors: COMP, INET, TELE, SOFT
This week’s comment …
I am really growing weary watching the talking heads on TV. I know that I’ve railed on this before, but I get rankled every time they impose their opinions as if it were hard news. Why so? For all of the media hype and attention over the past couple of weeks about the major indices hitting new 5-year highs, I’m sure find it hard to believe, but the market has made almost no progress since the first two-weeks of January. Since the interim high on January 11th the Dow Jones Industrial Average has only gained 0.42%, while the S&P 500 and Nasdaq Composite indices are down 0.59% and 0.90% respectively. What this tells me LOUD and CLEAR is that we have a market that has moved higher but is unable to hold onto gains. Since late last year, our investment posture has been intermediate-term cautious-long-term bullish. As such, our portfolios are positioned defensively given the mounting risks and growing headwinds that face the market as the year progresses. As for risks, they include: (1) a Federal Reserve that continues to hike rates and has a tendency to overreact, (2) rising market interest with yields high enough to look like an attractive alternative to equities, (3) crude oil flirting with $70/barrel, (4) the cyclical bull market long in the tooth, (5) the four-year cycle due to bottom later this year, (6) slowing economic growth for the remainder of this year, (7) slowing earnings growth and (7) technical deficiencies with growing price and internal divergences. The Fed probably doesn't need to hike rates any more given that they have hiked at each of the last 15 FOMC meetings. My concern is that they will overdue it especially given signs that the economy is set to slow for the rest of the year and the majority of their hikes have yet to fully work through the system. In our mid March Turret, I mentioned that "According to Ned Davis Research (NDR), the current cyclical bull is the sixth longest of the 34 cyclical bulls since 1900. Historically, dating back to 1928, the S&P 500 has endured on average three 5% or more corrections per year, one 10% or more correction per year, one 15% or more correction every 2-years, and a 20% or more correction every 3-years." The last time the market suffered a decline of 10% or more was in 2002. So, we are overdue! Earnings season officially began this past week. Corporate America has posted double-digit earnings growth for 15 consecutive quarters. The analyst consensus is calling for first quarter earnings to grow by 10.4%, which would keep the streak alive but earnings growth is slowing and this reporting season is likely to be last the last for double-digit gains. Giving this slowing trend it will be interesting to see what kind of guidance companies give for coming quarters and more importantly how the market responds. With all of that said, it doesn’t mean that the market will not have rally attempts. Technically, the market is oversold and a short term rally can begin at any time. Our primary indicators (shown above) are still telling us to keep the offense on the field. But given the proximity of the numbers to 70%, the defense has their helmets on. A 70% number tells us that the demand for stocks isn’t as high as it once was and that supply may be increasing. For now, we’re still committed to the upside, but only in the strongest sectors and we’ve moved our stops in tight to protect our profits. That’s about it. Have a great week!! Bob Robert Christy is a professional stock trader, money manager and author. Mr. Christy is also the President CEO of Christy Investment Group, Ltd., a registered investment advisory firm. He is also the Managing Partner and Portfolio Manager of Plato Advisors, LLC. At the time of publication, Mr. Christy may from time to time write about stocks in which he, Christy Investment Group Ltd or Plato Advisors LLC 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. |
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