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The Stock Trading Advisor
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From: R.A. Christy
Editor, ‘The Stock Trading Advisor’
President/CEO, Christy Investment Group
http://www.christyinvestments.comDate: January 25, 2007
Current Field Position: OFFENSE
Bullish Percent NYSE: Xs @ 74
Bullish Percent OTC: Xs @ 58
Bullish Percent Option: Xs @ 78
This week’s comment …
I’ve said a number of times in this space that I truly hate January. The
month offers me nothing but grief. This year is no exception because if
I had any luck at all, I’d have none.
You name it – the car, the house (I’m moving again), my daughter, the
current political environment and of course – my websites. I need some
time off.
The last time I wrote, I talked about my general expectation for the
market in 2007. Several factors that support a very strong market are:
the tremendous pile of cash sitting on the sidelines just itching to get
into action; the fact that we are in the 3rd year of a Presidential
cycle (historically the strongest of the 4 years) and on a valuation
basis, stocks are cheap when compared to bonds.
Even with all the positives, I won’t be throwing caution into the wind.
The current upswing that we’ve been riding is the longest bull market on
record without a 10 percent correction. We’ve also managed to go 133
days without at least a 2% correction in the Dow Jones Industrial
Average. This is the longest streak since 1958. If memory serves, I was
2 when it last occurred. This current rally is long in the tooth (I love
that phrase) and we’re due for a correction.
The market as I write this is currently overbought from a technical
perspective and when you combine the longevity and resiliency that we’ve
seen, investors are becoming overly optimistic. The recent American
Association of Individual Investors (AAII) investor sentiment survey
shows 57.6% of investors are bullish while only 27.3% are bearish.
Also, the Ned Davis (NDR) Crowd Sentiment Poll has risen to a level
consistent with other short-term corrections. While extremes in investor
sentiment don't guarantee that a correction is in the offing, it does
make the market more vulnerable to disappointment.
As you know, the market will do its best to prove the majority wrong,
and given the recent spike in investor sentiment a short-term correction
would go a long way in rebuilding the "wall of worry" that has sustained
the bull market climb.
One statistic that argues for a pullback is that the Nasdaq 100 has
suffered at least a 5% correction in January in 17 out of the past 20
years.
Our primary indicators still have us on Offense but the level suggests
having the defense ready to run onto the field. If the market does
correct here, I think it would represent a great opportunity to position
portfolios more aggressively for gains later in the year.
Earnings Season
We are currently in the midst of earnings season and so far earnings
have been mostly positive despite some high profile disappointments from
the likes of Intel and IBM. This week is a big week for earnings with
over 250 companies reporting. So far 22% of the S&P 500 companies have
already reported with 52% beating estimates, 20% were inline, and 28%
missed expectations. Of those that have reported, earnings have risen
15.5% and that is running about 6% better than expectations. However,
Thomson Financial is still projecting 4th quarter earnings for the
entire S&P 500 of only 9.3%, which would break the 13-quarter string of
double-digit earnings growth. Thomson also revised their estimates for
1st quarter 2007 earnings. At the beginning of the year 1st quarter
earnings estimates called for growth of 8.7% for the S&P 500. That
number has now fallen to only 7.3% growth based on the guidance
companies have given. For example, 51 S&P 500 companies have issued
guidance for the 1st quarter, 12 were positive, 7 inline, and 32 guided
lower. That is a clear indication that earnings growth is set to slow in
the coming quarters.
Operations-PLEASE READ!!!:
1099s and CIG Statements: Please be advised, we will begin mailing 1099s
and 1099Rs in early February. We’ll be sending year end recaps this
week. E*Trade and Schwab account statements should be on their
respective sites now. You can download these at your convenience.
IRA $35.00 Maintenance Fee- NO MORE! For those that have their accounts
with E*Trade, the IRA is waived if you select to receive your account
statements and confirms online. This is effective immediately. If you
notice that one of your accounts has been charged a fee, please contact
our back office to have this corrected.
That’s about it. Have a great week!!
RA Christy
P.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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R.A. Christy is a professional stock trader, money manager and author.
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 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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© Copyright 2007 RA Christy
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