Thanks for getting back to me. I am happy to share with you my 5 step process. My approach to the market has evolved over time. What you have before you is the result of years of research, trial and error – lots of it.

My background is in economics. More specifically, free market economics (Austrian school).

The 5 Step Process

Step One | Market Analysis

Step one is to determine whether to be in the market at all. Do we want to be on offense (capital appreciation) or defense (capital preservation)?

My primary market indicator is built around the concept of ‘bullish percent’ which has been used for more than 40 years. Bullish Percent measures the overall risk in the market. The BP reading sets our bias and answers the question will we be long or short?

Step Two | Sector Analysis

Next, I look deeper and dig into the sectors. I drill down into each of the 12 major market sectors and 40 sub-sectors to determine which, if any, offer the best chance of success. I do this using Bullish Percent and Relative Strength.

Industry sectors, like the four seasons, move in and out of favor. I want to be long the most favored sectors and to avoid (or short) the least favored ones.

* I should note here that academic studies have shown that 80-85% of an investor’s performance is derived getting steps one and two right.

Step Three | Fundamental Analysis

Fundamental analysis tells me what to buy or sell short. My goal here is to create a watch list of companies that are considered to be “best of class” or “worst of class” in each sector. I am not a fundamental analyst by trade so I use the research of several “buy side” research firms.

Step Four | Technical Analysis

Technical analysis answers the question of when to take action. Step four is the application of technical analysis to our watch list. I am an avid fan of technical analysis and have been using it since my introduction to it in 1975. I specialize in Point & Figure charting. I use P&F charting when trading stocks because I have found that it eliminates most if not all of the noise surrounding stocks and the indices. I am a position trader and not a day trader. I like to hold positions anywhere from 1 week up to a year. I will hold positions longer than 1 year if the technical picture is still positive and improving.

Step Five | Risk Management

The final step in my investment process is managing the portfolio. This final step is what sets me apart from others in the industry. The concept of risk management is one that is foreign to most investors. I consider this the most important step.

I have a risk limit for each position and the portfolio as a whole. I use a combination of stop loss orders, advanced option strategies as well as synthetic stops where appropriate. It should be noted that the risk is determined before a trade is ever placed.

Getting in is the easy part. It’s the exit strategy that determines whether the trade is successful or not.

This system works for me and I think it will work for most investors because the key to investment success is simply having a process. Developing a process is not hard. The hard part is making sure that your process works for you and your trading style.

That’s about it. If you have any questions, don’t hesitate to get in touch with me. I’ll be more than happy to help you in any way that I can.

Bob Christy
The Intelligent Trader

I’ll go as far as to say this – if PresBo manages to lose the House and Senate in the fall, this likely will be his Waterloo or Little Big Horn. Take your pick.

Most of the supporters for healthcare will either benefit directly or believe that the cost will not fall on them. Only 34% of us believe healthcare will increase our costs (Gallup poll).

The bottom line is this – the plan will cost more for everyone and our healthcare will get worse as a direct result.

Euro is oversold and could trade up as high as 1.40.

Marc Faber thinks stocks can fall 20% if rally fails. Sees a top forming 1150-1200.

Goldman Sachs sees lower inflation ahead and rates are headed south. Goldman Sachs is alone in a crowd with this call.

KC Fed President Hoenig wants Fed to raise rates sooner rather than later. He was the lone dissenting voice at last FOMC meeting.

Jim Rogers likes agricultural commodities and farmland right now. He says that prices are depressed on a historical basis. He also adds that India’s biggest problem is water.

Sen. Judd Gregg, R-N.H., says we are headed for a financial meltdown. Says stimulus was a disaster and didn’t work. He won’t get an argument on this from me. I think he’s dead on the money.

Jamie Dimon, JPMorgan CEO, still sees the threat of a double dip recession if we aren’t careful.

Commodity Currencies – look for these to make major gains this year. More on this later.

Kohn to retire from Fed board. Donald Kohn will retire as Federal Reserve vice chairman in June. His decision will give Obama a chance to reshape the Fed since it creates the third vacancy on the Fed’s seven-member board. If the White House and Senate move quickly, they could have replacements on the board in time to influence the timing of an eventual interest rate increase. Possible nominees could include Harvard’s Ken Rogoff, White House economic adviser Christina Romer and San Francisco Federal Reserve Bank President Janet Yellen.

Sovereign debt risk for U.S. banks. As concerns about Greece’s deficit mount and European contagion fears grow, U.S. Comptroller of the Currency John Dugan says regulators are taking a very careful look at the exposure of U.S. banks to sovereign debt risk. He declined to discuss the specific situations of individual banks.

Aussie rate hike. Australia raised its key interest rate this morning to 4% from 3.75%, betting that faster-than-expected economic growth will outweigh fears related to European deficits. Governor Glenn Stevens said the increase was a “further step” in bringing the interest rate “closer to average,” a level he previously signaled could be 75 basis points higher than where it currently stands.

But to a lot of Americans, MORE government is the solution.

Most analysts feel that the Fed Chief will take a dovish line on policy to ease from last week’s surprise bump up in the discount rate.

Look for questions to probe when the easy money policy will end.

If we get squeezed, I’ll add to my shorts a little above 1.3615.

The market opened on the ugly side and went down from there. The February Consumer Confidence Index came in below expectations at a 10-month low of 46.0 against an expected number of 54.

Also affecting today’s trading was the fact that all three major indices retreated below their respective 50-day moving averages. The 50-day moving average is important because many technicians use the number as a support floor.

The Materials Sector was off 1.7% with the Steel group the worst performing. Commodities also struggled with the CRB Commodity Index dropping 1.6%. Financials were officially the worst performing sector of the session finishing with a 1.8% loss, which undid the sector’s outsized gains from yesterday.

What’s next?

Do we continue down or is this another one of those buy the dip scenarios? I’m thinking that we have some downside to deal with here. The last bounce was light on volume which tells me that there is no real conviction out there.

The dollar was stronger today which is negative for oil, commodities and gold.

I’m leaning on my shorts the next couple of days. Defense is the name of the game for now.

The numbers that came out earlier today were just plain ugly. Consumers are not thrilled by what they see. The consumer confidence data at its lowest point since last April. The posted number of 46.0 was no where even close to the estimate of 54.8.

Look around, housing isn’t going anywhere, commercial real estate is getting ready to lay an egg, job losses continue to grow, Obama is raising taxes on everyone, and then there’s the debt.

Like my grandmother used to say – if the water is muddy and you can’t see the bottom, you should think twice about swimming in that pond.

Back later with more.

I’ve been looking high and low for anything relating to the situation in Greece and to my dismay, it’s quiet – too quiet.

Greece blew the deadline to provide Eurostat with their swap agreements.

This from Bloomberg:  “Athens told us that the reason for the delay was partly due to the four-day strike which affected the ministry of finance.”

You’re kidding me right. This is a government that does not want to meet their deficit reduction targets. I blame this on the whole of Europe because the missed deadlines have no consequences which means that there is no urgency to fix the situation.

The ball is in Greece’s court – they can request and accept aid from the European Union or they can seek help from Germany.

Germany is one country that appears to have its fiscal house in order.

Back later with more.

Note: I am short the euro at this time.

This could be the start of a major industrywide consolidation and one that we will continue to monitor. We already own RIG in the space and I am looking to add more as appropriate.