Wednesday, March 30, 2016

The Huge Wall Of Worry

There has been a lot of talk about the market climbing a wall of worry, every sentiment indicator, for the most part, has spent a bulk of the time in bearish territory.  This is normally considered a bullish contrarian indicator, however, it has mattered the most near the lows, never near the highs.  Market participants have become a pessimistic bunch, over the last 18-months they have been predominantly bearish near highs and near lows.  The Bulls, the Bears, and the ones that are neutral have all been right in the last 18-months.


Net net, we've been running in place with pockets of opportunities at extremes.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


   

Monday, March 28, 2016

Stocks On My Radar Today

Below are the stocks on my watchlist for today.  These swing set-ups become actionable to me if and only if they go through the previous day's high.  The stop-loss for most of these set-ups is Friday's low.








Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


  

Thursday, March 17, 2016

Mid Week Market Update

Earlier this week in our Market Preview, we highlighted a few important points; potential (possible) overhead resistance, positive March FOMC performance, the positive performance for the SPY when an FOMC meeting falls on the same week as options expiration, and the V-rally day count.

So far the week is slightly positive, the FOMC is out of the way, and the open gap from the beginning of the year is filled as of this morning in the pre-market.


We mentioned in our last post that the previous V-rallies have lasted about 26 days each, we are on day 24. You couple that with the charts below and the fact that the week after March expiration tends to be weak, and you have yourself an interesting short-term situation.

V-RALLIES


SPY VS FOMC MEETINGS

SPY VS OPTIONS EXPIRATION


  1. My opinion is subject to change as new information comes in.
  2. Not being overly excited to get aggressively long here does not mean to short.
  3. Animal spirits and the fear of missing out is something that can't be seen on the charts and without a doubt, it can't be ignored.
Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


 

Sunday, March 13, 2016

Market Preview, Big Week

You don't have to be a Chartered Market Technician to see that we are looking at some potential--possible overhead resistance. Seeing where we've come from in such a short period ($182ish-202.76), one can understand why a short-term speculator probably wouldn't push the envelope here.


The SP500 closed above its 200-day moving average on Friday for the first time this year.  The most widely accepted definition of whether or not the market is in a bull phase or bear phase is whether or not it is trading above or below the 200-day moving average.  Some trend followers use the 10-month moving average as a tactical way to be in or out of the market. So while we are above the 10-month for now, the month is not over yet, and monthly close is what is needed to confirm the "bull phase."


This week is and will be a big week; options expiration, FOMC Statement, interest rate decision, Fed Chair Yellen speaks, and BOJ meeting.

March options expiration weeks have been very positive for the market, out the last 31, 21 have been positive and very profitable as you can see in the chart below. H/t Rob Hanna.


When both Options Expiration and FOMC meeting fall in the same week, the market has done extremely well.  This has happened 31 times in which 23  (74%) have resulted in winning weeks for the SPY with an average change of +1.17%.  When the FOMC has landed a non-OPEX week the stats are negative; 41 winners, 55 losers, average change -0.10%.

Given the above stats, one can assume that a long-biased trader probably has a green light until Friday, but given where we have come from I would not be pushing my luck in the short-term. SOURCE; PASTSTAT

Over the last two weeks, we have been blessed with another V-bottom (sarcasm).  Unlike the previous V-bottoms this one has had phenomenal breadth, and the reason is that the Russell 2000 has participated and has been the top performer.  Sure, the beaten up names coming from 52-week lows are the one's being picked up and leading, but not all rallies are or should be the same, adapt.  Right around now, 21 days into this V-rally is when many start believing that we are never going to have a downtick again. The October 2015 V-bottom lasted 26 trading days, the V-bottom from October 2015 lasted about 26 days as well. The current V-rally is being compared to those two.


Because the Russell 2000 is finally participating the breadth of the market has been surprisingly good, the best I can remember in a long time. It has been so good that it is now a short-term negative. We currently have 74 stocks up 50% or more in the last month, historically readings in the 20's are considered red-hot and generally lead to a pullback.


The last time we got such high readings was in 10/28/2011 and 10/31/2011, back then we saw readings of 62 and 80.


As far as sentiment, people are not excited about the market, surveys are still somewhat negative, short interest on the SPY continues to grow.  Many believe that the market has to sucker everyone before it rolls over again, the fact is, we have been running in place for 16-18 months with the same negative sentiment.  This may be a new normal.

My opinion is subject to change as new information comes in.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.




Saturday, March 5, 2016

Top Posts Of The Week

A Good Short Set-Up At Hand

Is It 2008 All Over Again

Taking The Elevator Up


My opinion is subject to change as new information comes in.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


Friday, March 4, 2016

Taking The Elevator Up

"They take the stairs up and the elevator down" is an old Wall Street saying that has been around for ages.  It was always followed by; "what takes you two years to make you'll lose in three months." For a long time, the market always went down faster than it went up, this is no longer the case.  They are taking them up just as quickly as they take them down.  V-rallies are now a thing.


I'm not a fan of selling in the hole or chasing a frenzy.  Sentiment has shifted from oversold can remain oversold to overbought can remain overbought, don't buy into it.  Don't chase, allow the market either to rest via price or time, this ain't the 90's.

My opinion is subject to change as new information comes in.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


Thursday, March 3, 2016

A Good Short Set-up At Hand

It seems like a lot of people are eager to short the market right now.  The two main reasons are; the market has run up too much in the short term and the fact that we are very close to some possible significant overhead resistance.

If you look at the McClellan Oscillator, which closed at +206 last night, might suggest that we are due for a pullback.  Rallies tend to slow down once we get to the +200 level.


You don't have to be a chartist to see the possible overhead resistance.


Tomorrow the Non-Farm Payroll numbers will be released at 8:30 am, as you can see on the spreadsheet below, the market tends to get weak following the release of the data.


The one piece of data that as of right now will more than likely keep me away from a short trade on the SP500 is breadth. Breadth tends to peak before the indices, and so far it has not, it has not even shown signs of slowing down.  Not initiating too many long trades here makes a little bit more sense to me than outright shorting.


My opinion is subject to change as new information comes in.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.




Is It 2008 All Over Again

Is it 2008 all over again and why is the market crashing were the two question I was asked the most between the end of January and the beginning of February.  Real-time to the second information has been and will continue to be a huge distraction for investors. Tuning out the noise has never been more important.  Despite the fact that the average intra-year decline since 1980 for the SP500 is roughly -15%  people were freaking out when we were down -8%.  And they acted on it.  We saw a massive amount of put buying by small investors, similar to the record levels we saw in 2008 when we had a REAL treacherous bear market.  The amount of money flowing into the Rydex bear funds was almost 3x higher than the 2008-2009 levels.  Sentiment polls also showed more bearishness than the 2008 levels, when we finally get a real bear market we are going to redefine what extreme bearish sentiment is.




1/11/16: RBC Dain, sell everything.
1/12/16: The market could fall 75%.
1/21/16: George Soros, this could be 2008 all over again.


Fast forward to today, the SP500 has recovered most of the losses for the year, we are now down only -2.8%.  Chances are high that in the short-term pullbacks will be bought and contained until the negative sentiment unwinds.  However, if you were one of the many who in late January had multiple reasons why this year was going to be 2008 all over again, and felt very uncomfortable with your allocation to stocks now is the time to pare down and get to a comfortable level that won't keep you up at night.  Or, you can allow the market to force your hand if we roll over again.  Quite frankly, I don't think we are out of the woods yet.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.