Tuesday, January 13, 2015

Allow Me To Introduce You To

nbix_002
It seems like the Biotech sector has become the can’t miss sector of 2015, everything I read and hear is bullish, and probably rightfully so.  Many of the big cap biotechs make a ton of money and have fantastic pipelines. However, stocks/sectors go up AND down not up OR down, and it seems to me that many believe that biotech is now a one way street, up. The biotech sector without a doubt has reached the acceptance stage after 5 years and a 360% move (NBI-X), and its probably getting to the euphoric stage.
Allow me to introduce you to $BIS.

ProShares UltraShort Nasdaq Biotechnology seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the NASDAQ Biotechnology Index®.

This will come in handy to those who believe that sectors go up and down not up or down, and will like to possibly take advantage of a POSSIBLE post euphoric (blow off) move.
Zor Capital LLC is a New York based investment management firm, founded in 2011. Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts.  Managed Assets
$XBI, $BBH$NBI-X,

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Sunday, January 11, 2015

The V Bottom PlayBook

sp500
The V bottom has become a phenomenon, one that has frustrated a lot of traders and probably a well known financial publication.  It started mid 2012 and by my count it has happened 8 times and we are working on the ninth.  Very simply, the V bottom is one where the market pulls back in a straight line down, freaks out investors/traders and gives them the feeling that this is the big correction that we’ve all been waiting for, and then it miraculously snaps back in a straight line up to a new high like if nothing ever happened.  There has been no in between, it has been straight down follow by straight up action.  It has frustrated many because the minute that they do the prudent thing which is protect capital, take their stop losses etc….this is exactly when the market snaps back with like 17 straight days of relentless buying that does not allow them back in without the feeling that they are chasing a runaway train.
Like everything else, this will  end at some point, probably at the time when everyone gets comfortable with it.  What we want to do is simply dance until the music stops, but at the same time look for signs for when the character of the V bottom might be changing.  Here are some of the things that we know about the V bottom; (feel free to add in the comment section what you have noticed).
V_BOTTOM

Here’s what we know;
  • The average decline has been 6.48%, this is not a huge decline especially when the average intra-year decline in the last 34 years has been 14% (not in the last 2 obviously).
  • The average decline has lasted 18 days however the pullbacks are happening a lot quicker recently, the average since 2014 is only 10 days.
  • The average $VIX spike has been 74.74% (average within the date range), since 2013 the key number on the $VIX has been $12, a good level to buy some protection.
  • The average spike on the $VIX (74%) seems a little to extreme for the size of the pullback we are getting.
  • The round trip average to new highs has been 39 days but only 23 days since 2014.  As a matter of fact, in the September 2014 pullback it was the first time in history that we went from an all time high in the SP500 to a 6 month low, back to an all time high all within 40 days.
  • The average days from the lows to a new high has been 19 days but only 12 days since 2014.  We are basically getting a years worth of SP500 gains in 2 weeks immediately after losing 1/2 of the 30 year  average intra-year decline (14%) inside of 30 trading days.
  • We have had 3 V bottoms in the last 3 months, this can be considered a character change.
  • The NAAIM shows me that like many, the advisors being polled are being reactionary, out at the bottom, rush to get back in on the rebound.
Character changes I’m looking for;
  1. Every V bottom has reached a new high, look out for when it doesn’t reach a new high.  So far the $QQQfailed to reach a new high after last months  pullback and the jury is still out on the V bottom that is under way.
  2. Another possible character change would be a pullback in the SP500 that does not come with a huge$VIX spike (half the average would be a change, acceptance).
  3. A pullback in which the NAAIM index barely pulls back (acceptance).
  4. Frequency, if starts to happen a lot more within a short time frame. (we’ve had 2 in the last month, change)
  5. I would not put much weight on the sentiment on twitter due to the fact that what people do and say are two different things, even though some have been terrific contrarian indicators.
If we continue to see this playbook play out like it has, with the overreaction in the $VIX every time we get 5% pullback then I believe you should play the V bottom until we see the character changes.  You can be right 99 times playing the V bottom and be wrong once, or you can be right 1 time fading the V bottom and wrong 99 times.  The hard part is not putting money in the market when we are tanking, putting significant money behind it is the tough part.
Zor Capital LLC is a New York based investment management firm, founded in 2011. Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts.  Managed Assets

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Saturday, January 3, 2015

What You Need To Know To Make Money In 2015

forecast
So what do you think is going to happen this year?  This is the most common question asked at the beginning of every year.  No one knows, it’s all guess work.  Who in 2013 predicted Ebola, V bottoms, a down December, oil crashing, the destruction of high growth tech names in March/April, the sell off in energy names, etc…
  • You don’t need to know what is going to happen 12 months from now to make money in the market.
  • You don’t need to know what is going to happen 12 months from now to outperform the market.
  • You don’t need to know what is going to happen 12 months from now to avoid a deep correction.
  • You don’t need to buy the biggest winner in the SP500 everyday to make money.
  • You don’t need to be on the right side of every move to make money.
  • The fact that you don’t know what is going to happen 12 months from now doesn’t mean that you give up on stocks and buy a little bit of every ETF in the world and hope that one of them sticks, cookie cutter global asset allocation has been horrible recently.
  • Many who have forecasts get married to those forecasts and refuse to adapt to the changes that might happen to change the original forecast.  This is why there is a very thin line between having conviction and being stubborn.
  • The fact that you have no idea what is going to happen 12 months from now is not a stumbling block, or a hinder, or a curse, or a detriment. etc…
  • You don’t need to know the future to make money.
  • In 2013 I had no idea what was going to happen in 2014 and that didn’t change the way  I went about things one bit.
Zor Capital LLC is a New York based investment management firm, founded in 2011. Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts.  Managed Assets
Photo: davekocv