Less Is Better

There is no doubt in my mind that in the current market environment less is better for a majority of the participants.  However, I also believe that you have to stay engaged, go through the motions so you can stay in tuned with the market.

The biotechs have been under pressure all year, but stocks/ETF's go up and down not up or down.  It seems that $XBI has found support at the $48.50-$48.70 level--if you drill down the chart to an intraday level you might be able to find a trade on the long side with a close stop below the $48.5 level.

CREE, SWNC, SXCP, TTS, KSS, NTES are some of the stocks of interest to me on the long side if and only if they go through yesterday's high.  I'm speculating in a very short time frame.

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.

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Checking In On The Robo Advisors

The market is off to a rough start this year, many investors have been concerned about the market for the last few years as it was making new highs every other month, you can only imagine how sour sentiment is now that the market is making multi-month lows.

Today we are checking in on the Robo Advisors, Betterment and Wealthfront.  Passive investing has been the talk of the town for the last few years, the amount of money moving out of tactical/active management into passive investing has been tremendous.  The biggest road block investors in the passive strategies will encounter is sticking to the game plan.  You see, in a bull-market all your investing sins are forgiven, the less you pay attention the better you are off, the less you know the more beneficial it is to your portfolio. The last thing you want to do in a bull market is micro manage a long-term portfolio.  However, in a bear market, you will be susceptible to the many behavioral flaws we all have.  If your plan with your nest egg is to "set it and forget it" and/or "sit tight and ride it out", your behavioral flaws might fail you exactly at the wrong time.

With the market trading below its important 200-day moving average, I'm of the opinion that this is not the time to turn a blind eye to your investments. Betterment's and Wealthfront's 70/30 portfolio mix is down to the tune of -5% so far this year.  A simple proven timing strategy in these portfolios would have you 80% in cash for the time being protection you from further downside.

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.

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A Few Long Ideas And A Couple Of Shorts

As long as the indices stay above their 30-minute moving averages, speculators in the 0-5 day time frame should probably focus on long ideas unless of course they are shorting an extended move higher.

$DFRG, $HCKT $VG $ANF are the stocks on my long watch-list.  My only interest in getting long these stocks is if and only if they go through the previous day high plus .10 cents.  These stocks are have contracted over the last few days and move above the contraction should lead to a period of expansion.

$NOC, $SBNY are two stocks to consider on the short side.

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.

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Tactical Over Passive, Until This Happens

The above chart is a chart that gets thrown around a lot by the perma-bears and fear mongers, to let people know that the market has gone up too much, and it's due for another 50% decline.  As you can see, the chart has been publicised countless times---when the SP500 was up 95%, 125%, 150%, etc...

Bull markets can last longer than people can stay rational.  But something is about to happen that will put the wind behind the perma-bears backs.  The simplest and most general definition of whether or not we are in a bull or bear market is if we are trading above the 10 and 20 month moving averages. Bull if we are above, Bear if we are below.  Many money managers tend to get defensive ( tactical) when the market is below those averages.  By looking at the chart below it is easy to see why.  Bad things tend to happen when we are below those monthly averages.

Unless the SP500 rallies 8% tomorrow, we are going to close below the 10 and 20-month moving averages.  What that means to me, is that tactical investing makes more sense than passive investing until we get back above those averages.

Staying tactical when we are below the 10-month moving average has bode well over time.  Meb Faber has done extensive work on this subject, below are some of his charts that prove that timing the market base on the 10-month moving average has paid-off.

Tactical doesn't mean you sell everything and go to cash, or go 100% short because we are trading below these moving averages.  It means, be ready for things that happen in bear markets; rallies get faded, panic will be bought, you will get many fake head starts, bear traps will lead to huge 1-day rallies, despair will come into play, you can easily chop your account to pieces during this time, experience day-traders will do well, mom and pop will have 2008 flashbacks, Robo investors will second guess their strategy, etc.

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.

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Facebook Crushes Earnings

Facebook just hit the ball out of the park again.  The stock is up 14% due to its earnings announcement last night.  Revenues rose 52% year-over-year to $5.84 billion dollars, and earnings per share grew 46% year-over-year to .79 cents per share.  The 14% spike in the stock completely erases its 2016 losses and puts it a stone throw away from all-time highs.

Wall Street Analysts are tripping over themselves increasing their price targets:
Morgan Stanley $130 to $135
Susquehanna $130  to $140
JP Morgan $127 to $136
Wedbush $115 to $128
Cowen $125 to $140
Deutsche Bank $125 to $145
Piper $155 to $170

What now?  I'm not a big fan of chasing huge gaps on big cap names.  I would allow the stock to consolidate for a few days if I wanted to get long.

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.

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Make Your Move Now

On Wednesday of last week, we finally had some panic and despair show up, Google trends for the search of bear market hit levels not seen since 2008-2009.  If you remember, the S&P500 was down to the tune of 50% from its 2007 all time high.  

So far this correction is in line with the average intra-year decline for the last 30 years which is roughly 14%, 15% is the average intra-year since 2009.  Despite the average intra-year drops of 14.2% the SP500 has managed to close higher in 27 of 36 years (75%).

Before today’s rout the SPY managed a 5% rally from the lows, if you believe that this will be 2008 all over again, then take the recent respite to get your house in order. DO NOT WAIT UNTIL THE MARKET FALLS UNDER PRESSURE AGAIN.

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.

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Top Post Of The Week

It's Too Late To Short/Sell

Originally posted Wednesday, January 20, 2016

It's simply too late to short.  With SP500 down 11%, QQQ -13%, IWM -15%, since their 12/30/2015 high, it is simply too late.  If you believe that this will be 2008 all over again, chances are high that you might get an opportunity to short at better prices.  As you can see in the chart below, 2008 started with a 14% decline that was followed by a 10% dead cat bounce that led to some sideways action.

The largest rallies have happened in bear/corrective markets that are below the 200-day moving average as you can see below:

Be patient, you will get your chance.

Update 1/23/16, if you were panicking, if you believe this 2008 all over again, then take this 5% rally and get your house in order.  Don't wait until the market falls under pressure again.

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.

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Stay Informed