Shorts Beware

 

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So here we are, the markets are oversold by a few measures and all you read for the most part on the social media front is all the negative things that led to this pullback.  The guys who have been pounding the table consistently to short the market are patting themselves on the back, cnbc of course had someone calling for an 11% correction at a point where the market might be due for an oversold bounce.  The bullish guys who bombard us with with every single bullish stat they could come up with have gone AWOL with the studies exactly when it might be best to talk about them.  It seems like many people just believe in whatever they believe in when the market is moving in their favor.  I’m a fan of looking at the positives when I believe the market might be extended to the downside due to the tendency of the market bouncing from oversold levels time and time again.  Sure every now and then the dam opens up and all hell breaks loose and oversold becomes more oversold, but really how good have those odds been?

Let’s look at some of the things that might go right in the next 1-5 days that might give you a better price to sell and or a better spot to short if that’s what you want to do.

Telechart’s McClellan Oscillator closed under -200, readings under -200 have led to bounces many more times than it has led to a further pullback in the short term.

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Only 11% of stocks in the Russell 3000 are above their 10 day moving average, see the chart below to get a feel how the market has reacted around these levels.

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The CNNMONEY fear and greed sentiment indicator has done a decent job as a contrarian signal when the market has sold off, its at extreme levels.

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Midterm Election Years seasonal chart h/t @RickyRoma0

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Here is the point to all this; the market goes up and down not up or down, so chances are high you might get a better price in the next 1-5 days to sell if that is what you want to do.  If your game is shorting you will also probably get a better place to short risk reward wise in the next 1-5 days. As far as buying, I’m not going to touch on that point, that you do at your own risk.

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Frank Zorrilla is the founder of Zor Capital LLC a New York based investment management firm.  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; Scary Mercedes


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.


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