Tim Reazor
Chief Investment Strategist
NorAm Asset Management
This is going to be a big week. As I’m writing this news is breaking out of Ukraine that could affect the markets. Also affecting the markets this week will be a slew of earnings reports from big name stocks. We also have a market holiday on Friday and monthly options expiration this week. Here’s how I plan to stay focused this week.
I’m paying attention to the news coming from Ukraine, but I’m not trading off of it. Headlines can be misleading. But what have we know for awhile – at least readers of my column have known – that the energy markets, the bond markets and gold have been firming up and actionable – long before this latest round of Ukraine news. Price and volume don’t lie. There are 197 industry sub-groups that I follow. The top 50 are dominated with energy – oil/gas groups. I’ve documented this rotation from tech to energy for about three weeks. Your leading stocks in this group continue to be CLR, EOG, SLB and FANG. Don’t chase – the easiest way to play the shift is through USO.
This week also brings economic reports that will affect the markets. The first one is at 8:30 eastern Monday – retail sales. Tuesday will bring the CPI number to bear on the market – no pun indented. Again – I can’t stress this enough – don’t guess and place bets. Let the market report it’s news and earnings and then position yourself. Always keep in mind that cash is a position – stay nimble.
This is a short week so news and action will be compressed. That means expect more volatility and several head fakes from the market. I’ll say it here first. There most likely will be a relief rally this week. Don’t get sucked in – 90% of investing and trading is psychological – you’re not missing anything if the market starts moving higher. We have a lot of resistance to work though. Relief rallies are vicious and take no prisoners. The break the backs of folks who have gotten short at the wrong time and they do the same thing to folks who get long … how so? Most relief rallies will rally to resistance and then break the backs of folks who thought the market was going up up up without them.
One caveat to this week that I think is important. The put call ratio is something that I’ve studied for a very long time. We’re now above 1.1 – this is a big deal. As this ratio climbs higher we start to reach a point of market capitulation. What do I mean? 1.1 or higher means that the market is bearish – if the entire market is bearish who is left to sell – think about it. 1.2 is typically where I get excited because when we hit this level in the ratio markets tend to find bottoms. Make sense? If not email me and I’ll delve further.
Look at the facts of the markets – headlines affect the markets, but do not trade or invest off of them. If you want to know what is working in the market and what I’m expecting from gold, oil and bonds this this week please watch this short video.
http://noramassetmanagement.com/wp-content/uploads/2014/04/Meet-Now-4-11-14-6.40-PM.mp4
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Now that the sell-off has your attention allow me to explain a few rules of the road for the time being. There are no bargains in the stock market. You don’t need the Proctor and Gambles of the world. You need cash. Raise cash. No matter how temping the Tesla’s of the world appear to you remember this one thing – it’s a trap.
I get it – you love Netflix – that too is a trap. Don’t try and catch a bottom. Guessing rarely works. You’ll exhaust your capital long before you get it right. Say this to yourself over and over the next couple of weeks – “The market doesn’t care what I think”. Remember the market can be irrational longer than you can remain solvent.
So how can you participate in this market? I’ll explain in great detail in this Saturday’s Wall Street Shuffle Radio Show. In our pre-production meeting this afternoon Danny Stewart and I agreed that now is the time to cover the best ways to sell short and become a bearish for a bit. Click here to bookmark the link – http://www.iheart.com/live/1190AM-4276/?autoplay=true to listen live at 10 AM Central. You can also book mark the show’s site – www.TheWallStreetShuffle.com
I promised you a quick note on commodities and bonds for today’s newsletter. Gold is continuing to advance. From the 1288 bottom it appears that 1315 will hold and now there is a push up into 1332. If we get and hold 1332 then 1330 is the next stop. After that gold will most likely test 1400. We’re a long way from there. Don’t guess and place long options bets now. See what levels gold holds and then take action. For the moment a move up into the 140s in GLD is not out of the question. GLD is currently trading at 127.
Crude oil continues to act well and so does our two stocks CLR and SLB. Silver hasn’t quite followed gold leads, but this most likely is only a matter of time.
Bonds are one group that I’m really starting to get excited about. 30 Year treasuries broke out today and for me that means looking at TLT the bond ETF. TLT is around 109 right now. If we clear 113 on TLT a move up to 120 isn’t out of the question. These levels depend upon the severity and length of the correction.
One more note about the radio show this weekend – I’m planning to cover what I think are some of the best trade ideas so please do tune in or listen later via podcast.
I hope this helps you. If you’d like the team here at Noram Asset Management to implement the any of the above for you contact us right away. To set an appointment email me at Tim.Reazor@NorAmAsset.com I talk stocks and markets on Twitter most days – if you’re interested please follow me. My handle is @TJReazor
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
As we continue to stroll down the path of what is not obvious in this market let’s address how to scale into a short trade.
When you scale into a bullish position you do so by buying into strength and adding at critical support. I discussed this at length in yesterday’s newsletter. If you’d like a copy email me and I’ll send it to you.
Scaling into a bearish trade is different. You want to build your short position as your stock rallies into lines of resistance. The same lines that used to be support in an up trending stock are now places to start your short position. When your stock hits the underbelly of the 34, 21 or 8 period exponential moving average this is where you’d begin. A key to this is looking for low volume. If your stock is hitting these averages in low volume it’s more often than not the sweet spot for your bearish position. I also like to initiate short positions after a stock breaks the 50-day simple moving average and then rallies up to the 50-day on low volume.
You should use small size – relief rallies can be brutal so cutting down to a half–size position is appropriate. You only develop short candidates off the charts – the fundamentals do not matter. Corrections take down the best of companies. If you’re using options – take a longer perspective – allow the short to develop, use options with a delta of 70 and always be cognizant of earnings. Earnings will derail the best shorting candidates.
When should you cover? Take profits when you reach prior levels of support, hit price extensions or when the trade goes against you. Know you’re uncle point and keep losses to minimum.
Practically speaking the trade is over when you cross back over the 10-week simple moving average, the 50-day moving average or have two closes above the 21-period exponential moving.
What’s the easiest trade of all with the least amount of risk when you’re bearish? The call credit spread. We sell specific puts at specific time intervals to make our clients money in markets like this one. If you’d like to know more shoot me an email.
If all of this is too much then sit on the sidelines and wait for the trend take a more bullish tone.
One quick note – I’ll be writing about a number of commodity trades that are setting up in tomorrow’s newsletter.
If you need help with your investing please let us know – we can help you navigate these choppy markets. Email me at Tim.Reazor@NorAmAsset.com to set an appointment – either in person or online.
I talk stocks and markets most days on twitter – follow me by searching for my handle – @TJReazor
Best Regards,
Tim
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Continuing the theme of what’s not obvious in the markets – I’m going to talk over the nest two newsletters about scaling into a long or short trade. Proper scaling into an investment or trade actually reduces your over all risk in the markets. First up- the long trade.
How many of you plunk down your entire position all at once? If you have $10,000 to buy shares of XYZ stock you’re buying $10,000 worth all at once. Does this describe you? If so, the next time your buying stock long try the following.
Reward success. Meaning – if you’re looking to build a 10k position in a stock start by buying 50% of your total position. If the stock closes higher you’re free to buy more. The next day buy 30% more of your position. If the stock closes higher again you’re then free to complete the last 20% of your position. What did you just do – average up or as I call it rewarding good behavior in a stock. Why would you want to do this?
Risk control. If you’re building a position – and this assumes that you’re working with the top 2% of the most fundamentally and technically sound stocks – you want to buy strength. If you buy 50% of your position and the stock goes down – sound like you J – why reward the stock with more of your money? How do you know it’s going to come back? What if the move down is a more serious issue? How do you know that you’re not buying a top? You don’t – you may be cautious and have fact-based reasons to be cautious, but no one pegs exact tops or exact bottoms. This is why you need risk controls.
Imagine if you put down 50% of 10k and the stock dips 5% over the course of the next week – that’s only a $250 dollar loss compared to a $500 dollar loss if you had put down your entire position at once. In a choppy market like this one how many false steps do you think there will be in stocks?
Let’s examine four stock purchases. If you lose 5% on three stocks in a row on your 50% of 10k position you’ll have lost $750. If plunked down your 10K for all three you’d have lost $1,500. If on the fourth purchase you make just 10% to the upside on your average 10K position you’ll have lost on three out of four stocks and still come out ahead. If you’re a plunger you’ll be in the hole $500.
You can become wealthy over time with risk control.
If you need help with your investing discipline please let us know – we can help you navigate these choppy markets. Email me at Tim.Reazor@NorAmAsset.com to set an appointment – either in person or online.
I talk stocks and markets most days on twitter – follow me by searching for my handle – @TJReazor
Best Regards,
Tim
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Continuing on the theme of not writing about what is obvious this week I want to talk about why you shouldn’t short the market here.
If you listen to the Wall Street Shuffle Radio Program, read my newsletter regularly or hear me do daily market updates on The Dan Cofall Radio Show you that I often say that this is not the time to get short. So this begs the question…. When is the time to get short?
In markets like this one it’s tough. The QQQ’s hit a recent high of 91.36 – we closed today at 85.55. The SPY hit a recent high of 189.74. We’re currently trading at 184.34. We’re not too far off the highs and the media is picking up on the story that the market may be breaking down. This puts in prime territory for a relief rally.
A relief rally is when markets rebound because there is no one else to sell to – it’s too obvious a trade that typically sucks in individual investors. Most folks get short at the wrong moment – so tomorrow or in the near future markets will start to rally higher – not too much – think to their 34 and 21 period exponential moving averages or 50-day simple moving averages. As you see this some folks will want to get long their favorite stocks – this dries up supply. Some of you who got short the market will start to feel the heat – you shorted “XYZ” stock and it’s reversing higher. Every tick higher is more pain to your bottom line. You can’t take it anymore – you capitulate – you throw yourself to the stock market gods and beg for mercy.
Mercy will only come to you when you cover your short position – i.e. buy it back. This action makes it worse for other shorts… you just bought back your position and dried up some supply of the stock. You along with the folks who are getting long and now other short covers are continually drying up supply – add in the increase demand and boom – price goes higher.
How high? Most likely to the 34-period and 21period EMAs and to the 50-day SMA. It’s at this point if there is no continuation above this moving averages that you should then short.
If this volatility is too much too much or you’re not performing as well as you know you can – contact us here at Noram Asset Management – we can help. If you qualify for options trading give us a call. We have strategies for every market environment that can help you earn weekly income while the markets look for a definitive direction.
Contact me at Tim.Reazor@NoramAsset.com or 855.Real.Wealth – follow me on Twitter. I’m often talking markets and stocks – my handle is @TJReazor
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Since everyone in financial media will be talking this week about the obvious – I’ll be writing all this week about the not obvious. What good is a newsletter that just parrots what you know? Quick recap…
You know… the Nasdaq is in trouble. It’s below the 50-day simple moving average and most stocks that are perceived to over-priced / over-hyped will most likely capitulate to lower prices. You know that any moves higher are like that second helping of desert you seem to have most nights… you know you shouldn’t, but you can’t help yourself…. Well this week – help yourself – don’t go long the Nasdaq – every time it tries to suck you in tell yourself it’s a trap.
What is not obvious? For two week’s I’ve been talking about the rotation into energy stocks and crude oil ETF’s. This hasn’t been obvious unless you look at the relation of sectors and sub-groups. Where’s the institutional money headed? Oil and gas stocks – the oil and gas exploratory group in particular. Three weeks ago this group was ranked 164 out of 197. This week it’s ranked 45th.
There are several stocks in this group that I’ll be watching this week for our clients here at Noram Asset Management. If I see our signal we’ll start taking pilot positions.
What also may not be obvious is the gold trade. If you read me regularly or have listened to me on the radio you know I’ve been bearish on gold down to $1,288. That changed Friday. Gold looks like $1,288 will hold. I’m not entering the trade just yet. I’m waiting – there may be some more volatility to shake out the weak hands.
I talked about specific stocks and gold levels on this week’s Wall Street Shuffle Radio Show if you’d like to listen – http://www.thewallstreetshuffle.com/category/podcasts/
I also created a short video that talks about the energy trade – http://noramassetmanagement.com/wp-content/uploads/2014/04/Wall-Street-Shuffle-Video-Update-4-5-14.mp4
If you have any questions or want help navigating this market from the team here at NorAm please email me – Tim.Reazor@NorAmAsset.com
If you’d like timely updates to key market levels and trade ideas follow me on twitter. My handle is @TJReazor
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Since everyone in financial media will be talking this week about the obvious – I’ll be writing all this week about the not obvious. What good is a newsletter that just parrots what you know? Quick recap…
You know… the Nasdaq is in trouble. It’s below the 50-day simple moving average and most stocks that are perceived to over-priced / over-hyped will most likely capitulate to lower prices. You know that any moves higher are like that second helping of desert you seem to have most nights… you know you shouldn’t, but you can’t help yourself…. Well this week – help yourself – don’t go long the Nasdaq – every time it tries to suck you in tell yourself it’s a trap.
What is not obvious? For two week’s I’ve been talking about the rotation into energy stocks and crude oil ETF’s. This hasn’t been obvious unless you look at the relation of sectors and sub-groups. Where’s the institutional money headed? Oil and gas stocks – the oil and gas exploratory group in particular. Three weeks ago this group was ranked 164 out of 197. This week it’s ranked 45th.
There are several stocks in this group that I’ll be watching this week for our clients here at Noram Asset Management. If I see our signal we’ll start taking pilot positions.
What also may not be obvious is the gold trade. If you read me regularly or have listened to me on the radio you know I’ve been bearish on gold down to $1,288. That changed Friday. Gold looks like $1,288 will hold. I’m not entering the trade just yet. I’m waiting – there may be some more volatility to shake out the weak hands.
I talked about specific stocks and gold levels on this week’s Wall Street Shuffle Radio Show if you’d like to listen – http://www.thewallstreetshuffle.com/category/podcasts/
I also created a short video that talks about the energy trade – http://noramassetmanagement.com/wp-content/uploads/2014/04/Wall-Street-Shuffle-Video-Update-4-5-14.mp4
If you have any questions or want help navigating this market from the team here at NorAm please email me – Tim.Reazor@NorAmAsset.com
If you’d like timely updates to key market levels and trade ideas follow me on twitter. My handle is @TJReazor
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
By the time you read this the jobs number has been out and markets are reacting. This number shouldn’t change how you handle your investments today. Holding your stocks though today means that you would buy them on Monday… that’s how good they are. Let’s quickly review some sell rules to help you get through today.
Has your stock undercut its proper buy point by 5%?
Is your stock closing below the 10-week / 50 day simple moving average?
Is your stock gapping down?
Is your stock selling off in high volume?
Is one of your stocks looking weak? Don’t know what to do? What you’re looking for is a preponderance of evidence to hold your stocks. What kind of evidence you ask….
Is your stock pulling back in low volume? This is constructive – the institutions aren’t selling.
Is your stock finding support at the 10-week / 50-day simple moving average? This too is a sign of strength. In uptrends a first or second gentle pullback to the 10-wk/50-day is a place to add to a position.
I hope this helps you navigate the markets today. I’ll have a longer note Monday after the dust settles.
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
No one cares that you think the market should go lower. The tide is rising – you have to have to decide what your course of action is. You’ve heard that you can’t fight the tape, but what does that really mean? To me it means that you can’t ignore price volume. They’re facts. It means that you can have a hypostasis in regards to what the markets should do, but you can’t hold onto your thoughts or feelings in the face of facts. It doesn’t matter what you think… it just doesn’t – the ultimate arbiter is price and volume – and unless you’re nimble and willing to adjust your plans you’ll always find yourself on the wrong side of the trade.
Was I all set for a correction to take hold and shake up some dust – you bet! Did I have to reverse course mentally – that’s a big 10-4! What’s my point – your stocks, the markets, institutional investors who drive the trend – they’re not your friends, they don’t know you – they don’t care what you think or how smart you perceive yourself to be. You have but one job in the markets and that is to make money.
Focus in on that one job – derive a plan – find five leading stocks and make a watch-list. Don’t guess what you think should go up – figure out what is leading and what has the potential to lead –
This week at Noram Asset Management we’re executing our plan. We’re interrupting the market’s signals and stepping very cautiously back into the markets with leading stocks and our ETF strategy.
When you step back in don’t guess. Do you know what groups are leading? Do you believe its transports? Know that facts before you invest or trade – thinking and feeling is not for the markets.
Just because you think something should go up doesn’t mean it will. Remember, the market’s, your stocks, the institutional investors who drive trend – they don’t know you – they’re not your friends – they want your money. They want to suck you in like all the individual investors who bought into the 10-point move into Netflix this morning only to have the people who control the market beat the stock down until it closed down $1.81. Imagine how you feel if you bought at the top this morning.
I get it Netflix has a great model – but what you may be missing is that it’s a laggard stock – look at the chart! Your stocks should look like EOG, CMG on a weekly and several of the transports. Don’t get sucked in – the easiest way to avoid this is by staying away from laggard stocks.
If this volatility is too much or you’re not doing as well as you could be – please schedule strategic review with the team and me here at Noram Asset Management. We can help you. We can meet in our Dallas headquarters or live online.
For an appointment email Tim.Reazor@NoramAsset.com – also I talk stocks and markets most days on twitter if you’d like to follow me – @TJReazor is my handle.
Best Reagrds,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
Tim Reazor
Chief Investment Strategist
NorAm Asset Management
Is the market in a position to move higher? Yes. Should you jump back in with both feet? No. You need to wade in slowly. That’s exactly what we’ll be at Noram Asset Management.
Wade in to what? That is the question you have. You’ve heard me discuss and talk on the radio show I co-host that about the importance of only investing and trading in the top 2% of the market. That means only buying the best merchandise or stocks. When you’re screening, screen for stocks with superior fundamentals and superior technicals.
Pull a chart of EOG Resources (EOG) and Chipotle Mexican Grill (CMG): do your stocks look like these two watch-list candidates? These two stocks meet our stringent demands – does that mean that you rush out and buy them right away – no! There is no rush. Like us you should have defined process of what triggers you into the trade, how you’re going to scale in and what are your pre-defined exit points. This is critical. Have a plan and then stick to it!
You also don’t have to buy shares of the companies on your watch-list. Utilizing a credit spread is one of the most forgiving ways to make money in the market. Is it guaranteed? Of course not – can it become more consistent and predictable way for you to make money in the market? I believe so.
If you want to hear my thoughts on gold, critical market levels and the sample crude oil trade we set up please click this link. http://www.thewallstreetshuffle.com/category/podcasts/
If you’d like a strategic review of your portfolio and a game plan for the rest of the year please email the team and me at NorAm. Tim@NorAmAsset.com
If you’d like to talk to me on twitter my handle is @TJReazor – I often talk stocks and markets there.
Best Regards,
Tim
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.
