Itchy Buy Fingers Are About To Get Relief
As the markets close in on the 7100 level on the NDX that Zenolytics has been obsessively pounding the table on being a hook for the markets since last week, it's now time to review the timeframe for taking advantage of what has become a cacophony of fear in the markets. As the rest of Wall Street is just starting to grasp what I have been discussing since the beginning of May, it's time to latch onto the fact that, per the usual, what is obvious will be obviously wrong. EVERYONE now understands that the trade war is bad. EVERYONE sees that the Fed is going to cut rates. EVERYONE sees how terrible the price action has been and thinks we are going lower. Everyone suddenly believing everything that is nasty in the world of finance is occurring just as the market is about to hit its hook. For those unfamiliar with my style of price analysis, one of the pillars of my work is that the market will always have a market average that HOOKS the rest of the market, either pulling it down or up based on price levels of importance. The current hook in the market is NDX 7100 (red trajectory below). The expectation is that once the 7100 level comes into the play there is a high probability of a reversal after the typical volatility that takes place around such important levels. I said earlier this week that Friday to Monday would be the time the level is hit. With the NDX down 100 points currently and 50 points away from 7100, I am looking for a Monday low. Itchy buy fingers itch no more, relief is imminent. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital...
Here Is The Bottomline With Zillow At This Point In Their Business Cycle
Let's back up a little bit before we proceed. In case you've been living in a dumpster, Zillow announced earlier this year that they were fully transitioning their business model to Ibuying, which basically means they are now a market maker for homes in certain geographic regions. At first blush the news of Zillow moving into a capital intensive business that translated into potentially tens of thousands of homes sitting on their balance sheet was greeted with a great deal of trepidation. Nowhere was the reluctance to participate in this "Uber of real estate" more present than long-time institutional shareholders who were happy with the capital light business of getting money from realtors for having their listings appear on Zillow's website. Q4 earnings were announced by Zillow in February. The market initially boosted the stock up to the mid-40s range mostly on elation over stud-muffin tech entrepreneur Rich Barton coming back into the mix as CEO. In the weeks and months following their Q4 report the stock steadily sank from the mid-40s to the low-30s. In March, Zenolytics put out a note detailing how Zillow had been one of the best performing stocks in the first half of the year for every year going back to their IPO aptly titled, "There Are Few Things As Reliable As Zillow Outperforming During The First Half of Any Year." After releasing Q1 earnings earlier in May everything has suddenly changed. Investors are suddenly eager to participate in Zillow's growth. The losses created as a result of Zillow Homes are acceptable as long as revenues keep growing at a rapid (greater than 50% annualized) clip. Here is why this change in attitude among investors is so bullish for the stock: Investors have accepted the IBuying or Zillow Homes model Investors have accepted that the Zillow Homes model comes with sequentially increasing losses Zillow simply has to accelerate the pace of their home buying in order to create greater revenue growth With respect to point #3, this isn't building a car or having the marketplace accept the newest release of your software to gain revenues. This is telling a guy in Phoenix that I'll give you $300,000 for your home in a week if you want to sell it to me. Nothing created. Very little man power. A relatively simple transaction. And Zillow has all the credit and cash they want to effect such transactions. Never mind the fact that Zillow is the first destination (and it's not even close) for those seeking to effect a purchase or sale of a home. For that reason, they can continue an attractive level of growth in...
The Death Grip Of Yields On Equities Is Conveying An Important Message About Sentiment
As yields continue to grab equities by the throat, refusing to relinquish what is seemingly becoming a death grip, it is becoming obvious that levels of fear among investors is reaching tradeable, if not investable levels. There isn't any conclusion to be reached by looking at any of the myriad of traditional contrarian indicators that exist. Being that they are followed by nearly every investor out there, they typically cross signals, delivering nothing but an amplification of the noise that is so abundant. Instead, levels of fear are being demonstrated by how subservient equities have become to yields. Further, yields are falling (everyone is buying bonds) as a result of fear related to economic growth due primarily to the uncertainty over an escalating trade war. This type of newfound dependency of the equity markets to fixed income U.S. treasury securities is completely ignoring two facts: The further yields fall, the more attractive the earnings yields on the S&P looks on a relative basis Earnings, while being lumpy across sectors, are still in a relatively healthy period of growth. Just as Q4 2018 was an overreaction to fear of an earnings led slowdown, Q2 2019 has a high probability of being another overreaction. After being bearish for the entire of May, Zenolytics is preparing to turn a new leaf. While it still remains early, we are certainly close. Keep the buy button dust free and shiny because the time to use it is quickly arriving. Officially Live: Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the...
The Only Question To Ask As An Equity Investor Right Now
Are yields driving the market and equities are the passenger? That's what this current market cycle that started with a late April top in equities all comes down to. It has only become obvious over the past several trading sessions as yields have moved into parabolic drop territory with global inversion of yields being the current buzzword in the investment community. As yields have dropped equities are now being pulled into what is a seemingly hopeless vortex similar to Q4 of 2018. Only then it was equities that were leading the precipitous drop in yields. It was fear of an earnings slowdown. It was threat of junk rated corporate debt causing a domino effect in high yield market. And, of course, it was fear over whether China and the U.S. could come to terms on a trade deal. What has changed with the recent drop is the tail seems to wagging the dog presently. The steep decline in yields during May is beginning to negatively influence the thinking of equity investors. Typically, when this type of reversal of roles takes place, with hallucinations of spider demons among the investor class, markets are nearing an inflection point. That inflection point may indeed be an important support area for yields on both the 10 year and the 30 year. Both are at or near multi-year support areas, with the thirty year treasury sitting right below a support area with a twenty five year historical record. In other words, it's a significant piece of support. If yields do decide to suddenly obey the unseen laws of geometric price discovery, reversing off these important points of support, then equities will surely follow. The resulting bottom will, at the very least, be tradeable if not investable. At the very same time, the NDX is nearing a support area that has been discussed since last week at 7100. The next few days are everything. Zenolytics is looking for a bottom of some significance to take place in the Friday-Monday timeframe. The bottom will be for both equities and yields. Whether this it is a simple tradeable bottom that will be short-lived or an investable bottom that is intermediate term in nature is yet to be determined. Officially Live: Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for...
Zenolytics Sees Upside of 100% in SNAP Shares From Current Levels
Zenolytics is recommending shares of SNAP for aggressive portfolios with an intermediate to long-term time horizon. Initial price target on the shares is $22. SNAP's problems post-IPO had everything to do with the fact that while company is extremely popular among younger individuals, it didn't have in its possession a cogent pathway towards gaining revenue from advertising. Initial plans were scatter-brained and poorly executed. This lack of vision led to a precipitous decline of greater than 80% from 2017 to the end 2018 in the share price post-IPO. Recently, however, the company has been executing on an ad strategy to its young audience. SNAP reaches 90% of 13 to 24 year olds in the U.S., putting it in a leading position among advertisers who want to reach this audience. A recent report by Statista show that Generation Z users rate SNAP as their favorite destination with Instagram a close second. In a perfect world, SNAP should have waited for their traction and consistency in advertising to reach present levels prior to issuing shares to the public. The company's lack of patience in going public is an opportunity for new investors. Among the many improvements, SNAP has tweaked its Android offering recently, allowing previously disgruntled advertisers to come back to the company. There has also been a broad diversification of their social media offerings, focused on gaming and ecommerce, allowing the company to greater leverage its massive user base. Some highlights from the recent conference call: CEO Evan Spiegel: “As of March, our ads can now reach more 13 to 34 year olds than Instagram in the United States. Our business generated revenues of $320 million in Q1, an increase of 39% year-over-year and our year-over-year revenue growth increased by three percentage points versus the prior quarter. Our adjusted EBITDA loss in Q1 was $123 million, representing a 43% improvement year-over-year. This is the second consecutive quarter, where more than 100% of our incremental year-over-year revenue flowed through to our bottom line.” CEO Evan Spiegel: “As of the end of Q1, our new Android application is available to everyone. Compared to the prior version it is 25% smaller, opens 20% faster on average, and is modularized to allow for efficient ongoing innovation. On some of the lowest-performing devices, this resulted in a 6% increase in the number of people sending Snaps, within the first week of upgrading to the new Android build.” CEO Evan Spiegel: “We recently launched Snap Games, which allows our community to play high quality mobile games with their friends in real-time through our chat service. This was the result of more than two years of investment...
AMD New Product Announcement Sets Stage For $34 Price Target
On May 17th, Zenolytics released a bullish note on AMD with a $34 price target. Mentioned in the note as an "immediate upside catalyst" was the Computex Conference with the CEO of AMD giving the keynote. As expected, the release of key new products that specifically target Intel was announced with the release date for these products being within the next six months. A Cowen analyst had this to say following the presentation: "With 7nm Ryzen 3 PC and Rome server CPUs launching in mid-2019, Intel will no longer be able to rely on its n-node silicon advantage, and will instead lean on its incumbency and breadth of silicon as its 10nm chips are not expected out until late 2019 in PCs and 2020 in servers." Intel is running far behind on product development giving AMD an opportunity to pull ahead as 2019 progresses. Advanced product development should be reflected in earnings throughout 2019, justifying AMD's relative strength throughout the carnage of the past month in the semiconductor sector. Zenolytics maintains its $34 price target over the short-term. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing. Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor...
Zenolytics Flashback: May 2015 – An Issue of Self-Dynamics
The following article was published four years ago, providing insight into how understanding self-dynamics is often more important than understanding market-dynamics. PORTFOLIO UPDATE: AN ISSUE OF...
Boring May Be The Ticket To Outperformance Over The Next Few Months
Last weekend Zenolytics highlighted Single Family Residential REITs as an attractive investment for conservative portfolios. There is nothing exciting about buying a basket of homes, fixing them up, maintaining them over time and rotating tenants. In fact, it sounds like a burdensome way of cultivating investment capital. Nevertheless, it's what works in the current market. It's boring as hell. It's cumbersome. It doesn't involve the latest microchip or revolutionary software. It's houses being rented to a growing list of individuals that for whatever reason can't or won't purchase a home. Being boring has a time and place in every portfolio. Current market conditions are an example of that time or place. Here's the rub: It's not going to transition quickly to a market where maniacal positions in tech, financials and generally happy, go lucky market sectors are rewarded. The markets have been mired in a sideways dystopia since January of 2018. Close to 18 months of nothing on the S&P but anxiety over everything from recession, to debt, to global trade. Go ahead and embrace the boring as capital preservation takes precedence over anything else until further...
Yes, The Market Is Trying To Kill You
The market has demonstrated consistent hate towards investors for the past 18 months. Look at the simple fact that we are trading almost in the exact same spot where the market ended on January 31st, 2018. All the meanwhile, we have experienced a 20% bowel twisting decline in the market averages, with the worst of the downside volatility taking place smack in the midst of the holiday season. Quickly followed by a seemingly cocaine induced sprint right back up in the first few months of this year, just as investors were getting used to the idea that a recession was imminent. As soon as everyone came to terms with the fact that a recession was simply media induced hysteria in the face of a declining market, growing comfortable with the idea of equity exposure as a way of creating a little bit of wealth in the months ahead, the S&P falls 5% from its highs in a rapid fire, "I want to stomp on your guts" manner. The market is trying to kill investors in 2019. And this murderous volatility will only grow into the summer, as investors will have to deal with illiquidity, interest rate uncertainty, trade war rhetoric and all of the other maladies that seem to be percolating in the background. It's a very simple act to move out of the way of a market on a rampage. And it's better to do so on your own free will instead of at wrong end of a bulldozer that only seems to be picking up speed. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from...
Time To Take Profits On Zillow
We have no position in Zillow presently. However, for those who do, the time has come to rein in the gains. On March 17th, Zenolytics published an opinion on Zillow, succinctly describing how Zillow tends to outperform during the 1st half of any calendar year. "Tends" may be too soft a description. Zillow, on average, produces gains of 50% during the front half of calendar years going back to 2012. This tendency towards outperformance becomes all the more pronounced when rates plunge, as they have in 2019 to date. The fundamental thesis behind the trade has two pillars: Seasonality of real estate transactions heavily weighted towards spring and summer i.e. the first half of the year Low rates = cheap mortgages = attractive affordability for buyers By now, with the employment market having gone nuclear with record job growth, rates steadily withering and the consumer being jolly one would expect that home buyers would be stampeding to get the keys to their new house, especially as price appreciation has slowed or is declining in many of the hottest markets. Yet something is taking place. Existing home sales for April fell, coming in below expectations. This from CNBC: "Sales of existing U.S. homes fell 0.4% in April compared with March to a seasonally adjusted annualized rate of 5.19 million units, according to the National Association of Realtors. Sales were 4.4% lower compared with April 2018. That was the 14th straight month of annual declines." All the meanwhile, Zillow's primary publicly listed competitors in the space: RDFN, RMAX, RLGY are getting pummeled during May, with an average decline of 25% among the three. The one bastion of safety in the sector during May has been Zillow. There is no doubt that their Zillow Offers business is providing a much needed boost to revenues, even as losses continue to grow. The controversial nature of their Offers business has caused short sellers galore to barrel into the name, with short interest on Zillow coming in at 52 week highs as of the most recent data. CEO Rich Barton's outstanding ability control the narrative while shorts scream bloody murder with losses increasing has created a virtuous cycle of gains in the stock recently. However, once the stampede of covering ends, Zillow may be prone to some reversion back to its mean in the 30 range, especially as all of its peers are suffering an inordinate amount of pain in the face of a real estate market that certainly hasn't picked up as many thought it would this far into the spring buying season. Zenolytics now offers Turning Points Premium service for unparalleled...