A Different Market Reality Than Expected Has Become Apparent, But It Comes With A Price.
The current market environment has been beyond expectations and precedent since this rally kicked off in March. Given the liquidity mixed with the pessimism of the time, the natural move for the markets was to expand on the upside beyond the realm of what anyone expected, despite the seemingly negative fundamental headlines, whether earnings related or with respect to the broader economy. Now investors are beginning to come to terms with a different reality. That reality is that the bearish reality they suspected to be concrete just a few months ago, turned out to be completely false. This has become cemented with tonight's onslaught of positive tech earnings, proving that the Nasdaq was precisely right in not only being a pocket of relative stability during the March crash, but being a bastion of massive strength during this recovery. Investors now know, beyond any shadow of a doubt, that earnings for technology are resilient and will continue to be resilient over the short to intermediate term. The act of "knowing," however, creates market dynamics that have the potential to be counter-intuitive in nature. This is where the danger currently lies in the current market. To be clear, the type of danger I'm speaking of isn't a March type of crash or anything resembling that event. It is rather a confusing period for the markets that continues to be choppy, greatly punishing the vast army of investors who choose to chase rallies like the one we are almost certain to have tomorrow. If you had the intestinal fortitude to purchase along side us at the March bottom, where I explicitly laid out the case for what is occurring presently, then you have done well enough that you don't need to play the performance catch up game that nearly everyone who is buying presently is playing. All that's happening at this point is the market moving into the top end of its range with the afterburners racing due to the heat of all of these bright, shiny fundamental positives. Seemingly a green light for investors to go all-in, which is always reason to take a step back. Be bullish, but now isn't the time to press the gas at all. Zenolytics now offers Turning Points Market Intelligence premium service 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....
A Complicated Spot
After moving past the halfway point of a week that was supposed to be fraught with event driven volatility, we are looking at an S&P that is up a little more than 1% on the week and an NDX that is up close to 2%. Both averages remain largely range bound, sitting in the same spots they have for the past couple of weeks. This is a complicated spot for the market. We have various pieces of bullish fundamental information, mostly in the form of earnings and guidance, that have been off the wall positive. These are pieces of information that should have driven the markets out of these ranges. Yet, here we are, midway through the busiest week of a significantly positive earnings season, with the market embracing investors by seemingly saying "earnings are great, I'm sitting in the same spot I have all month, come along for the ride." There's something I like to call absorption theory, which very simply states that when the market absorbs positive news within a bullish uptrend without moving much at all, the situation has underlying layers of complexity that are yet to be revealed. In other words, markets should never be accommodative in BOTH price and fundamentals. If fundamentals are good, as they are now, the market should be forcing the chase, creating an uncomfortable buying proposition for investors. Perhaps after being long since late March, most often upwards of 350% until we lightened up in June, I am being protective of our profits, overthinking things a bit here. I will concede that possibility. However, at the same time, while being extremely bullish for the months ahead, the markets are more than due for some shenanigans that throw investors off balance. What we are experiencing presently may be the first steps towards the deception to come. While remaining long primarily technology, both T11 and Zenolytics portfolios have a significant amount of cash to deploy in case of any misbehavior in the offing. Zenolytics now offers Turning Points Market Intelligence premium service 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...
Called An Audible Today
For the second time in July, I called an audible today that took down risk significantly. I just finished going over the reasoning for the move with clients. We took profits on positions in Zillow, Redfin and Tesla. I had this week as having one day with inordinate downside volatility. Of course, there is a possibility that today was that day and the rest of the week will be up. However, FOMC days are typically torrid affairs, which is why I expected tomorrow to be the down day. I expect that tomorrow will take some digesting once the FOMC decision is announced and with renewed conflict on the Congressional front with respect to further stimulus, odds are that investors could be greeted with another down day tomorrow. That is going to leave a bunch of investors who begin buying on hope of good earnings out of the army of mega-cap tech companies reporting on Thursday. However, the situation could be setting up, with two down days in a row, for continued sell the news type of price action. The low probability scenario I outlined in the weekend note could then come to pass, with some ugly action into Friday-Monday. We have had a good month of July at T11, being up a double digit percentage for the month. There is no reason to take on this type of risk, when we could move into situational plays in the near future, while potentially avoiding forfeiting some valuable gains. On a technical basis, there is a broad deterioration of patterns in tech that need to be resolved in a quick fashion either tomorrow or Thursday. What we absolutely do not wanna see as investors in growth is an expansionary move down from here. That would change things here over the next couple of weeks. We'll cross that bridge once we get to it, however. If there is one thing this market has taught us in 2020, it's that moves have to be made on a dime. We can always reinitiate risk, whether through individual positions or leveraged ETFs. That's it for tonight. Zenolytics now offers Turning Points Market Intelligence premium service 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...
The Asset Blitz Has Arrived
We are on the verge of an asset blitz. An asset blitz is when a moment of realization strikes a mass audience who have been absolutely oblivious to what has been occurring, forcing them into an emotional reaction that has them chasing stock, commodity and asset prices, in general, with reckless abandon. With Congress about to approve another round of "spend at Wal-Mart and buy stocks to your heart's content" stimulus, while the Fed will likely disclose ever increasing creative measures to inflate their balance sheet this week, the bid in the market for the remainder of July has potential to get cannibalistic. Investors ripping flesh off one another in an effort not to miss out on another tick. The parabolic run in gold and silver is telling us of the outcome in equities loud and clear. What has been amazing is how few investors have caught onto this brilliant correlation since the March low. Gold has been telling investors exactly what equities would do with a lead time of 3-5 days for months now. I'm not sure if the present iteration of Wall Street investor are a group of mouth breathers who have difficulty digesting relevant information, however, this correlation between gold and the S&P should have been taped to the wall of every investor to remind them that the inflationary, "QE until the sun comes up" trade is just getting warmed up, with gold paving the way. The parabolic run in gold leading to a parabolic run in the S&P that I was discussing in April to take place in Q3/Q4 is arriving just in time. We added nothing today because we are already leveraged on the long side, with an extreme focus on the best performing tech names with a definitive theme, leveraging the current environment to their favor. The fun is just getting started at this late date in the month of July. Zenolytics now offers Turning Points Market Intelligence premium service 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,...
Weekly Note Preview: False Signals Abound; What True Market Sentiment Actually Reveals; Probability Scenarios This Week
What follows is an excerpt from this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here. The excerpt from last weekend's note is available here. In this weekend's 16 page note we discuss: The prevalence of false sentiment and technical signals What true market sentiment actually reveals The striking relationship between gold/S&P 500 and what it says about market action this coming week A high probability and low probability market scenario for the week ahead A new earnings play What to expect from TSLA after earnings Another look at The Great Migration cycle MARKET UPDATE From the time this rally kicked off in March, there has been a weekly chorus of false sentiment, technical and economic indicators that have successfully done their duty in throwing investors off the scent of the market, rendering their capital useless as it sits parked in cash or hedged to the point of absurdity. Some four months later, nothing has changed. Instead of seeking points of advantageous participation/allocation into this rally, an overwhelming majority of investors are looking at when it will end. Even the most bullish among us do not believe this rally can last for much longer than the next few months. In the face of the greatest act of global central bank liquidity injections, fiscal stimulus packages and a massive transformation of society as we know it, investors are focused on the same data that has caused them perpetual misery since the 2009 lows. That is backward looking fundamental, macroeconomic data points. While the misery of the current state of affairs is very real, it is also the type of common sense, in your face data that the market uses to not just run, but sprint through the wall of worry it builds, as the market looks ahead to different data points that have yet to revealed through conventional measures. Put simply, what is obvious will always be obviously wrong. The greatest threat that investors face in the current market is not missing the top, suffering through another repeat of the March virus crash. The greatest threat investors face has been and continues to be getting bearish early on a market that has done nothing other than demonstrate extreme consistency and momentum. All it took was two 1% down weeks in the Nasdaq to bring out an army of top callers, bubble predictions and pessimists, calling for a steep retracement of the gains we have experienced since March. All it took was two months of the S&P 500 moving sideways through a technical zone of turbulence that had a high probability of...
Flashback 2019: Zenolytics Goes Bullish On AMD
With a soaring performance on Friday, after Intel completely fumbled in their chip delay, AMD has fulfilled the promise (and then some) outlined here a little over a year ago. With our focus now being on all of the investment opportunities presented as a result of The Great Acceleration Cycle, we moved on from AMD sometime ago. However, it's worth noting how far the stock has come in a year's time. What follows is from May 17th, 2019 in a note titled Zenolytics Goes Bullish On AMD. Check that box: The SOX has experienced a ruinous decline during May, falling 11% from its April high, while key components within the average such as XLNX and NVDA have been treated like scraps of red meat for the eagerly awaiting, starving population of bears. In what has been a form of subtle bullish signalling, AMD has refused to to participate in this foray of self-loathing behavior among the semiconductor names, instead choosing to pin itself to recent highs, directly beneath a key trajectory point, while there are very obvious signs of accumulation taking place. In the category of technical imagery, this is the equity equivalent of increasing the throttle on the jets before takeoff. In the midst of this bullish technical dance are a symphony of bubbling positive fundamental developments: Data center revenue has doubled year over year Gross margin expansion Market share expansion versus competitors, specifically: INTC and NVDA A growing list of competitive product offerings targeting high growth markets, including gaming and datacenter markets Potential immediate upside catalyst 2019 Computex Conference May 28-June 1, with the CEO of AMD giving the keynote address Zenolytics is bullish on AMD seeing a test of the 2018 highs at $34 as being imminent, with the possibility of further gains entirely dependent on whether the market gains traction away from the current bearish regime. Zenolytics now offers Turning Points Market Intelligence premium service 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...
Weekly Note Preview: 6 “Decreased Risk Events” That Have Taken Place Making Being Long Equities Here as Favorable as The March Lows, Perfection In The S&P 500…..
What follows is an excerpt from this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here. The excerpt from last weekend's note is available here. In this weekend's 12 page note we discuss: 6 "decreased risk events" that have taken place making being long equities here as favorable as the March lows. Perfection in the S&P 500. What role the VIX will play from here moving forward. What role the SOX will play from here moving forward. The Great Mobility Cycle and how to best invest in it. TSLA earnings. MARKET UPDATE Let me begin this week's note by making a statement that may be thought of as ridiculous by some. I'll spend a majority of the time for the remainder of this note, explaining why I believe the following statement to be true. From a pure risk/reward basis, the risk/reward in being heavily long equities here is as favorable as the March lows. A certain set of developments has taken place in the markets over the past several weeks that has significantly decreased the risk of being long equities, while the reward for being long the correct sectors has increased. Decreased risk events: To view the remainder of this weekend's note, you can subscribe by clicking here. 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...
Weekly Note Preview: Institutional Money Coming, Utilizing TSLA as a Gauge For Speculative Capital Flows…..
What follows is an excerpt from this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here. The excerpt from last weekend's note is available here. In this weekend's 13 page note we discuss: Institutional money about to flood the market Utilizing TSLA as a gauge for speculative capital flows What speculative capital flows mean for the markets Technology names with parabolic potential A profile of a new portfolio addition in the restaurant space Bank earnings Taking advantage of tight inventories and constant bidding wars in residential real estate via equities MARKET UPDATE There remain many indications that a vast majority of investors, especially within the institutional space, remain reluctant to step back into the market. There are two imminent events that will essentially force the vast amounts of institutional capital back into the market: 1. The VIX moving below 20 2. The S&P 500 moving firmly into positive territory for 2020 and staying there There is a strong probability that the catalyst for both of the aforementioned events taking place will be Q2 earnings and forward guidance that we will be learning about in the coming weeks. What is especially impressive, and potentially profitable for investors who properly take advantage, is that we are at a juncture in the market cycle where speculative juices are beginning to flow. This means that parabolic moves in stocks can take place that will be mind-numbing in nature, going beyond levels that most anyone expects. As institutional investors begin to step back into the market, with the qualifications above being the trigger, there is strong potential for some very real fireworks to be set off through the remainder of July and throughout August. To view the remainder of this weekend's note, you can subscribe by clicking here. 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...
It’s Still Time For Investors To Be All In On Equities
As we exit Q2 and move into Q3 of a mind-numbing year of volatility, now is a good time to review the thesis surrounding our bullish stance coming into Q2 and moving forward through Q3. In my note from March 29th titled “It's Time For Investors To Go All In On Equities,” I asked investors to adopt the following mental framework in order to properly align with what was actually occurring in the markets: 1. This is not a bear market 2. Poor economic performance over the next few months doesn't necessarily equate to poor stock market performance 3. Far from being irrelevant and out of ammunition, the Fed is more relevant than ever 4. There is no historical reference to this market. It is completely unique and unprecedented in scope. Future results will reflect this fact. At the time, the reason it was important to adopt this framework was so that investors would not be led astray by data points that were largely irrelevant and in fact, harmful to creating alpha moving forward. Understanding that we were not in a bear market was key to properly constructing a beneficial technical framework for the market moving forward. Understanding that poor economic data moving forward was largely irrelevant was key to remaining bullish through the turbulence that would be created through lagging economic data. Understanding the Fed would move the markets significantly through expanding their balance sheet was key to determining that overall risk/reward in the markets was in its best position since the 2009 lows. Understanding that there was no historical reference to this market was key to staying put in leveraged long positions without getting thrown off the scent of the market with irrelevant comparisons to past technical or fundamental indicators. Now that we have experienced a historic rally in the markets during Q2, with all of the aforementioned foundations for a properly aligned mental framework proving beneficial, the question becomes does this framework continue to apply and if not, what mental framework can we adopt to maximize gains during Q3? The most basic fact that is commonly misunderstood by investors, leading to all types of errors in analysis, is classification of the market during any tumultuous period as a bear market. The virus correction during Q1 was just that...a correction within a secular bull market. Coming into 2020, I said that the markets would experience a decline that would be viewed as catastrophic. The reason for that view is a very a simple understanding of how bull markets function as they mature. Within every secular bull market, the investor psychology within the bull market is identical. Investors...