What follows are the topics covered in this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here.
What follows is an excerpt from this weekend's 175th Edition of Zenolytics Turning Points, where we discuss the following the topics in a 14 page note:
- The important message price is telling investors after this past week
- Where the next important resistance level for the market may lie
- An important mortgage ruling this past week that opens the door for our favorite mortgage related value name
- One chart that summarizes why every investor should have exposure to a specific financial sector at this stage of the recovery
MARKET UPDATE
In a market that has taken it upon itself to disregard anything and everything but buying the dip, while central bankers continue pushing the QE button to infinity, we are at a point in the market cycle where intellectual capacity to classify such actions must be traded in for the purity of price action alone.
In other words, instead of attempting to rationalize what is occurring in the economy and the markets against any historical precedent or relevant comparison, of which there are none, investors are better off looking at what asset prices from currencies to major indices are telling us.
What must not be forgotten, however, is that bulls are effectively corralled here into a pattern of behavior and concentration of investments that is vulnerable over the long-term. For the time being, while the music is playing, the dance is simply too much fun to sit out. However, the ability to adjust quickly in a defensive manner while enjoying the upside will be key to outperforming and more importantly, walking away with profits in hand.
A vast majority of those participating in this orgy of capital gains will walk away with but a fraction of what they have presently. That is the simple truth of manias that get to these extreme levels. It's not an IF equation, it's rather a WHEN equation of how the market chooses to exact revenge upon those who believe above average gains will be the norm, while every single dip is a buying opportunity of epic proportions.
This has been the rule of speculation since cavemen traded bones and rocks in the neolithic age. Every single time investors have come to believe that this rule of speculation has changed, they have been punished in an extreme fashion.
HOWEVER, in the meantime, the music is playing. So let's dance. At the same time, understand that defense in the form of hedging and taking lots of profits along the way will continue to be the priority in order to protect gains, while taking in some of what the market has to offer at this stage of the bull market.
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