In this weekend's 357th edition of Zenolytics Turning Points I went over the ultra long-term cycles that are ultimately dictating the moves that have confused, bewildered and angered so many investors and traders in 2023, along with the best ways to take advantage of the stage of the cycle we currently find ourselves in.
At its absolute essence, market prices dictate fundamentals, not the other way around. George Soros calls it the Theory Of Reflexivity, other investors have given it different names. However, it is the most important reality that investors consistently refuse to face to their own detriment.
Coming into 2023, there wasn't a single fundamental indicator that would have told you the Nasdaq during the first half of the year would put in one of its best performances ever.
What did tell you of this outcome was a mix of elements that have nothing to do with fundamentals, and everything to do with psychology, price structure and market cycles.
This from my tweet on December 20th of last year as everyone thought we would be in a recession, with the SPX at 3000 by now.
Here we are halfway through 2023 with investors indeed being surprised by the upside that has taken place.
The fact of the matter is that upside of this nature doesn't simply take place to allow the army of bearish investors that exist an opportune entry point to get short or in cash.
Upside of this nature in the face of every conceivable fundamental headwind possible over the past 6 months takes place because the markets are looking at a point in time and a future reality that few can grasp at this moment.
The absolute fundamental construct of what exists 9-12 months ahead is impossible to assess. However, what is possible is to properly judge price, allowing it to guide allocation decisions without bias.
Price continues to dictate increasing allocations as we have been steadily executing in recent weeks, with a new allocation taking place as we start the week ahead.
Looking for continued upside as the markets continue to steadily climb away from the majority that never saw this coming.
Act accordingly.
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