How Risk Is Shaping Up To Respond To Earnings and The Elections
There is a definitive argument to be made that the events of the past several months, accelerating into a crescendo of outcomes over the next several days, have suppressed risk to the point that anything but an extreme anomalous circumstance will be greeted with an increase in risk exposure. As the most immediate example, mega-cap tech earnings for this week will likely be overwhelmingly positive in the eyes of investors as election and interest rate chaos have managed to cap the ability for investors to add risk substantially until a conclusion is reached. With both the FOMC meeting and elections coming to a conclusion next week, unless there is a surprise outcome, the path of least resistance will remain for investors to continue adding risk. The only difference will be that with the path of rates becoming further solidified and the elections out of the way, the velocity of those additions will become greater moving forward. In this past weekend's edition of Zenolytics Turning Points, I made this exact argument, in addition to outlining how, perhaps not coincidentally, the price structure of the major averages is confirming that something significant is afoot. As such, we removed our short hedge on Monday, being leveraged long at the moment, with Bitcoin related positions constituting our largest area of exposure. Expect a continued embrace by investors of earnings results as the week progresses, leading into a monumental week to come, where anxiety will be quelled and we can get back to the business of investing for investments sake, without the overwhelming aspect of political noise. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. 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....
The Setup As We Head Into Elections, Earnings and The November FOMC
A reasonable investor would conclude that if the markets have been reluctant to pull back since the September rate cut, why would they suddenly decide to suffer a pull back just two weeks until election results are determined? Of course, we have to factor in some volatility with the bulk of earnings set to be released over the next couple of weeks, not to mention the early November Fed meeting. What seems to be occurring, however, are the markets factoring in a Trump victory, with a fair deal of hesitancy continuing to exist, in case of results favoring Harris, creating a situation where investors have to restructure a good portion of their bets. In either case, especially when considering the technical levels that the SPX and NDX find themselves resting at prior to the election, a clear result will more than likely be greeted with a great big sigh of relief by investors. A Harris victory would result in an initial jolt downward. However, it would be short-lived. As long as the result is clear, the markets will more than likely take the cap off of the upside, with a significant rally ensuing for some weeks. For this reason, it is wise to assume that the current setup is a rare buy the rumor, buy the news type of event, as opposed to the traditional buy the rumor, sell the news that seems to be worrying some investors at the moment. As far as momentum is concerned, there are two momentum growth names that investors have to own going into December. We have been trading both of these names extensively over the past few years, with a further commitment being made in recent weeks to both. The most unexpected outcome during the weeks ahead would be for earnings, elections and the Fed meeting going by with the markets yawning at all of these events, while continuing their recent propensity towards a lack of overall volatility, while simply grinding along their merry way. Continue to make adjustments as needed. Aggressive when need be. Defensive when need be. There are many reckless among us currently. One sided, extreme biases, while seemingly alluring during persistent trends, lead to misery more often than not. The willingness to adjust will prove invaluable. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. 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...
The Most Important Chart As We Enter A New Week
Just released the 488th Edition of Turning Points. A 17 page note with a primary focus on crypto as this constitutes our largest current long exposure. We also covered a new earnings play that we will be initiating on the open Monday morning. However, a good deal of attention was focused on where the market averages are choosing to camp out as we head into Q3 earnings and elections. Specifically, check out the NDX. February, March, April, part of May, some of June, part of July, some of August, half of September and all of October have been spent around the same trajectory. Throughout all of these time periods, we have had what seemed in the moment to be potentially explosive events that would have the markets making a decisive move to once and for all slay the proverbial dragon. However, throughout the entirety of 2024, the market has refused. It is sticking to a comfortable path forward, which isn't necessarily always the most productive path forward. The market needs to establish a new trajectory forward on the upside fairly quickly or time will be up. In establishing a new trajectory forward, whatever coming correction ensues will cover ground that won't be terribly damaging. However, sticking to the same key red trajectory, once a correction comes, can lead to losses that will prove difficult to stomach for most. Additionally, sticking to the same key red trajectory into mid-November/December increases the possibility that whatever breakout is seen above this technical point will be subject to retracement. The bottomline: The NDX needs to starts outperforming. The SPX being up more than the NDX in 2024 is a point of weakness for the market that remains exploitable. We are currently long China (have been since April), biotech, crypto, small-caps, while being short growth. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. 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...
The Current State Of Crypto
In this coming weekend's edition of Turning Points, the current state of crypto will be discussed, centering around our current largest allocation to Bitcoin related assets, with a secondary focus on alternative crypto assets. Perhaps more important than the data I will be sharing is the human psychology angle of crypto as it relates to alternative crypto assets. The simple fact that asset flows ALWAYS followed a defined path during secular bull markets makes alternative crypto assets a magnet for future inflows. It is not sometimes. There are no maybes. Human nature never changes. Greed always reaches a boiling point as fear of missing out mutates into acts of speculative haste and aggression. Many years ago, in 2011 to be exact, I wrote an article for Forbes describing Phase 4 investors and their role in the markets. The Cliff Notes version of this theory is that bull markets move through four investor phases: Phase 1: Start of a new secular bull market - investors have sworn off stocks, reluctant to get involved, sticking to bonds and real estate. Phase 2: A few years into a new secular bull market - investors begin to defrost a bit. However, they are still too timid to get involved in anything but extremely conservative, blue-chip names. Phase 3: Recognition and belief - mid-way through a secular bull market institutions ramp up buying, moving into more speculative names, mostly in technology. Wall Street comes alive with bullishness. Words or phrases like "optimistic, "cool," "great concept,", "fantastic," "revolutionary" and "I love" are being used more often. Phase 4: Pandemonium has broken loose - market participants begin pushing all-in. They become very aggressive, moving into high-beta technology names. Speculative micro and small-cap names begin to experience feverish runs. Two and three baggers becomes commonplace. Greed dominates the investment landscape. In the current secular bull that started right around 2012, we currently find ourselves in Phase 3: Recognition and belief. We briefly moved into Phase 4 during 2020-2021. However, it was interrupted by a very aggressive Fed attempting to put the fire that was inflation out in the the years to follow. What is different from 2011, when I first introduced this framework is there is now a Phase 5. Phase 5 is ultra speculative, alternative, unregulated asset classes, namely alternative crypto names. It is not a matter of IF Phase 5 will come into play over the next few years, but simply a matter of WHEN. Increasingly, we live in a society that sees gambling, whether on stocks, sports, crypto or political outcomes as the only means to escape the headwinds that are increasing costs, lower...
The Splits
In this weekend's edition of Turning Points, the case was made for interest rates being offsides as, among other things, locked capital expecting a dire outcome to the Israel/Iran conflict has obscured the rate picture. While certain sectors will benefit from rates coming down, there has been a tendency for risk assets to decline alongside rates in recent months as investors seem to have moved past inflation risk and are now focused on recession risk. In other words, the threat of a soft landing turning into a hard landing is the primary concern. With that said, those concerns have the potential to be magnified during the weeks ahead as earnings guidance will be erratic and economic data will turn from inflation focused with CPI/PPI out of the way, to economic activity. A mixed picture, at best, emerges under even the best circumstances. Rates decline, rate sensitive sectors benefit, most everything else suffers. The market does the splits. The rotation trade is alive and well. Adjust accordingly. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. 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...
Something Happened On The Road To Valhalla
Perhaps it is of little coincidence that the MOVE Index, a measure of bond market volatility, has decided to select this specific time period as a breakout point following a near 18 month downtrend. What this chart represents is essentially a magnifying glass placed by the market right on top of the Fed, investigating the intricate details of the recent policy error that was slashing rates by 50 basis points. Equally significant, the 18-month breakout in bond market volatility signals a lack of confidence in the Fed's future monetary policy decisions, particularly regarding interest rates. Lastly, and perhaps most importantly, what this range expansion to the upside in bond market volatility represents is a demand by the market for measures to insure that long term rates remain in line with the overall objective of the Fed for monetary policy to be less restrictive overall. While the recent massive spike in rates is short-term restrictive, it also intermediate to long-term accommodative in that it will force the Fed to act in a more creative manner, so to speak, with respect to future monetary policy decisions. Being long assets that will benefit from creative monetary policy efforts, both domestic and foreign, is likely a prudent investment. At the same time, being short assets that will find a higher rate environment disturbing, in case of a bond market gone mad, is equally prudent. Forest meet tree. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. 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...