Here Is Where We Stand After Today’s Decline
Disbelief in this rally is running rampant. That disbelief, however, does not preclude the market from putting in days like today. We took off our leverage for the first time in quite awhile on the open, suspecting that this week would be a volatile one in both directions. That volatility gives rise to opportunity, which is why a cash position was necessary to capitalize on the events to come. The buy zone (highlighted in yellow below) should arrive by Wednesday, if the market decides to be so gracious as to afford investors the opportunity for another dip before heading up to 4200 on the S&P and 13000 on the NDX. Far too many traders are looking for a retest of the now infamous downtrend line from the 2022 highs. This makes the signal far less relevant than it would be otherwise. In fact, if the NDX does test 11450 this week then the bulls have a real problem on their hands going forward. I'll detail this further if it does occur, but for the time being it doesn't necessarily warrant discussion as it's a low probability scenario this week. At maximum, the downside from today is to the 11550-11750 level. This is your buy zone for the week. The more shallow the pullback from these levels, the higher the probability of catapult type action back up to 13000 within the next two weeks. A move to 11750, followed by a quick rebound back above 12000 would be ideal for the 13000 scenario to come to fruition into the middle of February. Watch your levels. More importantly, watch how the market treats these levels over the next few days as a signal for just how great the momentum on the upside will be in the days and weeks ahead. Goodnight. Zenolytics Turning Points is 300+ 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...
There Is A Change In The Air
I present you the ratio of Bitcoin to long-term yields: Risk went off at the flip of the calendar from 2021 to 2022 when yields signaled a choking off of liquidity relative to Bitcoin. As we recently flipped the calendar again, from 2022 to 2023, we get another signal. This time telling us that liquidity is returning to the financial markets as Bitcoin is rising relative to yields, breaking out of the downtrend from the 2021 high. Risk assets want to breathe. Targeting SPX 4200 and Bitcoin 29000 in the short-term. Zenolytics Turning Points is 300+ 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 information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in, the transmission thereof to the user. With respect to information regarding financial performance, nothing on this website should be interpreted as a statement or implication that past results are an indication of future...
The Silver Lining After Today’s Drop
Investors are frustrated, irrespective of their affiliations (bull or bear). And here is why it has become so frustrating for nearly everyone. This is technically driven slop. The technical nature of the market is on full display presently. "The lines" in this chart haven't moved to fit the market. The markets have moved to fit the lines. In other words, we are basically pinballing between important technical points until the market figures things out. The question everyone should be asking at this point is WHAT? What exactly is driving the market to become a technical zombie while it figures things out. Yields are falling. The USD uptrend has fully reversed. Market averages globally are doing relatively well, with some even hitting new all-time highs in recent weeks. The velocity of rate hikes is declining. The markets shouldn't be playing technical pinball right now. The only silver lining in all of this is that we can gather, with a great deal of confidence, is that once a break above the resistance areas that have been plaguing this market for many months takes place, a certain momentum should develop, at least for a time. Judging that momentum will be key to figuring out what takes place next. 4100-4200 on the SPX remains critical. 12000-12750 on the NDX also remains critical. Goodnight. Zenolytics Turning Points is 300+ 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...
Weekly Note Preview: Speed Is Of The Essence
Below is an excerpt from the 320th edition of Zenolytics Turning Points. This past week was right up there with our performance coming out of the March 2020 lows as well as some of the other major turning points over the past few years. Whereas during those turns we largely held onto positions, favoring a multi-month swing approach to trading, in the current climate it's critical to capture some of our profits until we get more technical clarity. Of course, we are still heavily long by any measure after taking off *** and ****. For that reason, I want to see technical clarity develop in the next couple of weeks, otherwise there will be further scaling back to around 100% long in the equity portfolio. What do I mean by technical clarity? You will see three separate highlights in the chart of the SPX above. The first green arrow from June of 2022 was when we fell into what I call no man's land. Ideally, the market would have been able to sustain the bottom end of the red band at around 3900. However, given the liquidity pressures brought on by the Fed, the market wanted a deeper reset tagging the enormous wall of support at the October lows, marked by the CPI reversal on October 13th. The full 12 page report is available to clients by visiting https://www.zenolytics.com/premium/ Zenolytics Turning Points is 300+ 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,...
NOBODY SEES THIS?
Let's get right to the point. Here is the chart of the S&P with a horizontal line connecting what is roughly the 4100 level since May: I can count on one hand the number of investors who are bullish down here. In other words, investors are, by and large, being played. Why? The markets are doing absolutely nothing, except throwing an exceptional temper tantrum that is causing investors to bend to the whims of whatever they are being told is true by what is basically the echo chamber of social media driven financial news and analysis. Post FOMC in early May we were basically at the same levels where we started this week. Following Powell's uber-hawkish middle finger to investors worldwide the S&P closed at basically the same levels where we started this week. And after Powell's uber-dovish loving embrace of investors, the S&P closed at 4080. A gigantic nothing burger of a market that has done nothing except increase sales of Xanax for an investor class that can't see the forest for the trees. It took just two days of persistent selling this week for investors to forget the markets are doing absolutely nothing down here, ignorantly coming up with price targets in the low 3000-high 2000 range for where the S&P will bottom sometime in Q1/Q2. This is a critical juncture. As with every critical juncture in the markets, there is an abundance of information that is nothing other than misinformation and noise that is nearly impossible to separate from facts. During times like this, the most basic of analysis, such as what I have presented above works. Markets have done nothing since May, while everyone has spiraled into a suicidal economic analysis depressive schizophrenia the likes of which I have rarely witnessed in more than 20 years trading. Upside remains extraordinary. Guard your eyes and ears. Zenolytics Turning Points is 300+ 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...
The Inflation Trade Is Being Unwound Before Your Eyes
Some monumental moves in two major assets classes today while equities consolidated yesterday's gains. USD Index (DXY): A confirmation of the change of the trend taking place here with a close below the 200 day moving average. This is the first time in 18 months that the DXY has closed below its 200 day moving average, as the chart below demonstrates. And to further lob a flaming bag of fresh turds at the doorstep of every bear out there, yields were also pummeled today in poetic fashion: I highlighted the importance of the trend break for yields when it occurred during Thanksgiving week. What we have now are layers upon layers of confirmation that the inflation trade is disintegrating before our eyes. Not only will equities continue to respond to this by moving up towards 4500 on the SPX by year end, but Powell will also be responding by laying off the rate hikes past February, at the absolute latest. The game has changed. Make sure you're changing with it. Zenolytics Turning Points is 300+ 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...
The Path Forward
As outlined in yesterday's note, there were a handful of subtle clues going into today's Powell speech pointing to a run of this magnitude. You can find the text of Powell's speech in various places today, I'm not here to summarize what was said. The bottom line is that we are nearing the end of the rate hike cycle, with the possibility that a 50bp hike in December will be it for rate hikes, barring a final 25bp hike in February. Markets have been in the process of front running a pause since the October lows. Here is where the markets stand as of today, beginning with the S&P: Perfect move up over the 200 day moving average accompanied by a volume spike after a picturesque low volume consolidation. The recent consolidation only bolsters the argument that 4100 will fall in rapid fashion. I am expecting the SPX to consolidate around 4200 going into the FOMC in a couple weeks. From there, as Powell further rings the dovish bell, a price target of 4500 for the S&P by year end is not at all out of the question. Big volume breakout on the NDX today. Targeting 12500-13000 in the short-term. Lastly the USD Index: USD Index (DXY) is on the verge of another major downleg. The economic data over the next couple of days, combined with CPI data due prior to the FOMC decision should aide in getting this down much further, which will bolster risk assets significantly. Expecting December to set the table for a Q1 that will be shock and awe campaign for equities we have rarely witnessed. Prepare accordingly. Zenolytics Turning Points is 300+ 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...
Three Charts Demonstrating The Major Market Differences Between The August Powell Speech & The One Tomorrow
Put/call ratio first: The white arrow shows where the put/call ratio started the week of the Powell speech for August vs. present. Notice that going into the August speech, after a hunky dory post-FOMC conference in July, investors were actually looking forward to Powell giving them more ammunition on the upside. They were buying calls into the Jackson Hole speech without much hedging. Today it's the polar opposite. We have an uptrending put/call into Powell's speech tomorrow, as investors are hedging the speech. This type of pre-event hedging action typically leads to unwinds of those hedges once the event is finished, as the monster in the closet is a lot less scary once you open the door. The next two charts demonstrate why irrespective of how Powell comes across tomorrow, he will have to acknowledge that the future path of tightening will be of less consequence than what they have done the past few meetings. In other words, no more 75 bp hikes. The upward velocity of rate hikes is finished. Here is the USD: Uptrending in August. Downtrending at present. The foundation of the inflation argument has shifted. This means that there are very large amounts of capital restructuring their portfolios around a post-inflationary world. The restructuring of portfolios against such a massive macro trade as inflation has been over the past 12 months always begins with the largest market of all, which is the global currency market. Third are interest rates: Above trend with positive upside momentum in August. Below trend with positive downside momentum at present. Rates have now shifted from betting on greater inflation to betting on a timeline for rate hikes to end. All Powell has to say tomorrow is that the velocity of rate hikes is set to drop, confirming what both USD and rates are telling us. That alone will set off an unwind of all the hedges that have been taken going into tomorrow's speech. Remember, this isn't the market of August, June or March. Back then none of us had any idea how far Powell would go, or how high the velocity of rate hikes would get. Now that we are on the back end of the rate hiking curve, he can be as hawkish as he wants tomorrow, but he will have to acknowledge that the velocity of hikes is set to drop....and that is all it will take. Zenolytics Turning Points is 300+ 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...
So Here Is What Happened Today
Here is the NDX to best encapsulate today: An overall inconsequential day technically. Volume across the board on the Nasdaq was well below average. The volume for the NDX was in line with Thanksgiving week. In other words, sellers couldn't muster up anything more than holiday week volume on the sell side today. The Nasdaq and S&P both continue to consolidate in what has become a very attractive continuation pattern on the upside with this multi-week consolidation. NDX is setting up for a move to 13,000 or thereabouts in fairly short order. More importantly, what the market has done since the October lows is to demonstrate this it is more concerned with the forward outlook for inflation and rates, as opposed to the constant barrage of Fed talk. Further upside for equities and downside for rates is dependent on softer inflation data, which is a high probability in the days/weeks/months ahead. I expect investors will understand this after the PCE data on Thursday and the CPI due on the 13th. The combination of softer economic data, softer inflation data and a Fed that is slowing the pace of their hikes will be a potent recipe for significantly lower rates, translating to higher equity prices, especially in growth. As should be expected in the current state of bearish psychosis, it just took one bad day and investors are quickly jumping aboard the "this is a replay of the August top" bandwagon. Two stark differences that are not being mentioned, however. In August we did not have (1) Rates rolling over hard and/or (2) USD cratering. Today we have both. This is a structural change in the very foundation of the inflation argument. The last piece to fall in line will be equities. Bear in mind, with numerous Fed governors remaining hawkish today, yields were unchanged on the day. In other words, yields don't care about Fed talk any longer and neither should you, as an investor. That is all for now. Goodnight. Zenolytics Turning Points is 300+ 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...
Why Aren’t More Investors Talking About This Chart?
This was, by far, the most important technical development of last week if not of Q4, thus far: Long-term rates have broken their uptrend that started exactly around this time last year. They are currently targeting 3.1% in the short-term. The response from the majority of the investment community is crickets. Instead, investors are focusing on supposed bearish patterns in the major indices and a VIX that has been decimated, along with the usual suspects: Recession, inflation, China etc. It's the same old song. Never mind that the markets haven't moved at all since May, basically carving out what has been a complicated bottom that has upside to new highs and beyond. Never mind that the markets not moving since May has come against a backdrop of every single thing that could go right for bears going absolutely perfect. We have seen it all, from geopolitical conflict, threat of nuclear catastrophe, tightening, Fed hostility and so on. The market's response? Nothing. Same spot as May. Bears fumbled badly...It's been over for awhile, they just don't understand yet. This "bear market" has been a decimation of the excesses in the marketplace, including growth and crypto, while the major market averages consolidate preparing for new highs that are more imminent than most believe is possible. The Dow is already getting close, the S&P next up and when interest rates begin accelerating to the downside in the weeks ahead, the Nasdaq will join in, as well. I'll say it again, this is best long side setup in a decade plus, including the March 2020 bottom, which I called with a strongly worded note on March 29th, 2020 titled "It's Time For Investors To Go All In On Equities" while everyone was preparing for the next Great Depression. Bullish at S&P at 4026. Looking for 5000+ relatively soon. Zenolytics Turning Points is 300+ 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...