Quick Thoughts
- The nature of price action has changed. Everyone has missed it. - Bidders have become persistent in their demand for growth names for the first time since the 2021 market top. - Anyone labeling this as a bear market rally doesn't understand market cycles, specifically, as it relates to the nature of secular bull markets. - As secular bull markets rise so does the volatility as more participants jump on the train, causing it to sway in a much more dramatic nature than when there were only a few onboard. - I expect the volatility in 2022, when all is said and done, to be nothing short of shocking, with the upside that is to come being the more shocking aspect of it. - There is a good possibility that everything we consider as facts, whether inflation, Fed intentions or growth in economy related is completely wrong. This will become apparent in the next 6-9 months. - If you believe a recession is coming in 2023, then every single bear will need to be annihilated before prices for equities succumb to the effects of negative growth. - In order to get every single bear to capitulate, prices well above S&P 5000 are required. And when I say well above, I mean WELL above. - Alt crypto names are beginning to put in some fantastic bottoming patterns, I will be covering these in the weekly report. - Select software names are also beginning to put in patterns that look like 100% gainers through 2023. I will be covering this in the weekly report, as well. - The NDX will be hitting 14000 in August. sss - They scoffed when I Tweeted this in June 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...
The Market Wants Higher From Here, The Question Is How Much?
There's a bid out there. Not sure where it's coming from but I certainly have a good guess as to why. Put simply, the inflation equation is changing. Prior to the late May lows, inflation meant inflationary pressures, and all the misery that comes with those pressures. As of June that psychology has shifted to inflationary pressures now equate to economic pressures. This means a different view of rates. This means a different view of commodity prices. This means a different view of the Fed. It doesn't necessarily matter what that view may turn out to be months from now. All that matters is that we now occupy a gray area in this bear market. That gray area is all that is necessary to create a decompression of the selling pressure that has plagued investors for most of this year. At an absolute minimum, we are headed to S&P 4300 in the short-term, as the chart below demonstrates: How the S&P handles this level will tell us a lot about what to expect for the remainder of June, and that seemingly small detail will tell us everything we need to know moving forward. Stay tuned. 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...
Something Interesting Happened This Past Week….
We are past the stage where this market will reverse in some cataclysmic, vomit inducing downside move that creates headline news while men in suits jump from fifty story buildings. That is the stuff of cyclical corrections within a secular bull market. As we are now in bear market territory, the manner in which we approach the market must change. Being that nearly everyone has significant amounts of cash, awaiting the much touted capitulation move, there is a better than even chance that for at least this cyclical low, the low will come on a whimper, not a bang. Well, that whimper just showed up this past week in the S&P, as we saw one the tightest weekly ranges in the S&P of 2022. In the last note, titled Highway To The Resistance Zone, I clearly laid out the resistance area that we are now testing. While the initial reaction was that this is likely another bear market rally, the subtle contraction of volatility that occurred this week may be suggesting otherwise. There are other pieces of evidence, as well. In short, it's time to don the bull horns, drop the cynicism and begin considering all the ways the bears can be wrong in the months ahead. Hard to buy here? Damn right. But that's the point. 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...
Highway To The Resistance Zone
In the midst of the potpourri of confusion that seems to be a constant fixture in today's market, let's simplify where we are to the Nth degree: The support and price acceleration areas of yesteryear (2020-2021) have turned into the resistance and price deceleration areas of today (May 26th, 2022). This is a big problem for the markets until it tells us otherwise. A move to 4100 was expected as outlined this past weekend's edition Turning Points: Simplicity reigns supreme during the most confusing of periods. Simplicity in the current circumstance is selling the rallies until the market tells us otherwise. 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 performance. ...
Anatomy Of A Correlation: How 1998 & 1999 Are Perfectly Mapping The Market 20 Years Later
Let's begin with a simple premise: The market bottom of December of 2018 was a hurried, violent correction within a grand secular bull market that served as the first real reset of this secular bull since its inception. When Zenolytics was one of the only venues of market intelligence pounding the table on technology stocks late in 2018 in a note titled "How Everything That Happened In 2018 Now Makes Technology Names A Screaming Buy," it was with a correlation to the last time a real reset took place within a secular bull market that was both hurried and violent: 1998. Here is an excerpt from the piece on December 31st, 2018: "The buying opportunity here for technology, in particular, is one of the best over the past decade. Whether this assessment of risk/reward ends up being something that lasts one quarter or the entirety of 2019, I am not sure yet." The correlation to 1998 was even stronger than originally expected, as we are now tracking the market of 1998/1999 almost exactly. Here is an illustration of the Nasdaq Composite from 1998-1999 compared to the Nasdaq since the December lows to present. The price structure between the two timeframes is uncanny, from the persistent manner of the STEP 1 rally in both graphics to the short-term nature of the first correction in STEP 2, all the way to manner in which both markets consolidated following the first correction moving from STEP 2 to STEP 3. STEP 4 we don't see in the chart of the current market, but we have an idea of what to expect. There is an important caveat to consider that will change this correlation for the present market. In the market of 1998/1999, the panic low that set this grand sequence in motion was made in October. The low for the current market was basically made as the calendar flipped from 2018 to 2019. This is important because it will shorten the length of the consolidation period for the the current market by 3 months due to the natural forces that take over towards the end of Q3, into Q4. In other words, the seemingly long consolidation period you are seeing in 1999 won't take place in the current market because of the late-December low. The markets will have a 1999 type of reaction on the upside starting in September and lasting through the end of 2019. By all indications, the upside potential into year end, while perhaps not being as mind-numbing at the market of 1999. will still be substantial. Strap on your mud boots, there's still a lot of sewer salmon in...
NDX Downside Target Met as Pandemonium Breaks Loose
Zenolytics downside target on the NDX was met and exceeded with this mornings dramatic weakness in tech related names. The type of sloppy behavior we are witnessing with various sector seemingly in a knife fight with one another while major averages are cross eyed with volatility is perfectly standard during important turning points. In fact, the nature of today's volatility only cements the argument that we are at a major turning point in the markets that much further. These types of turning points in the markets offer extremely attractive risk/reward characteristics. As a result, it is incumbent on the market to torture investors through inflicting doubt as to the voracity of their analysis. Moving along the lines of a bullish turnaround looming, the SOX has now had two days in a row of relative strength and is currently up nearly 1% despite the fact that Fangs and software names are experiencing substantial selling today. The buying window for equities opened this morning and will remain open through tomorrow. Zenolytics now offers Turning Points and ETF Pro 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 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...
The Handy Zillow/Redfin Trading Ratio
In March, Zenolytics highlighted Zillow as being one of the best equities to own during the first half of any calendar year, especially in years that saw interest rates decline as they have in 2019. Fast forward to two months later and Zillow is gathering momentum on the upside, running over critics of its Zillow Homes offering in the midst of rapid revenue acceleration. Fulfilling the promise of another stellar first half performance in 2019 seems the least of its concerns at this juncture. There are, however, variant perceptions that should be discussed not involving fundamental arguments of the future viability of being a market maker in residential real estate. One very simple indicator that tells of the extreme disparities in price for Zillow is the ratio in share price between Zillow and Redfin. There is one very simple caveat: If Zillow does truly heat up with Wall Street fully embracing their new business model then it will blow the doors off of any previous acceptable ranges in the ratio between Zillow and Redfin. This condition aside, under normal trading circumstances this gives an objective view of the values between two of the leading players in the quickly evolving "real estate revolution, brokers are inefficient" business model: Recently, Zillow's stock price has quickly accelerated while Redfin has languished despite reporting overall growth in their business. Over the next few months this ratio should continue to be observed as Redfin has a number of offerings that adequately create a competitive product to Zillow despite being a fraction of its overall size, especially in the IBuying market. A rotation at some point away from Zillow into Redfin may be warranted. Stay tuned. ...
A Little Market Statistic
First, a little history to provide context. I presented this chart in January 2016, right around the lows that accompanied a correction of the magnitude we have experienced recently. The only difference then is that the correction and subsequent low of 2016 didn't cross the 20% barrier, which is a number that for some reason gets all sorts of hair raising chills and screams from stampeding investors. The article was titled A Dow Chart Going Back 90 Years That Provides Bullish Calm. That same chart I presented in the article then (chart from the article is below) can provide bullish calm now, only this time for different reasons. When looking deeply into what has occurred recently compared to previous periods, it is worth noting the following: We have experienced a 20.21% correction in the S&P from its September top to its December low. This is the 5th time since 1954 we have experienced a 20% plus correction during a secular bull market. Let me explain. In my work, there have been three secular bull markets post-Great Depression. They are labeled as "bull" in the chart above: 1. 1954 – 1968 2. 1982 - 2000 3. 2013 - ? In the 1954 – 1968 secular bull market the following substantial (being defined as a correction of ~20% or greater) took place: 1957: -20.57% correction 1962: -26.40% correction In the 1982 – 2000 secular bull market the following substantial (being defined as a correction of ~20% or greater) took place: 1987: -33.50% correction 1990: -20% correction 1998: -19% correction During the secular bull market that started in 2013, this is the first 20%+ correction we have experienced. What happened in the instances when a 20% or greater correction took place during a secular bull market? 1957 – After the correction, the market was positive 6 quarters in a row, gaining 64% 1962 – After the correction, the market was positive 9 quarters in a row, gaining 58% 1987 – After the correction, the market was positive 8 out of 10 quarters, gaining 60% 1990 - After the correction, the market was positive 11 out of 13 quarters, gaining 62% 1998 - After the correction, the market was positive 4 out of 5 quarters, gaining 55% If this secular bull market was to terminate after only one 20% correction, it would be the first secular bull market over the past 100 years to do so. Additionally, 20% corrections, as demonstrated above, are traditionally buying opportunities, with an average gain of 60% taking place before real turbulence is witnessed again. _______________________________________________________________________________ From time to time, I email individual company research, commentary and excerpts...
Lies, Damn Lies: Market On A Warpath Edition
Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance. The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved. These are simply thoughts (some completely random) as I attempt to connect the dots: As detailed in yesterday's note, I have cut all of our exposure to gold/silver names. I continue to believe metals offer some of the best long-term risk/reward setups out there today. However, the current market is so rich with trading opportunities due to the newfound surge in volatility that I need firepower. At a near 80% allocation to metals that I took on in November-early December, that firepower would best be served elsewhere for the time being. I want true "risk on" assets here. I want beta to the general markets. At some point this year I will revisit the metals thesis. With charts like this, you have to take gold seriously given the potential for exponential upside performance in the years ahead. You know why you want "risk on" assets here? The chart below sums it up. Global equity outflows are past the point of the 2008 financial crisis. The difference between now and 2008 is we are in a secular bull market that has been greeted with its first cyclical bear raid since it started in 2013. Let me say that again for the purpose of clarity and emphasis: We are in a secular bull market that has been greeted with its first cyclical bear raid since it started in 2013. That's important because when investors panic during secular bull markets (right now), it is a completely different beast than when investors panic during secular bear markets (2008). The market doesn't take its time in coming back as the foundation of the market is rebuilt during secular bulls. Instead, the market rip that comes typically only leaves bear scrotums behind as evidence they existed in the first place. In other words, it happens so fast that most investors who are attempting to intellectually and emotionally digest this monster will be left holding their tails instead of stock. The current market has forced investors into cash, giving it all the sidelined firepower it needs to move to new highs before the middle of 2019, as those investors come to the slow realization they have been played. One more demonstration of how badly investors have had their minds completely...
Lies, Damn Lies: Armageddon On Pause Edition
Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance. The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved. These are simply thoughts (some completely random) as I attempt to connect the dots: Insider buying is now at an 8 year high according to Bloomberg. "The last time insider buying spiked in this fashion, in August 2011, the S&P 500 was in the middle of a 19 percent retreat before staging a 10 percent rally in each of the next two quarters." Insiders are very obviously witnessing the fact that on a corporate level everything is fine. The weakness in the markets hasn't trickled down into the economy as of yet. Whether in two quarters from now those very same insiders are wishing they had put their cash in a bank CD due to a falling stock price and sudden economic weakness is another question entirely. Insiders are just as likely to blow it as anybody else, keep that in mind. For the time being, however, this is another indication that corporate earnings will calm the markets a bit in Q1. Short interest in various industry ETFs is plunging, which is basically the equivalent of soldiers putting down their guns in the middle of an oncoming assault. Either the soldiers have lost their minds or they don't think the assault is worth fighting against. The XLB (materials sector etf) is at a 4 month low in short interest. XLK (technology sector etf) is close to a three low in short interest. XLP (consumer staples) is sitting at a multi-year low in short interest, as well. From a purely contrarian perspective, this is a problem. Among developed countries, the United States is certainly an outlier when it comes to debt. This fact puts the Federal Reserve in a precarious position should another economic crisis take hold. In any case, the U.S. Dollar will be the most apparent casualty. The Fed expanding their balance sheet had a stupendous effect on equity prices. How can we logically assume then that through extensive global central bank balance sheet tightening, this effect won't reverse to an extent? We have already seen that in 2018 as the Fed's expanded tightening starting in October of $50 billion per month was accompanied by a market top. Europe climbs onboard the QT train in 2019. While the markets could very well...