Itchy Buy Fingers Are About To Get Relief
As the markets close in on the 7100 level on the NDX that Zenolytics has been obsessively pounding the table on being a hook for the markets since last week, it's now time to review the timeframe for taking advantage of what has become a cacophony of fear in the markets. As the rest of Wall Street is just starting to grasp what I have been discussing since the beginning of May, it's time to latch onto the fact that, per the usual, what is obvious will be obviously wrong. EVERYONE now understands that the trade war is bad. EVERYONE sees that the Fed is going to cut rates. EVERYONE sees how terrible the price action has been and thinks we are going lower. Everyone suddenly believing everything that is nasty in the world of finance is occurring just as the market is about to hit its hook. For those unfamiliar with my style of price analysis, one of the pillars of my work is that the market will always have a market average that HOOKS the rest of the market, either pulling it down or up based on price levels of importance. The current hook in the market is NDX 7100 (red trajectory below). The expectation is that once the 7100 level comes into the play there is a high probability of a reversal after the typical volatility that takes place around such important levels. I said earlier this week that Friday to Monday would be the time the level is hit. With the NDX down 100 points currently and 50 points away from 7100, I am looking for a Monday low. Itchy buy fingers itch no more, relief is imminent. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
Here Is The Bottomline With Zillow At This Point In Their Business Cycle
Let's back up a little bit before we proceed. In case you've been living in a dumpster, Zillow announced earlier this year that they were fully transitioning their business model to Ibuying, which basically means they are now a market maker for homes in certain geographic regions. At first blush the news of Zillow moving into a capital intensive business that translated into potentially tens of thousands of homes sitting on their balance sheet was greeted with a great deal of trepidation. Nowhere was the reluctance to participate in this "Uber of real estate" more present than long-time institutional shareholders who were happy with the capital light business of getting money from realtors for having their listings appear on Zillow's website. Q4 earnings were announced by Zillow in February. The market initially boosted the stock up to the mid-40s range mostly on elation over stud-muffin tech entrepreneur Rich Barton coming back into the mix as CEO. In the weeks and months following their Q4 report the stock steadily sank from the mid-40s to the low-30s. In March, Zenolytics put out a note detailing how Zillow had been one of the best performing stocks in the first half of the year for every year going back to their IPO aptly titled, "There Are Few Things As Reliable As Zillow Outperforming During The First Half of Any Year." After releasing Q1 earnings earlier in May everything has suddenly changed. Investors are suddenly eager to participate in Zillow's growth. The losses created as a result of Zillow Homes are acceptable as long as revenues keep growing at a rapid (greater than 50% annualized) clip. Here is why this change in attitude among investors is so bullish for the stock: Investors have accepted the IBuying or Zillow Homes model Investors have accepted that the Zillow Homes model comes with sequentially increasing losses Zillow simply has to accelerate the pace of their home buying in order to create greater revenue growth With respect to point #3, this isn't building a car or having the marketplace accept the newest release of your software to gain revenues. This is telling a guy in Phoenix that I'll give you $300,000 for your home in a week if you want to sell it to me. Nothing created. Very little man power. A relatively simple transaction. And Zillow has all the credit and cash they want to effect such transactions. Never mind the fact that Zillow is the first destination (and it's not even close) for those seeking to effect a purchase or sale of a home. For that reason, they can continue an attractive level of growth in...
The Death Grip Of Yields On Equities Is Conveying An Important Message About Sentiment
As yields continue to grab equities by the throat, refusing to relinquish what is seemingly becoming a death grip, it is becoming obvious that levels of fear among investors is reaching tradeable, if not investable levels. There isn't any conclusion to be reached by looking at any of the myriad of traditional contrarian indicators that exist. Being that they are followed by nearly every investor out there, they typically cross signals, delivering nothing but an amplification of the noise that is so abundant. Instead, levels of fear are being demonstrated by how subservient equities have become to yields. Further, yields are falling (everyone is buying bonds) as a result of fear related to economic growth due primarily to the uncertainty over an escalating trade war. This type of newfound dependency of the equity markets to fixed income U.S. treasury securities is completely ignoring two facts: The further yields fall, the more attractive the earnings yields on the S&P looks on a relative basis Earnings, while being lumpy across sectors, are still in a relatively healthy period of growth. Just as Q4 2018 was an overreaction to fear of an earnings led slowdown, Q2 2019 has a high probability of being another overreaction. After being bearish for the entire of May, Zenolytics is preparing to turn a new leaf. While it still remains early, we are certainly close. Keep the buy button dust free and shiny because the time to use it is quickly arriving. Officially Live: Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
The Only Question To Ask As An Equity Investor Right Now
Are yields driving the market and equities are the passenger? That's what this current market cycle that started with a late April top in equities all comes down to. It has only become obvious over the past several trading sessions as yields have moved into parabolic drop territory with global inversion of yields being the current buzzword in the investment community. As yields have dropped equities are now being pulled into what is a seemingly hopeless vortex similar to Q4 of 2018. Only then it was equities that were leading the precipitous drop in yields. It was fear of an earnings slowdown. It was threat of junk rated corporate debt causing a domino effect in high yield market. And, of course, it was fear over whether China and the U.S. could come to terms on a trade deal. What has changed with the recent drop is the tail seems to wagging the dog presently. The steep decline in yields during May is beginning to negatively influence the thinking of equity investors. Typically, when this type of reversal of roles takes place, with hallucinations of spider demons among the investor class, markets are nearing an inflection point. That inflection point may indeed be an important support area for yields on both the 10 year and the 30 year. Both are at or near multi-year support areas, with the thirty year treasury sitting right below a support area with a twenty five year historical record. In other words, it's a significant piece of support. If yields do decide to suddenly obey the unseen laws of geometric price discovery, reversing off these important points of support, then equities will surely follow. The resulting bottom will, at the very least, be tradeable if not investable. At the very same time, the NDX is nearing a support area that has been discussed since last week at 7100. The next few days are everything. Zenolytics is looking for a bottom of some significance to take place in the Friday-Monday timeframe. The bottom will be for both equities and yields. Whether this it is a simple tradeable bottom that will be short-lived or an investable bottom that is intermediate term in nature is yet to be determined. Officially Live: Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
Boring May Be The Ticket To Outperformance Over The Next Few Months
Last weekend Zenolytics highlighted Single Family Residential REITs as an attractive investment for conservative portfolios. There is nothing exciting about buying a basket of homes, fixing them up, maintaining them over time and rotating tenants. In fact, it sounds like a burdensome way of cultivating investment capital. Nevertheless, it's what works in the current market. It's boring as hell. It's cumbersome. It doesn't involve the latest microchip or revolutionary software. It's houses being rented to a growing list of individuals that for whatever reason can't or won't purchase a home. Being boring has a time and place in every portfolio. Current market conditions are an example of that time or place. Here's the rub: It's not going to transition quickly to a market where maniacal positions in tech, financials and generally happy, go lucky market sectors are rewarded. The markets have been mired in a sideways dystopia since January of 2018. Close to 18 months of nothing on the S&P but anxiety over everything from recession, to debt, to global trade. Go ahead and embrace the boring as capital preservation takes precedence over anything else until further...
Yes, The Market Is Trying To Kill You
The market has demonstrated consistent hate towards investors for the past 18 months. Look at the simple fact that we are trading almost in the exact same spot where the market ended on January 31st, 2018. All the meanwhile, we have experienced a 20% bowel twisting decline in the market averages, with the worst of the downside volatility taking place smack in the midst of the holiday season. Quickly followed by a seemingly cocaine induced sprint right back up in the first few months of this year, just as investors were getting used to the idea that a recession was imminent. As soon as everyone came to terms with the fact that a recession was simply media induced hysteria in the face of a declining market, growing comfortable with the idea of equity exposure as a way of creating a little bit of wealth in the months ahead, the S&P falls 5% from its highs in a rapid fire, "I want to stomp on your guts" manner. The market is trying to kill investors in 2019. And this murderous volatility will only grow into the summer, as investors will have to deal with illiquidity, interest rate uncertainty, trade war rhetoric and all of the other maladies that seem to be percolating in the background. It's a very simple act to move out of the way of a market on a rampage. And it's better to do so on your own free will instead of at wrong end of a bulldozer that only seems to be picking up speed. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
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 Surly Market
With the market poised to further exhibit its newfound surliness in the week ahead, the following points remain relevant as the week progresses: Post option expiration, there are always some adjustments to be made. Counter-trend rallies should be greeted with skepticism during the first part of the week. The SOX continues to look like a dumpster fire. Until we see some traction there, the markets aren't going anywhere. Financial names look worse than the SOX in that they seem to have lost the will to put together ANY volatility whatsoever. The sector looks rather morose to be frank. A positive aspect to the current decline is that it has obliterated the long end of rates. This acts as an ease in overall liquidity to the market and creates a very real, attractive valuation gap between rates and equities. In other words, equities are cheap here with rates so low. Another positive aspect is that sentiment is quickly turning bearish. While this doesn't guarantee a turnaround, barring an absolute fundamental debacle in the weeks/months ahead, it should slow down the descent somewhat. In the end, it seems that choppy is the tune to sing. Rallies should be sold or used to lighten exposure. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
S&P 2895 Is Everything
There's DNA in certain levels of the market. That DNA is passed on from bull market to bear market. From crashes to booms. From panic to euphoria. The DNA for these events is carried forward in price and through levels that have consequences in the markets for decades. The 2895 level for the S&P is one such level. It holds such magnificent consequence in its blood that how the market treats this level not just this week, but in the months ahead, will mean everything in terms of performance for the remainder of 2019. It's not just one level of importance that lies in the 2900-3000 area, however, it is multiple. Therefore, the potential for chop is extreme. The potential for a top of some importance should also remain on the mind of investors. Chasing performance and buying the dip was a viable strategy from January until May. Going forward, however, rallies should be treated with skepticism and dips should be treated with some measure of caution. As it stands today, the high for the S&P was 2892. The weekly close is more important than the daily so watch how the markets react into the end of the week to what has been a pretty much spot on touch of this point this morning. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...
The Most Powerful Moves In The Market Occur When Contrarianism Fails
What is obvious is obviously wrong is one of my favorite sayings in the markets. Contrarianism as a foundation for speculation, just like everything else, is subject to a changing of the locks just when an investor or trader thinks they have in their possession a master key. It's important to realize that when everybody is suddenly right about a scenario and the market agrees with the majority, powerful moves will occur in favor of consensus opinion. We are very obviously being pelted by trade news with China on a near hourly basis as the situation remains extremely fluid. Nearly everyone is concerned about the outcome of the trade negotiations. Nearly everyone has taken some sort of precaution with respect to the negotiations, whether in the form of raising cash, hedging or being net short. Simple because everyone is prepared for the worst case scenario doesn't necessarily mean that market won't react negatively if it comes to pass. I posted last night about the absurd symmetry being demonstrated by the market on the bearish side of things. It's the same kind of technical symmetry that the market was demonstrating at the market bottom in December, only in the opposite direction at present. This type of symmetry when being met by fundamental information confirming the direction of the reaction is rarely coincidental. Leading me to believe that, at a minimum, a defensive stance is warranted through the summer. At maximum, a net short or 100% cash position can be justified. The markets may just be worth avoiding until the September to October time period, with the exception of select opportunities. Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. 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...