QE Is A Selling Opportunity As We Head For 3700
In late March 2020, when the entirety of the investment world determined that the next Great Depression was imminent as a result of a raging pandemic, I put out a note that in the strongest terms possible detailed why it was time for investor to go all in on equities based on investors, at the time, underestimating the powerful effects of QE going forward. This isn't 2020. In March of 2023, as the Fed embarks on another round of QE that is effectively equivalent to about $600 billion in this latest bank rescue, QE is a strong sell. The reasons are simple: Now that the Fed has demonstrated that they are willing to embark on QE again, the market is naturally going to make demands of them that will scale further than at any point in the past. By embarking on another round of QE, the Fed will be forced to hike rates further and for longer than the market is currently giving it credit for. I expect the 2 year to reverse sharply this week following the CPI, which I expect to come in well ahead of estimates on Tuesday morning. The credibility of the Fed is now front and center, having ramifications that are especially crucial for the treasury market. I expect that as Fed credibility becomes a concern, the selling of treasury securities will accelerate further creating burden and stress as a result of higher rates. We have all been waiting for something to break as a result of the speed at which the Fed hiked rates. Now that we have seen the first dominoes to fall, expectations should be for further dislocations to take place, with it becoming increasingly evident that with every bailout to come, the Fed further strains its credibility, further compromising QE, which in turn accelerates inflation. A vicious cycle? Absolutely. It's not that simple this time. A simple press of the QE button will only exacerbate the selling. By the time CPI hits on Tuesday, investors will realize the position the Fed and the markets find themselves in isn't easily solvable. Expecting 3700-3750 this week, with new lows on the SPX likely by month end. We added to our short positions on March 7th, before all hell broke loose in the markets. Plan on adding to shorts should the markets gives us the opportunity tomorrow morning. Things are about to get wilder than most can imagine. 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 Is The Call Going Into Tomorrow’s Job Report
We are in for a string of hotter than expected economic reports, starting with the jobs reports tomorrow morning. At least, that is what the bond market is suggesting if you are to take into account that the short end of the curve has gone vertical in recent weeks. Of course, there are many who seem to attribute the recent rate surge to the markets getting their panties in a bunch over "seasonal blips" in recent economic reports. This type of dismissive optimism has kept the markets elevated, despite the fact that yields are commanding a much lower floor for equities presently. With that said, the dismissive optimism of the past few weeks is about to turn into reluctant acceptance that there is a good chance we are now facing a second leg of inflationary pressures. Tomorrow begins the trek down to the 3700 range, which is where the markets are likely to end up right as the March FOMC meeting kicks off a little less than two weeks from today. There is a confluence of support beginning at SPX 3750 down to 3630. All of these support levels will be hit in the weeks ahead. It will be enough, however, for the SPX to move down to around the 3700-3750 mark by the 21st of March. Expecting a hotter than expected NFP number tomorrow and I expect that today's volatility will only be expanded upon to the downside into the end of this week. We remain short after adding to our short exposure on Tuesday. 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...
Here Is The Call As We Head Into The Powell Testimony Tomorrow
Remember Jackson Hole? I've highlighted the S&P price movement headed into Jackson Hole, as well as where we stand today in the below chart. As we headed into Jackson Hole, the sentiment with respect to Powell was unconcerned according to the put/call ratio. I've also highlighted the seemingly unconcerned state of the current investor population with respect to Powell's testimony tomorrow in the chart of the put/call below. Why does this matter? A consistent theme of the current Fed obsessed market has been that when the markets are unconcerned with Powell, downside becomes the predominant trend following his speech. When the markets are overly-concerned, a rally ensues. Despite the fact that economic data has come in hotter than expected following Powell's last public speech in early February, investors seem to be in the camp that he will go against his own word of being data dependent in his decisions, with investors primarily relying on Powell determining that the PPI, CPI and jobs are all seasonal blips. Additionally, tomorrow he is up against a group of fire breathing politicians who are being harassed by their constituents with respect to inflationary pressures compromising the earning power of the average American. Politicians want votes. Powell will be the punching bag. In the face of this, with increasingly obvious signs of a pickup in inflation and with no slowdown in the economy in sight, Powell will be reluctant to strike a dovish tone. All this while the markets have rinsed bears over the past few days via a short squeeze that leaves the market hollow, vulnerable and compromised into severe selling pressure should he strike a hawkish tone in a pattern that looks an awful lot like the early September peak following the August high. Last week's low of 3928 is up for grabs this week. Look for the 3700 range to arrive at some point prior to the late March FOMC. 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...
Market Flat Line
There is a lot to the technical picture right now that most seem to be missing, while placating themselves with largely irrelevant, ill-timed and incoherent data points that are misguided, for lack of a better term. Here is the most obvious example from just today with AAPL. This is endemic in the markets presently. Important market averages and individual names are casually moving beneath their 200 day moving average as if it isn't there. Basically, this is the markets version of shocking a patient who is in cardiac arrest with no response. AAPL is flat lining. It's not 1, 2 or 10 names/indices that doing this. It is everywhere. By the end of this week, the S&P 500 should join the flat liners, although it is, at least, trying to put up a fight. I expect that by tomorrow that fight will be over, with the S&P moving beneath 3900 to end this week. Getting short and only adding to shorts since the beginning of February, after being heavily net long since October was not as difficult as it may seem if you are observing the correct price levels. 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...
The Destruction Theme
There are two dominant circumstances that make up the destruction theme: Since early 2022 there has been an expansive distribution pattern forming in the major indices. This only became obvious recently after the rejection at 4200 which marked the top of the distribution range. Supply overwhelmed demand in a far reaching, expansive manner. To the point that the markets have done nothing but decline since that time, in a manner which suggests that 4195 was the top for 2023. The fact that a majority of investors continue to believe that the October low was THE low for this cycle creates a significant vulnerability in the markets moving forward. This becomes all the more evident as the markets draws closer to the October lows while distribution continues, paired with technical deterioration across the indices. There are numerous pieces to this puzzle that are far too detailed to get into here. Our weekend Turning Points note has gone from 11-12 pages on average each weekend to 16-18 pages recently as I detail all the data pointing to the rejection at 4200 being a severely underestimated, highly significant technical event that virtually guarantees a retest of the October lows, at a minimum, with a high likelihood of new lows in the offing. Distribution and the refusal to suspend disbelief of certain outcomes have led to consequences in the markets throughout time that are often times destructive, to put it mildly. This is one of those instances. As I have been detailing since the beginning of February, we have arrived at a point in time where caution is warranted at an absolute minimum. We have been building short positions throughout February in anticipation of what is to come, taking a more aggressive stance towards the bearish trend ahead. Be careful out there. 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...
Tomorrow’s Price Action Provides An Opportunity
It was just about a month ago that investors were clamoring for a significant dip to get their allocations to the long side of risk right. As of today, we have moved below 4000 on the SPX from a high of near 4200, giving investors exactly what they were looking for. And therein lies the issue, among many others that have come up over the past few weeks. Bull market reversals off extreme lows do not provide opportunity for those who missed the lows. Instead, they take opportunity from those who missed the lows by forcing them into uncomfortable buying decisions. The more discomfort arises for those who missed the lows, the more legitimate the rally. It really is that simple. True bull market market reversals force the issue. They force discomfort. They make investors chase obscene prices. After being bullish off the October lows, the distribution patterns along with a myriad of other issues popping up have forced us into a bearish position for the first time since September. The NVDA earnings induced rally we experience tomorrow will only provide an opportunity to add more short exposure before the next down leg occurs. Positions and plans forthcoming. Looking forward to capitalizing on tomorrow's price action. 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...
The Technical Outlook For The Rest Of This Week Starring The S&P, Bonds and USD
Back to the long side today after observing the following setups in the final hour of trading. First, let's review: Wednesday was a setup day to determine how the rest of the week would turn out, whether bullish or bearish. After Tuesday's price action, Wednesday's results became largely uncertain, prompting us to move to cash. We went long in the final hour of trading today upon seeing the following technical setups, along with other macro and technical factors that have a high probability of setting up this week to end strongly on the bull side. A lot of traders are watching 4200 now. If we hit 4200, which I expect by tomorrow or Friday, the market won't simply stop there. Too much attention being paid to this level at this point. Expecting, at least, 4220 with the possibility of 4250-4275. I have been saying for sometime now how explosive a level 4200 can be. We are about to find that out in real time. Bonds next. Traders are too deeply entrenched ahead of the PPI tomorrow. This is a similar setup to the CPI on Tuesday forcing an unwind into equities, creating a sustained bid for equities throughout tomorrow. Lastly USD. Exact same setup as bonds. USD investors are too deeply entrenched before the PPI tomorrow. They will be forced to unwind on most any number. Bond and USD unwinds force a sustained bid in equities throughout tomorrow, allowing for 4200+ to be reached. Option expiration week only amplifies the volatility. That's it for tonight. 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...
Equities Were Going To Be Bid No Matter What Today, But Something Happened Along The Way
After getting net short for the first since September to start last week, we came into this week getting long for a 2-3 day trade going into the CPI. As detailed here, the CPI was going to be bid under most any circumstance, barring an absolute scorching hot print, which was a very low probability. In any case, the opportunity to get long on Monday morning at the open was not so much an opportunity that had potential for massive rewards, but rather an opportunity to take on long positions for 2-3 days with very little to no risk. The stock market version of a free roll. We took the opportunity with the intent of getting out of our longs on Wednesday-Thursday. However, something happened today that caused us to move back to cash. That something was despite macro investors coming into today max short bonds and long the USD, there was enough flow moving their way that they were allowed to sit relatively comfortably to see what transpires into tomorrow's trading. That's right, the markets allowed them to live to fight another day. Upon seeing the reversal in bonds and the USD, along with the volatility in the equity markets, the decision to get back into cash was an easy one. The fact that the markets were not able to exploit bond and USD investors today, who were front running this CPI number for multiple trading days leading into this morning's release is a definite short-term negative. More than likely resulting in weakness through tomorrow, at least. Depending on the extent of any decline that takes place tomorrow, the decision can then be made as to what the next set of steps will be. For now, it's time to observe how the market reacts to key levels starting with 4110 on the SPX. S&P futures down 19 points tonight. Nasdaq down 82. 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...
Here Is The Call For CPI Tomorrow
After getting into cash to begin last week, we reinitiated long exposure on the open this morning moving back to near 100% invested on a notional basis. In this Sunday's edition of Turning Points, I outlined our decision to again get long in a 16 page report. The reasons for switching from net short to net long are based on technical, sentiment and some macro reads on the market for this week. One of the primary dilemmas that bears face going into tomorrow's CPI is that investors have become overextended in their bond and USD positioning. Namely, too many investors fell for a cooked jobs report, expressing their renewed hawkish sentiment by selling bonds and buying USD. The good ol' inflation trade came back with a vengeance throughout last week. This sets up a real problem going into tomorrow for bears. Everything but a scorching hot CPI number (I put the probability of this at around 1%-2%) causes bond sellers and USD buyers to massively unwind the positions they built up last week. In the meantime, last weeks selling got the bears attention in equities, with short positions being built up again, while bulls have been sidelined going into the CPI. There are a million and one analysts parsing through the data to guess where CPI will come in tomorrow. Pinpointing the number through in depth fundamental analysis of every price point isn't what I do here. What matters going into these types of events more than anything else is the predominant allocation of capital among investors. These types of focused allocations represent holes in the dam that markets inherently break with overwhelming force. Tomorrow the markets will do what they like to do best: Take a sledgehammer to what everyone thought was the right allocation last week, starting with those betting on higher yields. Moving onto those betting on a higher USD. And naturally, bidding up equities as a result. Looking for another test of 4200 (4210-4220 to be exact) this week. Good luck tomorrow. 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...
Detailing Our Decision To Get In Cash or Net Short
For the first time since the September/October time period, Zenolytics portfolios have moved to a net short position. This is after being upwards of 200% long throughout the majority of January, taking advantage of primarily growth stocks with one crypto in particular (RNDR) giving us a 150% gain since August. We are out of everything, but a couple long-term crypto names. Our portfolio of growth stocks has done what it was meant to do. That is to produce a furious snap back rally, riding on the back of short sellers, investors who were forced to take exposure into the new year, and dreadfully misallocated portfolios that were built on fear of Q1 2023 being a replay of Q1 bear market action in 2001 and 2009, as two examples. During this past weekend I put out an 18 page report to clients with 17 charts detailing why, at a very minimum, it is time to be conservative with overall exposure to risk assets. There are a number of factors involved in completely flipping our exposure this quickly, some of which are macro based, but most of which are technically based. The bottom line is this: The markets are well behind schedule. I have been emphasizing in recent weeks that speed is of the essence moving forward. This from January 10th, with the SPX at 3900: This past Thursday we hit 4195 and reversed. The fact we are sitting around 4100 is now a problem. This is the same vicinity the S&P 500 was during Powell's now infamous Jackson Hole speech on August 26th, 2022. Two days before Powell spoke at Jackson Hole, the SPX was at nearly the exact same levels as prior to his speech tomorrow (today depending on where you are). We have made no progress despite an abundance of clarity with respect to inflation and the Fed since the August Jackson Hole speech. The markets are looking at something else. It's a guessing game right now as to what that is, with macro analysts coming up with everything from earnings to more rate hikes than anyone expects. We don't necessarily need to know exactly what the market is looking at to delay making substantial progress. The fact that the delay is taking place, while numerous rejections take place along key resistance points in all types of major averages is enough to step back. Investors must now demand clarity from price before further committing to a market that has seen a significant shift from extremely bearish to quite bullish in just a few weeks. On...