There Are Continuation Patterns and Then There Is This
Patterns like this are popping up everywhere. I'm showing the major market averages here, but individual growth names are demonstrating identical traits. Here is the S&P: S&P 500 moving into resistance after a stiff rally. Contraction at resistance is a classic continuation signal. So is almost nobody thinking this can continue. You have two camps right now: Market is going lower/Market is going sideways. The "market is going to keep going" camp is nearly non-existent. In the meantime, price action is butting heads with the popular perception that this can't last. Price action wins in this scenario. Next up the NDX: Same thing with the Nasdaq. The Nasdaq 100 just plowed through resistance and followed up with a range contraction, basically coiling over the very short-term above resistance prior to its next leg. When will that next leg come? It could be tomorrow with the jobs report. It will assuredly be by next week, barring some type of geopolitical surprise, involving missiles and violent dictators. This market has left EVERYBODY behind. It won't relent until they believe that this is the next coming. Until they are foaming at the mouth to buy stocks. We are long ways from that eventuality. Enjoy the ride. 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...
A New Dynamic Emerges After Today’s Events
With the much anticipated CPI number coming in hotter than expected, a new dynamic has developed in the markets that didn't exist before today: We now have a 100 basis point hike in rates at a near 80% probability for the July Fed meeting. This creates a brand new psychological lever between now and the July 27th Fed decision. The market will be at liberty to pull that psychological lever at will over the next nine trading days, until the Fed provides some clarity moving forward. In the meantime, there isn't much happening on the news front. The rest of this week only has financial earnings to provide any sort of catalyst, if you want to call bank earnings that. Next week has Netflix and a few other names reporting, with a bulk of growth names reporting the same week as the FOMC meeting. So we have Thursday and Friday of this week, followed by the entirety of next week for the market to pull the 100 basis psychological lever and with it bring all sorts trepidation, strife and anxiety to an investor class that is already psychologically and emotionally pummeled. At Zenolytics, we reduced long exposure today in anticipation of better buying opportunities ahead prior to the Fed meeting, as we are knee deep in the summer trading months, with low volume and volatility creating opportunities for the bears to pull a surprise raid on bidders, bringing in sudden, sharp weakness at will. The message between now and the July 27th FOMC decision will be a mix of 100 basis points from the Fed, steep recession and earnings weakness. It's a potpourri of angst that is best left alone for the time being. This doesn't change the outlook for the rest of the year at all. We are still going to blow the doors off the upside, once investors realize that a recession will be largely avoided this year and the Fed has done a better than expected job of stomping out inflation. Over the next week and a half or so, we simply have the opportunity for some tactical decisions that have a high probability of enhancing performance. Who am I to disregard such an opportunity? Enjoy your evening. 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...
The Pessimism Is Thick
Recession. Inflation. Fed. Rates. Oil. War. Bear Market. Whatever worry, doubt or anxiety laden thought you ever considered is becoming a reality in 2022. Add to this long list of worries the following......EARNINGS. Investors are just now catching onto the fact that earnings are going to stink moving forward. There is a caveat, however. Earnings being terrible was a relevant narrative months ago, while the Nasdaq and S&P were hell bent on lower prices, while mummifying investors into a perpetual state of involuntary, fear based responses. This is exactly the point. The information has been digested. Investors have acted on the reality of lower earnings, earnings guidance and whatever else may come in the near term. The next step to take is a forward outlook, peering out 6-9 months down the road, while coming to the conclusion that things may not be so bad. The very fact that so many investors are so hesitant to get in prior to Q2 earnings being reported is the exact type of obstacle you want to see as an investor. You want emotional and psychological barriers to entry. You want it to be hard as hell to make the decision to buy. Whenever things get easy, it's time to run. This isn't easy. This is one of the most difficult spots to buy in a long time. Investors are caught in the fog of war, not knowing their nose from their toes. In other words, the perfect environment for the market to run unencumbered, unhinged and surprise everyone yet again. 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...
A Little Perspective That Is Very Bullish For Stocks Into The Second Half of The Year
Those of you who have been familiar with my work over the years will recognize the following chart. I post it from time to time when emotions, psychological handicaps and all around pandemonium breaking loose becomes the theme of the day, week, month or quarter. This is a 100 year chart of the Dow showing bull and bear markets of the past and present, revealing some valuable data applying to the current situation we find ourselves in: We are presently 9 years into this bull market, making it a relatively young bull market compared to those of the past. The threat of this being some type of diabolical generational top, with the Dow crashing to 5000 in the years ahead is slim to none, with a strong tilt towards none. What is more interesting, however, is when you consider the fact that we have been unlucky enough over the past couple of years to experience two of the most vicious quarterly declines of a bull market over the past 100 years. I am, of course, referring to the 2020 pandemic decline of 23% and the current 2022 inflationary/fear of recession decline of 14%. Ranked 2nd and 5th respectively over the past century. What is interesting is that we have a corollary to this period from 1987 to 1990. In 1987, the infamous Dow crash took place, making it the worst bull market quarter in history with a decline of 25%. Just a few years later, similar volatility struck in 1990 with recessionary fears driving the Dow down by 15%. Judging from history, it's rare during a bull market to see such compacted volatility events. Here is what the Dow looked like from the 25% 1987 crash to the 15% 1990 mini crash: Here is what the current market looks like from the Q1 2020 crash to the current Q2 2022 mini crash: What is interesting to note is that following the Q3 1990 mini crash, the Dow reached a brand new all-time high just six months later, emphasizing the point that market cycles matter much more than you, I or anyone else thinks. Oh but the Fed wasn't tightening back then and inflation wasn't out of control, you say? Sure, it was a different situation entirely, but the situation then was arguably much worse, with a banking crisis via the savings & loan crisis resulting in the collapse of hundreds of banks, further resulting in the insolvency of the Federal Savings and Loan Insurance Corporation. Followed by a recession that lasted from 1990-1991. Despite all of this upheaval, the markets managed to forge ahead to new highs,...
Some Late Weekend Thoughts As Futures Plunge
Let's review: Thursday investors sold the CPI number suspecting that inflation is a beast that cannot be tamed Friday investors sold the CPI number after the numbers were released, knowing for a fact that inflation is a beast that cannot be tamed Sunday futures continue the selling as traders know that investors are still shook from all the suspected and factual selling that took place on Thursday and Friday. As detailed exhaustively in my weekly note the inflation trade has hit a saturation point that allows for the bulls to put together a good/great/spectacular run over the summer. The prerequisite to this run, as is the prerequisite to every substantial run after a bear market debacle with this degree of pomp and circumstance is to make it as difficult as possible for investors to grasp the fact that the market is putting in a low. There are numerous signs that are, in fact, pointing to this eventuality. We just have to deal with the dissuasion, manipulation and all around degradation of the soul and spirit of every last remaining bull until that low comes. Close. Very, very close. The time to buy into the bearish euphoria was months ago. Not now, not by a long shot. Bullish at 3857 on S&P futures with everyone freaking out on a Sunday while I watch the Angels go down a run against Steve Cohen's Mets. 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...
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. ...
Well, Hello Stranger….
It has been a little over a year since Zenolytics last put out a public note. That note titled, It's Time For Investors To Go All-In On Growth Stocks, was published in March of 2021 right near the lows for the year on the Nasdaq around 13,000. As we all know by now, the Nasdaq would keep moving up from that March low, right up to the November high that so many investors wish they could have back to resurrect their portfolios to some semblance of its previous glory. Unfortunately, Jay Gatsby is not a potent role model for investors, as no matter how much you can hope to repeat the past, one can only learn from it, apply those lessons and move on. While there has been a public absence, in private, the Zenolytics Turning Points weekly note is getting close to its 300th edition, which is actually quite shocking to me. The membership base at Zenolytics consists of both institutional and retail investors who gain value out of a vast majority of the analysis I send out on a weekly basis. I say a "vast majority" because the markets have become infinitely more difficult on a micro basis. Just like everybody else, Zenolytics will have its great calls, good calls, bad calls and downright terrible calls. It's really easy in the current environment to get a lot wrong. And even more poignant is the fact that the market will let you know how wrong you are extremely quickly when conditions are bearish. You can literally lose everything overnight, as we recently learned with our crypto position in Terra Luna. A position, by the way, that at one point showed a 10x plus gain. That story is far from over, however. The nuances are endless. The opportunities for the reemergence of the chain are real after the bearish sentiment becomes a little less amplified, you can say. In the meantime, the markets are slated to get much more difficult than most are expecting. Over the intermediate to long-term, there will come a buying opportunity, at some point in the distant future, that will be historic in scope. However, prior to that opportunity becoming apparent to most, there will more than likely be devastation on a scale not seen since the 2000-2002 bear market market in growth. The point here is not that you must, as investors, participate in the downside that is to come in order to capture the inevitable bottom of this market tirade. The point is that you, as investors, better be damn sure that you have some capital in reserves prepared to capture the historic...
It’s Time For Investors To Go All-In On Growth Stocks
What follows is a portion of this weekend's note sent to Zenolytics clients: The Nasdaq remains in an overall consolidation phase following the March lows. You can see in the chart above that the Nasdaq experienced expansions in volatility into the lows, followed by the large reversal on March 5th, briefly driving the Nasdaq below the yellow trajectory before reversing to close near the highs of the day. Notice that since this reversal took place, the Nasdaq daily ranges have steadily been experiencing contractions in volatility. These contractions in volatility following the type of expansionary reversal we experienced earlier this month are indicative of a low being made, with the market now taking its time to carve out a base from which it can move forward. As we move closer to Q1 earnings being released, it will become less likely that we will come anywhere near the March lows as the quality of earnings out of tech will be superb, with guidance to match. UPST went a long ways towards telling investors this past week that there remains an appetite for exceptional growth in the marketplace. Of course, the current chatter is all about the reemergence of value. However, if you look at the chart below, you will see that whenever value gets this overextended versus growth, it has been a poor bet. This is the ratio of the Ishare Value Factor etf versus the QQQ. The last time we experienced a spike of this nature was in late 2016/early 2017. At that time, the Nasdaq experienced a 7% correction during Q4 2016 from peak to trough. Presently, we have experienced a 12% correction in the Nasdaq from peak to the recent March trough. When you look at the ratio above what it does is to allow an investor to basically boil the entire market down to one question: Is growth finished as a superior performing asset? With this type of extension over the 200 day moving day average of value versus growth, every single other incident of this divergence since the bull market started earlier this decade has been an opportunity to throw everything you have, including the bathroom toilet and kitchen sink, at the technology. The only question an investor has to ask themselves right here is will this time be different? Is this the moment that growth fades for the long-term? One thought I've had frequently over the past few years is that the modern day, experienced investor has come out of a framework that involved numerous booms and busts. Take myself, for example. I experienced the 2000 internet bubble top, witnessing wealth get...