Preparing For A Post-Election Unwind
In major cities across the US that have previously dealt with politically motivated rioting, windows and doors are being boarded up. This is a real life reflection of the wretched state the US political system finds itself in during the current election cycle. In major markets across the globe, investors are participating in the financial market version of boarding up your windows and doors by either paring back exposure or hedging risk off the books completely. For a demonstration of what hedging risk off the books completely all you need to do is pull up a chart of the index put/call ratio for today. The mother of all spikes, seemingly out of nowhere. This is 100% institutions wanting to tame whatever volatility they feel will arrive in the days ahead as a result of a seemingly unpredictable election cycle. At the very same time, the VIX and VVIX both remain highly elevated as they have been for months in anticipation of the very same thing that index option traders are attempting to front run with today's put buying frenzy. In this past weekend's edition of Turning Points the case was made for the election tomorrow providing clarity and simplicity, with what will likely be a very clear result, followed by an extremely simple methodology of taking advantage of the investment environment that takes shape in the weeks and months ahead. All of this hedging off of risk will have to be unwound in somewhat dramatic fashion should the worst case scenario everyone seems to be expecting not occur. In other words, a clear result, without any surprises in the direction of the current odds on favorite. This isn't necessarily an area to pussyfoot around. After all, the NDX has been range bound for what? Close to six months now. Bitcoin has been range bound for eight. The coil is about to spring as the markets breathe a sigh of relief, with the election cycle behind us and nothing but clarity ahead for at least some weeks and possibly months. We are up to 105% long. Risk on. Zenolytics Turning Points is nearly 500 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...
How Risk Is Shaping Up To Respond To Earnings and The Elections
There is a definitive argument to be made that the events of the past several months, accelerating into a crescendo of outcomes over the next several days, have suppressed risk to the point that anything but an extreme anomalous circumstance will be greeted with an increase in risk exposure. As the most immediate example, mega-cap tech earnings for this week will likely be overwhelmingly positive in the eyes of investors as election and interest rate chaos have managed to cap the ability for investors to add risk substantially until a conclusion is reached. With both the FOMC meeting and elections coming to a conclusion next week, unless there is a surprise outcome, the path of least resistance will remain for investors to continue adding risk. The only difference will be that with the path of rates becoming further solidified and the elections out of the way, the velocity of those additions will become greater moving forward. In this past weekend's edition of Zenolytics Turning Points, I made this exact argument, in addition to outlining how, perhaps not coincidentally, the price structure of the major averages is confirming that something significant is afoot. As such, we removed our short hedge on Monday, being leveraged long at the moment, with Bitcoin related positions constituting our largest area of exposure. Expect a continued embrace by investors of earnings results as the week progresses, leading into a monumental week to come, where anxiety will be quelled and we can get back to the business of investing for investments sake, without the overwhelming aspect of political noise. Zenolytics Turning Points is nearly 500 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....
The Setup As We Head Into Elections, Earnings and The November FOMC
A reasonable investor would conclude that if the markets have been reluctant to pull back since the September rate cut, why would they suddenly decide to suffer a pull back just two weeks until election results are determined? Of course, we have to factor in some volatility with the bulk of earnings set to be released over the next couple of weeks, not to mention the early November Fed meeting. What seems to be occurring, however, are the markets factoring in a Trump victory, with a fair deal of hesitancy continuing to exist, in case of results favoring Harris, creating a situation where investors have to restructure a good portion of their bets. In either case, especially when considering the technical levels that the SPX and NDX find themselves resting at prior to the election, a clear result will more than likely be greeted with a great big sigh of relief by investors. A Harris victory would result in an initial jolt downward. However, it would be short-lived. As long as the result is clear, the markets will more than likely take the cap off of the upside, with a significant rally ensuing for some weeks. For this reason, it is wise to assume that the current setup is a rare buy the rumor, buy the news type of event, as opposed to the traditional buy the rumor, sell the news that seems to be worrying some investors at the moment. As far as momentum is concerned, there are two momentum growth names that investors have to own going into December. We have been trading both of these names extensively over the past few years, with a further commitment being made in recent weeks to both. The most unexpected outcome during the weeks ahead would be for earnings, elections and the Fed meeting going by with the markets yawning at all of these events, while continuing their recent propensity towards a lack of overall volatility, while simply grinding along their merry way. Continue to make adjustments as needed. Aggressive when need be. Defensive when need be. There are many reckless among us currently. One sided, extreme biases, while seemingly alluring during persistent trends, lead to misery more often than not. The willingness to adjust will prove invaluable. Zenolytics Turning Points is nearly 500 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...
The Most Important Chart As We Enter A New Week
Just released the 488th Edition of Turning Points. A 17 page note with a primary focus on crypto as this constitutes our largest current long exposure. We also covered a new earnings play that we will be initiating on the open Monday morning. However, a good deal of attention was focused on where the market averages are choosing to camp out as we head into Q3 earnings and elections. Specifically, check out the NDX. February, March, April, part of May, some of June, part of July, some of August, half of September and all of October have been spent around the same trajectory. Throughout all of these time periods, we have had what seemed in the moment to be potentially explosive events that would have the markets making a decisive move to once and for all slay the proverbial dragon. However, throughout the entirety of 2024, the market has refused. It is sticking to a comfortable path forward, which isn't necessarily always the most productive path forward. The market needs to establish a new trajectory forward on the upside fairly quickly or time will be up. In establishing a new trajectory forward, whatever coming correction ensues will cover ground that won't be terribly damaging. However, sticking to the same key red trajectory, once a correction comes, can lead to losses that will prove difficult to stomach for most. Additionally, sticking to the same key red trajectory into mid-November/December increases the possibility that whatever breakout is seen above this technical point will be subject to retracement. The bottomline: The NDX needs to starts outperforming. The SPX being up more than the NDX in 2024 is a point of weakness for the market that remains exploitable. We are currently long China (have been since April), biotech, crypto, small-caps, while being short growth. Zenolytics Turning Points is nearly 500 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...
The Current State Of Crypto
In this coming weekend's edition of Turning Points, the current state of crypto will be discussed, centering around our current largest allocation to Bitcoin related assets, with a secondary focus on alternative crypto assets. Perhaps more important than the data I will be sharing is the human psychology angle of crypto as it relates to alternative crypto assets. The simple fact that asset flows ALWAYS followed a defined path during secular bull markets makes alternative crypto assets a magnet for future inflows. It is not sometimes. There are no maybes. Human nature never changes. Greed always reaches a boiling point as fear of missing out mutates into acts of speculative haste and aggression. Many years ago, in 2011 to be exact, I wrote an article for Forbes describing Phase 4 investors and their role in the markets. The Cliff Notes version of this theory is that bull markets move through four investor phases: Phase 1: Start of a new secular bull market - investors have sworn off stocks, reluctant to get involved, sticking to bonds and real estate. Phase 2: A few years into a new secular bull market - investors begin to defrost a bit. However, they are still too timid to get involved in anything but extremely conservative, blue-chip names. Phase 3: Recognition and belief - mid-way through a secular bull market institutions ramp up buying, moving into more speculative names, mostly in technology. Wall Street comes alive with bullishness. Words or phrases like "optimistic, "cool," "great concept,", "fantastic," "revolutionary" and "I love" are being used more often. Phase 4: Pandemonium has broken loose - market participants begin pushing all-in. They become very aggressive, moving into high-beta technology names. Speculative micro and small-cap names begin to experience feverish runs. Two and three baggers becomes commonplace. Greed dominates the investment landscape. In the current secular bull that started right around 2012, we currently find ourselves in Phase 3: Recognition and belief. We briefly moved into Phase 4 during 2020-2021. However, it was interrupted by a very aggressive Fed attempting to put the fire that was inflation out in the the years to follow. What is different from 2011, when I first introduced this framework is there is now a Phase 5. Phase 5 is ultra speculative, alternative, unregulated asset classes, namely alternative crypto names. It is not a matter of IF Phase 5 will come into play over the next few years, but simply a matter of WHEN. Increasingly, we live in a society that sees gambling, whether on stocks, sports, crypto or political outcomes as the only means to escape the headwinds that are increasing costs, lower...
The Splits
In this weekend's edition of Turning Points, the case was made for interest rates being offsides as, among other things, locked capital expecting a dire outcome to the Israel/Iran conflict has obscured the rate picture. While certain sectors will benefit from rates coming down, there has been a tendency for risk assets to decline alongside rates in recent months as investors seem to have moved past inflation risk and are now focused on recession risk. In other words, the threat of a soft landing turning into a hard landing is the primary concern. With that said, those concerns have the potential to be magnified during the weeks ahead as earnings guidance will be erratic and economic data will turn from inflation focused with CPI/PPI out of the way, to economic activity. A mixed picture, at best, emerges under even the best circumstances. Rates decline, rate sensitive sectors benefit, most everything else suffers. The market does the splits. The rotation trade is alive and well. Adjust accordingly. Zenolytics Turning Points is nearly 500 editions in and only getting better. Find out why institutions and individual investors have come to depend on our service through each and every type of market environment. Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing. Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our...
Something Happened On The Road To Valhalla
Perhaps it is of little coincidence that the MOVE Index, a measure of bond market volatility, has decided to select this specific time period as a breakout point following a near 18 month downtrend. What this chart represents is essentially a magnifying glass placed by the market right on top of the Fed, investigating the intricate details of the recent policy error that was slashing rates by 50 basis points. Equally significant, the 18-month breakout in bond market volatility signals a lack of confidence in the Fed's future monetary policy decisions, particularly regarding interest rates. Lastly, and perhaps most importantly, what this range expansion to the upside in bond market volatility represents is a demand by the market for measures to insure that long term rates remain in line with the overall objective of the Fed for monetary policy to be less restrictive overall. While the recent massive spike in rates is short-term restrictive, it also intermediate to long-term accommodative in that it will force the Fed to act in a more creative manner, so to speak, with respect to future monetary policy decisions. Being long assets that will benefit from creative monetary policy efforts, both domestic and foreign, is likely a prudent investment. At the same time, being short assets that will find a higher rate environment disturbing, in case of a bond market gone mad, is equally prudent. Forest meet tree. Zenolytics Turning Points is nearly 500 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...
The Next Significant Market Trap Has Been Sprung
The tendency for investors to anchor themselves to bearish outcomes has become a feature of this market since the 2023 lows. During 2022-2023 it was inflation, the Fed, with sprinkles of stagflation thrown in for effect. More recently it has become recession, with shades of irrelevant historical comparisons to past shifts in monetary policy from hawkish to dovish that have caused markets to fall once rate cuts commence. Once again, at its root, the bearish argument relies on recession being imminent, as it has been since 2021. Only this time it comes with a brand new caveat - the Fed dropping rates means it is even closer than it has been all those other years. At its essence, the argument is silly. The market will force investors into realizing this during the weeks ahead, with a series of moves that will force this mentality to be confronted in a manner that will be unpleasant for those who are on the wrong side of the trade. Only then will the markets be allowed to entertain the possibility of the Fed being behind the curve, with recession being imminent, once more, even though the outcome will likely end up being much the same as all previous instances. But that's an October/November story. The path for the remainder of August and most of September is forceful, persuasive and demanding of those who fail to fall in line with the simple bullish ramifications of the long awaited shift in monetary policy. Zenolytics Turning Points is 470+ 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...
Weekly Note Preview: The Future Ramifications Of The Volatility Experienced This Past Week; Market Price Structure; What The Volatility Index Seems To Be Hinting; Significant Allocation Shifts
In this weekend's 468th edition of Turning Points we have a 15 page note discussing the ramifications for the weeks/months ahead of the significant volatility experienced this past week; market price structure; what the volatility index seems to be hinting; significant allocations shifts in Zenolytics Portfolio. What follow is a brief preview from this weekend's note: For all the chaos that was this past week, the SPX closed down 2 points, basically unchanged on the week. However, beneath the surface, the market is very clearly telling investors that we are entering a period of volatility that will be both violent and unpredictable. Whether this volatile period lasts weeks or months remains unclear. What is abundantly clear, however, is that the market is making every effort possible to shake loose as many participants as possible. Just looking at the fundamental picture, whether it is recessionary fears that have you lying curled up in the fetal position, or a tense election season directly ahead, there is no shortage of monsters in the closet, frightening investors out of the market. It doesn't end with an uncertain fundamental backdrop, however. The technical backdrop - in other words price action - has suddenly decided to match the uncertain fundamentals after an extended period of fairly serene trading. There is an abundant amount of information to be gathered during volatile periods in the market. During every large move there are intentions at work that can deliver valuable insight as to what lies ahead. As an example, this past week saw the market expend a significant degree of energy in shaking loose as many investors as possible prior to the SPX delivering its largest one day gain since November 2022 on Thursday. In the Monday, August 5th edition of Turning Points I discussed the market “forcing the issue” for the remainder of the week, following the surprise, out of the blue futures ramp directly following the regular session close. We saw a tremendous amount of force used from Thursday-Friday to basically recalibrate the markets off of an overly-bearish setup that had been weeks in the making. To view the entirety of this weekend's note, you can subscribe by clicking here. Zenolytics Turning Points is 450+ 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...
Market Intentions and Reality
Last weekend's 454th edition of Turning Points called out the premature, elementary level technicians who actually thought the price action from on June 20th - June 21st, would yield gains into the new week. An excerpt from the 6/23/24 note: High for the week was 5524. What was most impressive about this past week is that the market exerted pressure on the bears into the 11th hour, before finally revealing the hand it was meant to play all along, by squeezing the shorts in order to make room for further shenanigans during the week to come. Ultimately, the posturing and positioning that is taking place is a waiting game to throw both bulls and bears into a tizzy prior to the next leg taking place. From a perspective purely rooted in the basics of price structure, the longer we continue carving out a flattish range around present levels, the more the possibility this turns into a continuation pattern for the primary trend. There is the issue of the earnings season quickly approaching, along with an end of July FOMC meeting. Both events will drive the intentions of the market over the next few weeks, as there will surely be attempts at dislodging positions prior to any profitable, sustained trend revealing itself. Continued chop remains the theme until further notice. Zenolytics Turning Points is 450+ 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...