Weekly Note Preview: The Truth About EPS Cuts And Market Bottoms; The Great Unwinding To Come; The Current State Of Crypto
What follows is an excerpt from this weekend's 280th Edition of Zenolytics Turning Points. To become a client of Zenolytics Turning Points or to learn more click here. MARKET UPDATE The 100 basis point rate hike narrative lasted approximately two days, allowing the markets to reverse towards mid-day Thursday, closing out the week at their highs. As it stands now, we are looking at a 29% chance of 100 basis point hike on July 27th. At one point Wednesday, it was up near 80%. This should drop further in the coming week, as just this weekend, the Fed's unofficial media mouthpiece, Nick Timiraos of the Wall Street Journal, is out with an article solidifying the fact that the Fed wants to do another 75 basis points at their next meeting. With the uncertainty of a 100 basis point move removed, the markets can now go back to focusing on the following: 1. Inflation is being tamed 2. A recession is likely to be a 2023 story, and if we do get one in this year it will be mild 3. EPS cuts are finally here, creating the necessary ingredients for low earnings hurdles that have a high probability of being exceeded in future quarters 4. The markets are basing after a significant decline, with record wealth destruction 5. Everyone is either in cash, hedged or very lightly allocated, especially to what has been working best over the past decade – Growth. When you take all of these ingredients together, it very simply creates a potentially explosive concoction that likely results in upside that is beyond what most are currently considering possible or likely. To view the entirety of this weekend's note, you can subscribe by clicking here. 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...
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...
Weekly Note Preview: Bearish Pessimism Leads To Unexpected Results; Why Market Ambiguity Is A Huge Tailwind; The Strategy For Growth In Q3
What follows is an excerpt from this weekend's 277th Edition of Zenolytics Turning Points. To become a client of Zenolytics Turning Points or to learn more click here. MARKET UPDATE Bearish sentiment remains the single most prominent feature of today's market. You can divide market participants into two classes: 1. Those who think we are going right back down to new lows 2. Those who think we will stop at around 4050 in the S&P and move to new lows This presents a problem for bearish investors as in order to have their wishes fulfilled, there would need to be an amplification of bearish factors leading to further selling pressure from an investor population that has largely offloaded risk to date. How fervently have investors offloaded risk over the past many months? As it turns out, according to the advance decline of the Nasdaq, they have been selling tech shares at a rate we have not seen during this current bull market. This is real one sided pessimism we are seeing that is historic in scope. To view the entirety of this weekend's note, you can subscribe by clicking here. 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,...
Weekly Note Preview: Why We Remain Very Much In A Bull Market; Investor Misallocation Will Drive The Next Leg Up; 3 Software Names Under Accumulation That Provide Big Upside In The Months To Come
What follows is an excerpt from this weekend's 276th Edition of Zenolytics Turning Points. To become a client of Zenolytics Turning Points or to learn more click here. MARKET UPDATE This is not a bear market. More importantly, the secular bull market remains very much intact. Analysis of the markets that stems from any other conclusion, more specifically, that we have seen a shift into an intermediate to long-term bear market environment is doomed to failure as the foundation of the analysis naturally creates numerous faulty conclusions that will be systematically disproved by the markets as the secular bull market resumes. Unfortunately, for investors that fall into the “bear market” trap, by the time realization occurs that this has simply been yet another correction within a bull market dressed in different color clothing, markets will be at or near new highs. The problem of bull or bear market classification stems from the fact that investors continue to utilize a pre-March 2020 mindset when considering volatility in the markets. The post-March 2020 volatility regime is a completely different animal altogether than anything in the pre-March 2020 markets. Although the Fed has been attempting to remove liquidity from the economic system, the fact of the matter is that record liquidity remains. Liquidity drives volatility. In turn, investor behavior changes, further exacerbated by financial information that piles onto a specific theme, whether that theme is recession or otherwise, causing investors to make seemingly informed decisions that are anything but. Put as simply as possible, moving from one side of the boat to the other has never occurred in such a uniform, dramatic fashion as it does now. Further amplifying the situation is the fact that there are no more data advantages between investor classes. What this does is to create exaggerated market moves based on data that is being disseminated simultaneously among all investor classes, creating identical reactions. As the volatility of the price action increases in a singular direction, investors both small and large tend to act on that data with more conviction, further driving price in the direction of the primary trend. While liquidity has played an enormous role in the ultra-volatile markets of today, information distribution and the near uniform conclusions drawn from such information also play a major role. More than ever, investors are analyzing identical information with the direction of the primary trend influencing their bias more than any other single factor. All of these factors taken together create massive moves in both directions. The March 2020 decline, followed by the record rally taking place afterwards was the first iteration of the new volatility regime. The...
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...
Weekly Note Preview: 17 Charts Demonstrating Why This Is One Of The Best Buying Opportunities Of The Bull Market To Date
What follows is an excerpt from this weekend's 275th Edition of Zenolytics Turning Points. To become a client of Zenolytics Turning Points or to learn more click here. MARKET UPDATE There are numerous reasons to believe that the markets are in the process of putting in a bottom around current levels that will be looked back on as significant come year end. Following this past week's price action, Fed decision and cross asset correlations, the markets seem to be moving away from the inflation narrative, with an evolving realization that the economy has already stalled, being broken down on the side of the road, while the Fed keeps taking a baseball bat to its windshield. While the Fed can be behind the curve for months on end, the markets are much wiser, seeing further down the road than anyone can imagine as real capital is at stake. The Fed, on the other hand, has numerous conflicting motivations, whether political or otherwise. As we all know, the Fed raised by 75 basis points this past week, for the first time signaling that they are serious about tackling inflation. And this weekend, this newly conceived tough guy stance from the Fed was further confirmed by a Fed official who stated they will most likely raise by another 75 basis points in July. Given how quickly the economy is deteriorating, the 75 basis points they do in July, if they indeed follow through, will be their last rate hike of the year. I expect the market to begin sensing that any day now. In the meanwhile, we have complete and utter chaos taking place in nearly every risk related sector that is not associated with commodities. Leading into and following this past week's Fed meeting, numerous historically relevant signals have taken place demonstrating the extreme nature of the selling that has taken place. This is taking place just as we reach peak inflationary fears, with investors forgetting what is on the other side of the Fed destroying wealth, ballooning inventories and all but eliminating consumption. Perhaps by design or perhaps by pure coincidence, we are reaching peak inflationary fears right as we are about to make our way into election season past July. The motivation to take care of the threat of inflation in as expeditiously a manner as possible has arrived. To view the entirety of this weekend's note, you can subscribe by clicking here. 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...
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...