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...
Those Anecdotal Data Points, You Know?
As we blaze through the first month of a new year filled with equal parts angst and optimism, there seems to be very little that will dull the appetite of investors for speculation in nearly anything with the perception of value. Be it sports memorabilia, commodities, vintage goods or stocks, if it fluctuates in value, then odds are there is appetite for it. Anything works, except for holding onto eroding wads of cash that serve no purpose other than incremental depletion of value on a seemingly perpetual basis. In the midst of this celebration of crisis era capitalism, brought on by seismic shifts in the economic landscape of the past century, anecdotal data points continue to appear that suggest the fondness for speculation may have crossed the line from holy into unholy grounds that threaten to unleash the oversized fists of the market gods, causing tremors that few are prepared for. Now lets me first explain that while the theme of this note may seem generally bearish in tone, as an investor, you very simply cannot buck the present bullish trend. What I am attempting to express here is that the comfort with which most are approaching this market, as expressed through leverage in its various forms, will lead to a period of exhausting volatility, be it short lived or otherwise. The violent nature of this market suggests that investors should be looking for evidence of such an event, as it will be the key to outperforming both the markets and peers in 2021. In other words, unlike 2020, 2021 will not be a year where you can simply grab nuts and buy whatever is going up. There will be consequences for acts of juvenile barbarism that few are prepared to face. In 2021, thus far, I have received numerous inquires that go something like this: My god, my friends are making so much money in the markets. I cannot sit this out any longer. What's the best way to get involved? This one was an insta-classic: My 10 year old wants to start trading options, what brokerage firm do you suggest for him? And then there are the more refined individuals who simply ask for advice on recent IPOs that they have no idea about, but like the symbol or the fact that it trades in the triple digits right off the bat. While anecdotal data often times is early in nature, in this circumstance, use it as a means of refraining from grabbing both of your nuts while you dive into the most high octane driven stocks, perhaps instead choosing to only grab one, while you shield...
Themes For 2021 and Beyond Are Emerging Early On
What if the virus crisis and the resulting global response, in terms of ongoing fiscal and monetary stimulus, was such an outlier, with such significant force, that it effectively reset the lifecycle of the economic expansion back to what is essentially 2010 again? What if the fiscal and monetary response are not just meant to stimulate the economy from a demand standpoint, but to actually destroy cash as an asset class in order to force asset prices to levels that will boggle the mind, while creating economic benefits that create the foundation for inflation led, government induced prosperity? What if $500 billion, trillion and $2 trillion dollar market caps are just the beginning rather than any conceivable end? If cash as an asset class is on its way to oblivion then the entire investment ecosystem of 5-10 years from now is an unrecognizable leviathan compared to where we are presently. It involves the complete economic destruction of anybody who does not possess investable assets that are deployed aggressively, preferably with leverage. It involves the restructuring of corporate balance sheets away from cash, into asset classes, whether stocks, precious metals or cryptos, that preserve the value of corporate earnings. This is a very raw concept presently because it is so early on. The eventual winners of this new age of the annihilation of cash as an asset class will shift multiple times over the next decade. What is absolutely certain is that all of those times that you heard "cash on sidelines is coming into the market" is no longer just a headline but an absolute force of nature. Global governments are destroying cash as an asset class because it's the only means of insuring an inflationary outcome that will then allow for any semblance of an unwind of stimulus over the long-term. If the first several days are any indication, 2021 is gonna be on another level completely. Zenolytics now offers Turning Points Market Intelligence premium service 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...
Weekly Note Preview: 2021 Offers Investors Multiple Avenues To Outperform, But Those Avenues Will Be Much Different Than What 2020 Offered
What follows are the topics covered in this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here. What follows is an excerpt from this weekend's 180th Edition of Zenolytics Turning Points: MARKET UPDATE With the new year comes the tradition of forecasts for the year ahead that are typically based on both recent past performance and some measure of distant historical precedent. While many are attempting to handicap 2021, to do so demonstrates either a certain degree of arrogance or ignorance as we are moving into a terrain that is alien to all of us. What has occurred since the virus crisis in March and the resulting massive stimulus measures, whether fiscal or monetary, has been an acceleration of dynamics that should have taken 5-10 years to properly prepare for and digest. This has forced a great amount of stress on both societies and economies globally. We are seeing that stress expressed through the great amount of social unrest, mostly aimed at governments, whether with respect to economic inequality or lock down measures that are seen as unnecessary or abusive in nature. We are also seeing that stress expressed through massive volatility across numerous asset classes that have primarily taken the direction of upside in everything from small-cap stocks, cryptos and even sports memorabilia is seeing values inflate as endless amounts of capital seek a home away from cash. This stress induced appreciation of asset prices, forced by what is essentially the destruction of cash as an asset class, is a volatility enhancing event. “Volatility enhancing” is likely not a powerful enough term to properly classify what is occurring presently, however. What we have seen occur in asset prices, induced by governments being forced to destroy their monetary base, is the beginning of a volatility explosion that will be both deceptive and ultimately, destructive in nature. The only forecast for 2021 that has any chance of being accurate then is that it will be a year where the forces of volatility will become even pronounced, taking the form of both upside and downside volatility that can be potentially historic in nature. Our job as investors is to first and foremost, protect capital in such an environment. And secondly, to capitalize on this volatility to the best of our ability. 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,...
Here Is The View Of The Market From 50,000 Feet Up
Let's move up to 50,000 feet above this market in order to truly appreciate what we are witnessing presently. Here is the view from way up above: Everyone was convinced the world was ending just nine months ago. As the power of the Fed and the accompanying liquidity became known, the message went from "don't fight the Fed" to "let's make love to the Fed." As the momentum in equities, especially tech, grew increasingly powerful in nature, investors decided to completely ignore anything happening in the economy presently in order to focus on everything positive that lies ahead. As the perception of what lies ahead grew increasingly positive and powerful in nature, especially with a vaccine on the horizon, investors decided to leverage their positions. With increasing fiscal stimulus measures and a continuing lax monetary policy, the view of the Fed being all mighty and powerful has only grown. This rapid fire succession of evolving market psychology based on emergency economic measures has led to a psychosis among investors that involves complete allegiance to price appreciation without any consideration whatsoever for what can be on the other side of emergency fiscal and monetary stimulus, leading to a seemingly perfect landscape of picturesque meadows that the bulls have been given full permission to roam without boundaries. This seemingly perfect landscape is the greatest danger of all as we prepare to flip the calendar over to 2021. Investors have built up such expectations for perfection, in what has become a stunningly imperfect world, that the slightest slip of the narrative has potential to cause disproportionate reactions among the over-leveraged, over-exuberant masses. 2021 has become the year where the markets have been given no room for slipping. Everything needs to work. From the sick getting healed. To the economy reviving. To fear turning to optimism. To economic policies that have never been attempted working splendidly to the oohs and aahs of the desperate masses. It's a tall order to fill, which doesn't mean it will not be filled. However, to believe such an environment isn't fraught with danger is the peak of ignorance, or perhaps, excessive optimism that has turned into a full fledged mania. Zenolytics now offers Turning Points Market Intelligence premium service 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...
Weekly Note Preview: Market Update
What follows are the topics covered in this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here. What follows is an excerpt from this weekend's 178th Edition of Zenolytics Turning Points: MARKET UPDATE Another round of fiscal stimulus, with a likely consumer focused stimulus check component attached, is on the verge of passing. In the meantime, the important market averages are all consolidating ABOVE a key area of resistance that has now turned into support. These types of tight wound consolidations above key resistance levels that have become support are high percentage areas to take on leveraged long exposure, as we have done. There are other advantages, as well. Primarily from a risk control standpoint, knowing exactly where the market should not go, is a rarely discussed yet extremely valuable tool to possess. In this case specifically, we know exactly where the markets should not go moving forward, giving us an extremely well structured framework from which to take on leveraged long exposure. While it may not be en vogue to discuss risk in the current market environment, instead opting to simply pull your pants down and let it fly, the goal of investment is to preserve capital while taking well calculated, aggressive risk. In other words, the approach here will always take into account what our downside might be and from there we build the framework of our current approach to the market, along with the allocations necessary to take advantage. Now onto some charts to illustrate exactly where the market should not go from here.... 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...
Revenge of the Nerds
In what can only be described as an interesting turn of events on Wall Street, anything that has been obvious past July of this year has turned into a bonanza of profits for investors. The less experienced the investor, the more probability of an extreme bonanza of profits, as inexperience has continually beat anything resembling market savvy. The more obvious the opportunity, the greater the upside. It is all around us. The markets have become a Chinese buffet with all types of deliciousness for anyone who walks through the front door. You will have a population of investors and traders who will refuse to participate in such circumstances, as they realize how all of this ends. That hardened type of belief, resulting in stubbornness of action is, however, a handicap in such an environment. While these contrarian pessimists are right in their analysis of blood and gore, with the splattered brains of once virile bulls being the eventual outcome of all this, the old saying that "the markets can remain irrational longer than one can remain solvent" can come in handy here. We are in the midst of irrationality, without a doubt. However, at the same time, that very same irrationality is all around us, not just in the markets, but in governments, populations and a culture that now sees fiscal stimulus a birthright. That combination of seemingly irrational fiscal and monetary stimulus for as far as the eyes can see has potential to deliver an entirely new frame of understanding to "the markets remaining irrational longer than investors can remain solvent." Irrationality may just be the new norm. It comes with a caveat, however. Investors must still remain paranoid that this can all flip at the drop off the hat. Just as irrationality works for optimism, the thin line that separates irrational pessimism remains ever present. During December we have upped our long portfolio dramatically, to our longest overall net exposure since March/April. Unlike that time, however, our time frame isn't measured in months. These are trades that are judged day by day and week to week, at most. Zenolytics now offers Turning Points Market Intelligence premium service 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...