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...
Weekly Note Preview: The Important Message Price Is Telling Investors After This Past Week; The Next Important Level of Resistance For The Market; An Important Ruling For Our Favorite Mortgage Related Value Name; One Chart That Summarizes Why Every Investor Should Invest In This Sector
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 175th Edition of Zenolytics Turning Points, where we discuss the following the topics in a 14 page note: The important message price is telling investors after this past week Where the next important resistance level for the market may lie An important mortgage ruling this past week that opens the door for our favorite mortgage related value name One chart that summarizes why every investor should have exposure to a specific financial sector at this stage of the recovery MARKET UPDATE In a market that has taken it upon itself to disregard anything and everything but buying the dip, while central bankers continue pushing the QE button to infinity, we are at a point in the market cycle where intellectual capacity to classify such actions must be traded in for the purity of price action alone. In other words, instead of attempting to rationalize what is occurring in the economy and the markets against any historical precedent or relevant comparison, of which there are none, investors are better off looking at what asset prices from currencies to major indices are telling us. What must not be forgotten, however, is that bulls are effectively corralled here into a pattern of behavior and concentration of investments that is vulnerable over the long-term. For the time being, while the music is playing, the dance is simply too much fun to sit out. However, the ability to adjust quickly in a defensive manner while enjoying the upside will be key to outperforming and more importantly, walking away with profits in hand. A vast majority of those participating in this orgy of capital gains will walk away with but a fraction of what they have presently. That is the simple truth of manias that get to these extreme levels. It's not an IF equation, it's rather a WHEN equation of how the market chooses to exact revenge upon those who believe above average gains will be the norm, while every single dip is a buying opportunity of epic proportions. This has been the rule of speculation since cavemen traded bones and rocks in the neolithic age. Every single time investors have come to believe that this rule of speculation has changed, they have been punished in an extreme fashion. HOWEVER, in the meantime, the music is playing. So let's dance. At the same time, understand that defense in the form of hedging and taking lots of profits along the way...
Welcome To The Twilight Zone Of Investing
We are in the Twilight Zone of investing as we run into the final weeks of 2020. Being in such a peculiar spot has created a bifurcation of sorts, in that professional investors recognize how this story ends, with blood, gore and mayhem being the inevitable outcome. However, all the meanwhile, we are in the midst of a retail power play that has amateur option traders trouncing anything your Wall Street professional can conjure up. Even the tame side of the retail investment spectrum, who just decide to trade stocks, are making seasoned professionals on Wall Street look like newbies with investments in TSLA, NET, SPCE, SNOW and countless others. What it becomes is a question of approach as we move into 2021. There is a certain inevitability that a majority of us know is coming. However, in the meantime, performance in such a vibrant bullish environment demands investor participation. Balancing the inevitability of what is to come (bearish), with the performance demands of keeping up with the major market averages (bullish), will be the key to outperforming in the weeks ahead, as well as throughout 2021. What this means for investors is agile footing, as long positions should give way periodically to a market neutral stance when risk/reward dictates. A vast majority of those investors who have been perpetually bullish throughout Q3 and Q4, with little doubt in their thesis, will be the ones who suffer the largest drawdowns once the inevitable future of maniacal speculation becomes the inevitable present of a market that succumbs under its own weight. In order to avoid being in the vast majority, the attention of investors must be focused on risk, with a strategy towards hedging risk and possibly getting net short incrementally when price dictates that course of action. A singular minded focus on bullish excess, while being rewarding currently, must be tempered with a realization of the risks involved in a derivative driven market that has created a frenzy among investors. While we are net long presently, realizing that investors are being treated to a course on anomalous market behavior of the bullish kind, our focus remains on preservation of the capital gains created this year through a fine balance of opportunistic bullishness and tactical bearish operations, when the market dictates. Be like water, my friend. 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...
Weekly Note Preview: Five Macro Themes Set To Emerge; The Role Cryptos Are Set To Play; A Look At Key Macro Indicators; Exponential Upside In A Small-Cap Financial Name; A Leveraged Means of Investing in Bitcoin
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. In this weekend's 172nd Edition of Zenolytics Turning Points, we discuss the following the topics: Five themes set to emerge in the economy and markets over the next 6-12 months What role cryptocurrencies are set to play as both an investment and an indicator of liquidity moving forward A look at what key macro indicators are telling us after this week's breakout across market averages Why there remains exponential upside in a small-cap financial name we are holding that was up 50% this week A study of a leveraged means of investing in Bitcoin 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, 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...
Here’s The Thing About Mania Levels of Bullish Sentiment
Sentiment by itself is terrible as a reliable tool to judge reversals in the market. When combined with any number of other factors, the most important being technical patterns across important market averages and assets, you can typically come within striking distance of catching tops and bottoms. However, there are times when even the best patterns combined with all kinds of compelling contrarian evidence of a reversal punch you right in your dome, reminding all of us that markets can neither be caged or compelled to act in a way that is consistently predictable. What works one day will fail another. What works for a decade straight will rip your heart out in the next decade. Over the past couple of months our short positions in the market were obviously premature in nature. These positions were taken as a result of a combination of factors, including both technical and sentiment based. As we kick off the final month of the cage match that has been 2020, long positions across sectors have, once again, become the order of the day. With the markets at new highs, punching through all kinds of important resistance levels over the past week, the primary reason to remain bearish will be sentiment based. That's a real problem for bears. What most fail to realize is that mania levels of sentiment, whether bullish or bearish, have a tendency to act as a self-reinforcing mechanism in the direction of the mania. The trigger for what ends up becoming a parabolic run is a combination of mania levels of sentiment AND a market that breaks through all relevant resistance levels. While there are some minor resistance levels remaining in the market, the moves of the past week over resistance now create a scenario where all upside possibilities must be entertained. We're long small-cap finance, large-cap tech, with a smattering of names in between. 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 in any jurisdiction where such...
Weekly Note Preview: 8 Popular Perceptions Currently Being Regarded As Fact That Are Set To Be Challenged In The Weeks and Months Ahead
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. A preview of this weekend's 15 page note follows: A number of thoughts currently being regarded as fact by investors are set to be tested by the market in the weeks and months ahead: 1. This is a bull market 2. QE works 3. Technology is a safe haven in a virus economy 4. Rotation to real economy names is just beginning 5. Downside in the market is limited 6. A year end rally must occur 7. Virus cases do not matter 8. Political division of historic proportions is manageable These are all psychological foundations of the current move up in the markets. This foundation of popular thought serves as a means of seemingly mitigating risk. However, as popular perception comes to be regarded as absolute fact, the very stability of the foundation the market is built on begins to slowly crumble, until risk shows up, often times suddenly and with a significant degree of violence. The potential for a turn down at any point from here into the end of the year can be especially violent because so few are prepared for it. The idea of a significant year end decline is such a foreboding topic that most on Wall Street will not even consider it. 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...
Craters Ahead
The first few days of November have been a misdirection event unlike any in recent memory. The stampede of those individuals and institutions who feel underexposed to equities, while nervous bears cover their short positions for fear of new highs leading to a parabolic upside scenario, has caused one the craziest bars you will ever see on a weekly chart. As a very simple rule for understanding price, range expansions are reversal patterns while range contractions are continuation patterns. While there are no rules on Wall Street that are static, understanding the role of expansionary volatility and contractionary volatility at important market turning points is essential. What this week's move equates to is a 500 pound man doing back flips on the edge of a cliff during an ice storm. It's not a question of if he will fall, it's only a matter of when. Given that I have been bearish a majority of the time since the September highs, those highs must be viewed as a major inflection point. The fact that the market has wasted this much energy just to get close to those highs is a significant energy burn that leaves little in the way of new energy to take the market to new highs and beyond. This becomes especially true when you consider all of the event risk that lies ahead. From the elections likely eventually ending up with the Supreme Court, to fiscal policy being in limbo until next year, to an economy that is in desperate need of a functioning government, to the virus spiking, social unrest and so on. The event risk moving into the end of 2020 while the market is doing back flips on a cliff's edge is a potentially lethal combination. The slippage from here will likely be epic in scope when it arrives....and that should be soon. Extreme caution is not only warranted but fully encouraged. 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 in...
Today’s Selloff, Election Angst and What To Expect Into Year End
You know that scene where a large tree stump gets shoved into the wood chipper and a mess of unrecognizable wood chips come flying out? That has been our October, with a handful of trading days left in the month. It's an impossible mission to go through any trading year unscathed. As it stands now, October has been the month to challenge our strategy as we have been continually whipsawed from the start of the month. The greater question, putting aside our relatively poor short-term performance, is determining where we will be creating returns into year end? We have had a great year, despite this setback in October. What got us here in the first place was catching a big move earlier in the year that few, if any, expected would come. Any recovery that we will earn into year end will come from catching an extreme risk/reward opportunity that offers up insignificant risk that is only apparent in hindsight. As it stands now, while it may seem like there is a lot of air beneath the market, there is a case to be made for the elections artificially compressing a Dow, S&P and Nasdaq that should have been much higher given the monetary stimulus that has seen the Fed balance sheet reach all-time highs last week and fiscal stimulus that, while being delayed in implementation, is sure to come in the weeks and months ahead. In other words, investors need to ask themselves where the markets would be if this wasn't an election year? There is a very real argument to be made that the September top and the resulting grinding price action ever since has been an effect of the angst caused by the elections being imminent. Once that angst is cleared away, irrespective of the outcome, the markets will be free to focus on what matters: earnings, economic recovery, monetary stimulus and fiscal stimulus. When all of these things are taken together, with very few if any investment alternatives to equities, there will be no choice but for investors to pile into the equity market into year end. The elections have impeded the progress of the markets from late Q3 into early Q4. That impediment is about a week away from being removed. Clarity will bring with it the incentive to act in a manner that favors progress, while putting the uncertainty that has been with us for a majority of 2020 in the past. This is a bullish catalyst in and of itself. The window for bears has closed. The bulls will rule the day post November 3rd. Zenolytics now offers Turning Points Market Intelligence...
Weekly Note Preview: What The Dow of 1938 Is Telling Us About 2020; What the Nasdaq of 1999 Is Telling Us About 2020; Two New Developments In The Market; New Positions Being Taken
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. In this weekend's 15 page note we discuss: What the Dow of 1938 is telling us about the market in 2020 What the Nasdaq in 1999 is telling us about the market in 2020 Two new developments that could serve as a market catalyst The significance of bond yields moving up in recent weeks while equities consolidate An old economy sector that is signaling economic strength ahead A review of the Nasdaq, S&P and SOX New positions being taken for what lies ahead into and after the election 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, 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...
Weekly Note Preview: The Shifting Liquidity Foundation of The Markets; Early Risk On, Risk Off Warnings; Gold and Silver; The Real Technical Signal In The Nasdaq and S&P
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. In this weekend's 13 page note we discuss: The shifting liquidity foundation of the markets The potential for early "risk on," "risk off" warnings from the currency markets Gold and silver The real technical signal that the Nasdaq and S&P are sending after this week MARKET UPDATE Let's begin with what is the most important underlying movement in the markets over the past month. The liquidity foundation of the market has shifted from the post virus crash, QE induced framework to something much different. Typically, when the liquidity foundation of the market shifts, as it has over the past several weeks, risk becomes an issue. However much the market chooses to ignore the risk determines the severity of the downturn when the risk is recognized by the markets. In other words, the longer the markets delay recognizing risk, the more potential for a significantly negative outcome over a short period of time. Of course, it goes without saying that we are in a political/macro environment that is unlike anything witnessed in quite sometime. In a little more than two weeks one of the most anticipated elections will arrive on the scene while investors who are seemingly concerned about potential instability as a result of any myriad of unpredictable election outcomes have decided to take the road most traveled by declaring their complete faith in the Fed, with any potential weakness in equities being nothing more than a blip on the radar before they are rescued, being made whole once again. When one takes into account the liquidity foundation of the markets; the pervasive use of leverage by investors; the exposure levels of all classes of investors; and the emerging risks chasing the market from behind, then we are left with an environment that can get slippery quickly. This is no longer the market of Q2 and most of Q3 when you could be confident that downside slippage would be negligible, making most any dip a buying opportunity, with the ability to leverage significantly. That's what you get when the liquidity foundation is intact, while investors have yet to fully embrace the bullish argument, remaining cognizant of risk that is in the rear view mirror, which naturally creates the necessary wall of worry for the markets to climb. As it stands presently, the majority of investors who are significantly exposed to equities are underestimating their risks, while blindly putting faith in a Federal Reserve that has made it clear that the next phase of...