Weekly Note Preview: The importance of the signals presented this past week; What the 4300-4600 range could bring for the markets; Thoughts on when to turn bearish if appropriate; Adding to our largest current portfolio position.
In this weekend's 343rd edition of Turning Points we have a 12 page note detailing the importance of the signals presented this past week, what the 4300-4600 range could bring for the markets, thoughts on when to turn bearish if appropriate, as well as adding to our largest current portfolio position. What follows is an excerpt from this weekend's note. We haven't witnessed as signal rich a market as this past week's price action since the February high While the S&P 500 ended April with a modest gain of 1.47%, the numerous price signals on display strongly indicate that the first week or two of May should see some significant buying pressure as the remaining bearish arguments get systematically annihilated. In what has been largely an event driven price environment that may be finally normalizing to more independent price action, there remain a handful of events in the coming weeks that will more than likely blow up whatever bearish arguments remain over the short-term, while simultaneously launching the markets over 4200, creating a significant short covering event. In the week ahead we have: FOMC on Wednesday AAPL on Thursday Jobs report on Friday An absolutely huge week of data for both mega-cap tech and the economy as a whole right as the markets are breaching/approaching key technical levels that will force the hands of many. Already over the past week we have witnessed some key technical breaks taking place that are telling a story of real, sustainable strength. Given the volume coming with the moves, these are by no means inconsequential breakouts. First up, here is AAPL prior to its report this week. To view the entirety of this weekend's note, you can subscribe by clicking here. Zenolytics Turning Points is 300+ 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...
Some Items Of Note As We Head Into An Earnings Driven Gap Up Tomorrow
Let's begin with this chart of the SPX: The lowest print for April was 4069.84 on the SPX. Today we closed at 4071.63, effectively testing the bottom end of April's range for the SPX. With the threat of an earnings catastrophe after the close paired with the worst demonstration of price action today in sometime, it became a natural reflex for investors to grow pessimistic as the selling progressed throughout the day. The equity put/call ratio pictured below is a glowing testament to the infectious nature of the short-term pessimism. We have to go back to the March lows when the SPX hit 3808 to find a equity put/call ratio that exceeded what we experienced today as we basically tested the levels that marked the March HIGHS. Needless to say, today's price action ahead of GOOG and MSFT earnings trapped a significant population of investors into thinking that this week would be like last week. We found out after the close that GOOG and MSFT are not NFLX and TSLA. We will further find out in the days ahead that AMZN, AAPL and META are also not NFLX and TSLA. While I expect this week to remain volatile, the volatility should give way to a steady rise once mega-cap tech earnings are fully digested past Thursday's close. Risk on remains the default stance for sometime to come despite the market's insistence to convince you otherwise. Zenolytics Turning Points is 300+ 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...
This Rally Is Different
For all the false starts, fake outs and general sense of deception that has defined the market action of the past 12 months, this current rally is exhibiting all the characteristics an ardent, or even skeptical bull would prefer to observe at the onset of a substantial move forward. Take for instance how this rally started: In the depths of absolute misery. In the midst of a banking crisis that was being compared to 2008. In the middle of no man's land from a technical and fundamental standpoint. An inconspicuous starting point, at a very minimum. Take for instance what has led this rally forward: Crypto and growth names. The quintessential speculative leadership groups that are still under severe scrutiny, with crypto being assaulted by legislative initiatives, and growth under a fog of doubt with respect to valuation and earnings momentum moving forward. Take for instance the cover this rally is taking to make its move: Q1 earnings function as what can basically be interpreted as the "cover of night" for the markets to get away from investors. Q1 earnings represent a prohibitive emotional and mental obstacle for investors who deem this earnings season too risky, especially in growth with the perceived atrocious valuation and earnings momentum equation. Markets like to make their moves under the cover of night. Earnings won't be the negative event most suspect, with a likely acceleration a la July/August of last year taking place in late April-early May. Take for instance HOW this market is moving up: Contracting daily ranges, as volatility is suppressed, while both the Nasdaq and S&P coil around major support/resistance. We haven't seen this type of coiling paired with volatility contraction during any rally since the bull market peak. This rally is different. The next major point of interpretation for price analysis is S&P 4300. From there we can assess what is next for the markets. We have 150 points of free and clear upside until then. Enjoy. Zenolytics Turning Points is 300+ 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...
Here Is The Call Heading Into CPI Tomorrow
None of this is a coincidence with CPI, PPI and Fed minutes being imminent: SPX 4109 BTC 30300 10 year yields 3.4% DXY nearing 100 VIX below 20 All of these key indicators of capital flows are telling us that something has indeed flipped in recent weeks. While most are still stuck in a narrative of recession, bank failures, stagflation and geopolitical turmoil, the market is focusing on something else entirely. It's not our job to be psychics as investors, pinpointing what that "something else" could be. Our job as investors is to recognize when price momentum and structure is of the type that is significant enough that it dictates shutting down all emotional traits associated with following group think, and following the smoke signals that price is clearly emitting in the near distance. If you will recall, in mid-January with the SPX at 4000, I detailed how investors were focused on the incorrect price levels around 4000, with 4100-4200 being the true point of interest for the markets. 4200 came in early February, stopping the markets cold in their tracks. Investors had their eye on the incorrect target. Now here we are again, the same mistake is being made. The SPX has a point of interest at 4300, constituting either resistance (down) or an acceleration zone (up). 4100-4200 no longer matters. The goalposts have been moved. With that said, for the remainder of this week investors are contending with a bunch of scary economic events (CPI, PPI and Fed minutes) along with perceived technical resistance areas (4100-4200) that carry little weight. This combination of factors will allow for the markets to quickly move up for the remainder of this week on the back of economic data that will reignite discussions of a dovish pivot. 4300 tells us what the next steps will be. Zenolytics Turning Points is 300+ 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...
Weekly Note Preview: Bullish Setups Continue To Present Themselves; The Interesting Correlation Developing In The Bond Market; Two New Long Opportunities
In this weekend's 340th edition of Turning Points we have a 9 page note detailing the decision to further add to our long exposure with two new positions as bullish setups continue to present themselves. What follows is an excerpt from this weekend's note. When looking through the charts it becomes apparent that this market is, generally speaking, a genuine unmitigated mess. Every stock, sector and etf is going in its own direction, mostly either to the downside or sideways, without much in the way of volume, within an overall directionless pattern that doesn't seem to desire any sort of conclusion in the near-term. What is holding up the markets continues to be a handful of issues, mostly mega-cap tech, that are only growing in strength as the days and weeks wear on. It has been a fruitless endeavor for investors to attempt to guess when this phenomenon of extremely narrow leadership will end. By the looks of the charts of AAPL, MSFT, META, GOOG and NVDA, it seems that investors are rather optimistic about this coming earnings season. All of this in the face of continued doubt by a majority of investors as to the voracity of the current rally due to a host of factors, most pressingly the complete lack of participation of just about every stock but the elite generals, quickly followed by recession fears, stagflation fears, as well as fears of continued chaos in the banking sector. Price action in the Nasdaq, along with the key names that lead that index, are telling us that we are past the point of falling into the trap of doubting what is occurring on the basis of the numerous negative fundamental factors that exist. Put as simply as possible, price action among the narrow few that are leading the market higher is telling us, once again, that something is afoot that market participants have yet to realize. Just as the S&P topped in early February at 4200 without explanation, followed by the March banking crisis, factoring in negative developments a month prior that were yet to be seen, the Nasdaq is more than likely factoring in positive developments that are also yet to be observed. To view the entirety of this weekend's note, you can subscribe by clicking here. Zenolytics Turning Points is 300+ 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...
Long With A Caveat
The decision was made last Tuesday after the close to cover our short positions on the following day's open right as the SPX was breaking 4000. Now that we are 125 points higher, with numerous confirmations taking place that something bullish is certainly afoot, creeping into a little bit of long exposure is warranted. 50% long to start in some rather unconventional positions. No leveraged index ETFs. No large cap growth names. In fact, the greatest opportunity over the next few weeks may just be to front run the increasing number of FOMO cadets that will be looking to make up for lost performance by moving into high-beta, small cap names that still have some surprisingly attractive risk/reward setups, even after the recent growth rally. Additionally, the more investors lever their exposure to lower interest rates, the more potential for portfolio upside exists. There is an argument to be made that sometime during mid-March the Fed started a covert YCC (yield curve control) campaign. The entire complexion of bond yields changed in recent weeks, with today being a prime example, as crude oil soared and bonds didn't blink an eye. Bond market volatility has also cratered from historic heights to a more standard elevation, calming not just the bond market, but obviously the equity markets, as well. Selectively long. Levered to persistently lower rates. Conservatively positioned until we see how the S&P handles 4300. Simple. Zenolytics Turning Points is 300+ 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...
Investor Positioning Is Way Off Going Into Wednesday’s FOMC
No pivot. Powell raises rates. Conditions continue to tighten. Risk comes off. That is where we end up Wednesday. All the talk of a pivot fails to take into account what the ECB did recently with a 50bp hike and a fairly cautious statement following. It fails to take into account every speech that Powell has given this year stating that they will keep going until the job is done. It fails to take into account that central bank action with respect to facilitating backstops for banks can function independently of monetary policy. A point I'm sure Powell will make on Wednesday. In fact, if you look at the proactive stance the Fed is taking towards attempting to mitigate the banking crisis, it directly reflects their desire to do so with the understanding that by taking such a stance it won't interfere with their inflation fight. The perfect decision on Wednesday would be a 50bp hike. It would tighten policy to the point that the bond market would have no choice but to rally for fear of over-tightening, allowing bank balance sheets to breathe, while showing the markets that the Fed has the utmost confidence that the current banking situation is very well contained. Powell being the bureaucratic version of the Cowardly Lion from the Wizard Of Oz, of course, will go with a 25bp hike because it falls exactly into a middle ground type of decision. Investors are bidding up stocks presently with wishes of a pivot, thinking that the banking crisis will force Powell into a policy error. While a pause in rate hikes or a cut would be initially greeted by a barnstorming rally, it would create a great deal of fear in the markets as they would naturally demand more in the days and weeks to follow. It would also create absolute bedlam in the bond market, as rates would spike, recognizing that a hyper-inflationary cycle is now a possibility. With all of this said, here is how investors are approaching Wednesday's event, bearing in mind that last week saw a record spike in SPY inflows among other signs of bullish QE driven euphoria. The put/call ratio cratered today, closing near 1 year lows, as investors have no choice but to hitch their wagon to the QE horse, in hopes of a fruitful ride ahead. Unfortunately, the ride ahead will be anything but fruitful as we close out this week. The cart is about to flip, injuring riders who will walk away dazed and despondent. Plan accordingly. We remain bearish after having liquidated our long positions in late January, moving to a net short...
The Confidence Game In The Nasdaq That Has Everyone Convinced
There is a confidence game taking place on Wall Street right now. Most everyone is presently convinced that lower interest rates are generally a bullish signal for equities, growth equities especially. Irrespective of how those lower interest rates are derived or whether they are subject to illiquid conditions while piling on record amounts of short interest prior to the run in bonds makes little difference. Lower interest rates mean that it's safe to buy growth equities. We saw an example of this in real time today, as the Nasdaq started the day going significantly lower, but the appeal of lower rates on the day caused a stampede into tech names by the close, reversing the earlier losses. At the same time, investors are beginning to believe that tech has become a flight to safety trade, as rates have cratered and the reversals, almost daily this week, have been very convincing in nature. The fact that the markets have only recently started playing this confidence game, with this week having the added bonus of lower interest rates to drive home the point that tech is generally safe is a precursor to chaos in the sector. This is the manipulation of psychology in the markets at work in real time. The attempt by the market to create paths of least resistance before the statistically significant moves take place. The only way to do this is to convince investors that a certain reality is concrete. They can't lose or have a very small chance of loss. Risk is seemingly minimal. Investors piled into growth today, being manipulated into thinking they are now safe because rates have recently tanked, while technology continues to demonstrate relative strength on a consistent basis. The market is going out of its way to drive this point home as demonstrated by the last 3 days of trading in the Nasdaq 100. Similar to mid-February before the Nasdaq began to descend in earnest, what we have seen in mid-March are 3 days in a row of closes at or near the daily highs, with the opening tick being near the lows. This is the confidence game of the markets at work. This the market attempting to convince investors it is safe to step back into the water at the worst possible time. Markets don't go out of their way to put together patterns like this without intention. Guaranteed that this intention doesn't involve handing bags of cash to the average investor who believes that growth HAS to go up when rates drop while believing in the growth safety trade mirage that has emerged in recent days. Another trap...
QE Is A Selling Opportunity As We Head For 3700
In late March 2020, when the entirety of the investment world determined that the next Great Depression was imminent as a result of a raging pandemic, I put out a note that in the strongest terms possible detailed why it was time for investor to go all in on equities based on investors, at the time, underestimating the powerful effects of QE going forward. This isn't 2020. In March of 2023, as the Fed embarks on another round of QE that is effectively equivalent to about $600 billion in this latest bank rescue, QE is a strong sell. The reasons are simple: Now that the Fed has demonstrated that they are willing to embark on QE again, the market is naturally going to make demands of them that will scale further than at any point in the past. By embarking on another round of QE, the Fed will be forced to hike rates further and for longer than the market is currently giving it credit for. I expect the 2 year to reverse sharply this week following the CPI, which I expect to come in well ahead of estimates on Tuesday morning. The credibility of the Fed is now front and center, having ramifications that are especially crucial for the treasury market. I expect that as Fed credibility becomes a concern, the selling of treasury securities will accelerate further creating burden and stress as a result of higher rates. We have all been waiting for something to break as a result of the speed at which the Fed hiked rates. Now that we have seen the first dominoes to fall, expectations should be for further dislocations to take place, with it becoming increasingly evident that with every bailout to come, the Fed further strains its credibility, further compromising QE, which in turn accelerates inflation. A vicious cycle? Absolutely. It's not that simple this time. A simple press of the QE button will only exacerbate the selling. By the time CPI hits on Tuesday, investors will realize the position the Fed and the markets find themselves in isn't easily solvable. Expecting 3700-3750 this week, with new lows on the SPX likely by month end. We added to our short positions on March 7th, before all hell broke loose in the markets. Plan on adding to shorts should the markets gives us the opportunity tomorrow morning. Things are about to get wilder than most can imagine. Zenolytics Turning Points is 300+ 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 Is The Call Going Into Tomorrow’s Job Report
We are in for a string of hotter than expected economic reports, starting with the jobs reports tomorrow morning. At least, that is what the bond market is suggesting if you are to take into account that the short end of the curve has gone vertical in recent weeks. Of course, there are many who seem to attribute the recent rate surge to the markets getting their panties in a bunch over "seasonal blips" in recent economic reports. This type of dismissive optimism has kept the markets elevated, despite the fact that yields are commanding a much lower floor for equities presently. With that said, the dismissive optimism of the past few weeks is about to turn into reluctant acceptance that there is a good chance we are now facing a second leg of inflationary pressures. Tomorrow begins the trek down to the 3700 range, which is where the markets are likely to end up right as the March FOMC meeting kicks off a little less than two weeks from today. There is a confluence of support beginning at SPX 3750 down to 3630. All of these support levels will be hit in the weeks ahead. It will be enough, however, for the SPX to move down to around the 3700-3750 mark by the 21st of March. Expecting a hotter than expected NFP number tomorrow and I expect that today's volatility will only be expanded upon to the downside into the end of this week. We remain short after adding to our short exposure on Tuesday. Goodnight. Zenolytics Turning Points is 300+ 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...