We Have Arrived
I've been discussing 4300 since covering shorts and getting bullish in late March/early April. Fast forward here we are two months later. 4200 really didn't offer up much resistance. 4300-4350 is a different story, however. The high for Friday's trading sessions was 4290. We are now entering the zone. It's not just the generational resistance that comes into play at 4300-4350, going back quite a few decades, it is also a long-term supply area as shown by the following charts of the SPX and NDX. The exact levels the SPX is testing now are where the breakdown in the market emanated from in 2022. Markets have a memory. That memory includes jaded investors who held through the entire scary, Fed induced, macro laced market of the past 18 months. Those investors will be creating supply as the SPX moves back above the breakdown area. To be clear, there is enough emerging demand that they won't be able to tank the markets, but they can grind things to a screeching halt for the time being. A few other factors coming into play, like a spike in yields, has the potential to turn things ugly for a period during the first few weeks of June. Same thing with NDX, supply area ahead. The NDX broke down from this price level in early 2022, retested it shortly thereafter and then fell into oblivion for a time. This becomes a natural resistance area where supply comes into the market for a time. It's not just this resistance that is in play up here, however. In this weekend's edition of Turning Points I shared 11 charts pointing to now being the time to be conservative, at the very least, with long positioning. An important week ahead technically. Let's see where it takes us. 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...
THE CURRENT STATE OF THE MARKETS: WHAT IS OBVIOUS IS OBVIOUSLY WRONG
In looking over the situation facing investors, at present, it seems we are all faced with a series of relatively simple judgments to make in order to assess the portfolio allocation that would create the greatest expected value going forward. The decisions are as follows: 1. Does the fact that the S&P 500 is pinned to its all-time highs with steadily decreasing volatility present a bullish or bearish phenomenon? 2. Does the fact that the Dow Jones Industrials and Transports are pinned to all-time highs with steadily decreasing volatility present a bullish or bearish phenomenon? 3. Are both of the above mentioned questions negated entirely by the fact that the Nasdaq and Russell have been demonstrating the exact opposite behavior? In other words, both the Russell and Nasdaq have been declining with volatility attached to the move. The third question is the most important as it seems to garnering the most attention. More importantly, it is creating the most fear and emotion among market participants. Before we get to the indices that have broken down, here is a look at the S&P 500 on a weekly basis. The most important aspect of the current price action is the fact that volatility is so well contained along a key trajectory (in blue) and directly below another key trajectory. The behavior strongly suggests that the S&P is eyeing the trajectory (in red) sitting around 1950. A move of some 3% higher from current levels. In a very simple sense, the S&P 500 is telling us what to think. In this case, it is telling us that the issues of the Nasdaq and Russell are of no concern. It is the choice of market participants to believe that there are shadows lurking behind every corner. Volatility demons with jagged teeth looking to rip into the flesh of investors. That is an issue of investor imagination, rather than reality. The answer according to the S&P 500 is very clear if you choose to accept it: The markets are preparing to move higher. Let's look to see if the Dow agrees with the S&P 500. This is a look at the Dow on a monthly basis. What you see is an incredibly bullish picture the Dow is painting when you zoom out with a monthly view. Especially given the fact that it is occurring below a key trajectory that has acted as resistance for the 2000 top and the 2007 top. At present, the Dow is simply consolidating along this trajectory with a series of tighter monthly ranges. This is a continuation pattern in the direction of the primary trend. And it...
CHANGES TO MONTHLY PERFORMANCE SUMMARY
The monthly performance summary will be posted over the next couple of days. As usual, it will contain a detailed review of portfolio positions. Beginning this month, however, the full PDF version of the summary, including managed account performance data will only be available via email. The full PDF version does have a couple extra components to it, in addition to return data. Return data will no longer be published as a part of the summary posted to Zenpenny. If you would like to be added to the monthly email list, please contact me at...
THE DO NOT DISTURB SIGN IS IN EFFECT
I haven't taken a weekend off the market, let alone a business day, for more than a year now. Now that the market has gone into Dark Lord of Boring mode, I have come to the conclusion that if I am to take off now, I will not suffer from the paranoia of missing out on my next 100% gainer for lack of attention. I'll be back on Monday with a look at the weekly and monthly charts to see where we stand from a very long-term point of view. Enjoy what is left of...
EXCUSE THE MESS
Zenpenny is being redesigned. You'll notice a few quirks and abnormalities over the next several days while the redesign takes place. The new site should be a lot more easy to navigate and more research focused than the current site. Should be done by the...
QUICK THOUGHTS
There isn't much to take away from the current market action. We are up against the generational resistance point I have been speaking about for a couple weeks on the Dow. What the major averages are forming is a narrow consolidation against the highs on declining volume. This is picture perfect behavior, foretelling a near-term attempt at a breakout over 13,000 on the Dow. I have again been saying for weeks that I think the first attempt at 13,000 will fail and a multi-week correction will start from that point. The correction will not exceed 5% until, I believe, late spring or summer. If the market continues to rise from 13,000, without an initial failure, then this market is far stronger than anyone thinks. It would qualify as a major breakout on a long-term time frame. Keep your mind open to that possibility. I scan every night for new buy candidates. As you probably already know, I am selective in what I choose to profile here. In fact, I am being much more selective with long positions now than I was at any point last year. It only takes a few big winners each year to have a monster year. No need to be impatient. The opportunities always come. As they become apparent, I will profile them here. I wish I could provide a dog and pony show that would knock your socks off tonight. If I did, however, it would probably wouldn't help you and would cause me to lose money. So I'll keep it simple and short. Less is more. Simplicity is genius. Both ring true in the current state of the...
SEPTEMBER OF 2011: A HORROR MOVIE FOR THE BEARS
This article also featured on Forbes There are two distinct frames of thoughts with respect to the current state of the stock market: 1. We fall from current levels more or less unabated, in a horrific fashion that resembles 2008. 2. We fall from current levels more or less unabated, in a horrific fashion that resembles 2008 following a small bounce. The key here is the reference to 2008. The Fall of 2008 left such an impression in the minds of the financial community that traders, investors and fund managers alike are in various stages of panic for fear of extreme losses. Furthermore, opportunistic investors are now salivating at the prospects for creating monstrous gains via shorting the market thinking that a free fall from these levels is a virtual slam dunk. It's not only far from a slam dunk, the bullish side of the trade is setting up for a move that will wipe clean the gaggle of bears that currently populates Wall Street. 2008 has become like Camp WalaWala. You know, the campground that populated horror movies from the 80's and 90's. A masked man shows up with a machete, chainsaw or blunt object. Obnoxious guys who like beer begin to vanish. Scantily clad women who like guys who like beer also vanish. Eventually the entire campground is emptied of bad actors and what's left is the makings of a great movie franchise. It's as if all of Wall Street has taken to Camp WalaWala for September. You have a large group of investors huddled around a campfire telling stories of all the bad things that happened at Camp WalaWala. At the first snapping of a tree branch or sudden gust of wind, everybody runs into their cabins armed with baseball bats and kitchen knives waiting for a killer that will never come. There are certain truths about the markets that have stood the test of time since the first bid and offer were posted. One of those truths is that deception is an integral part of the functioning of any market where prices lead to profit or loss. There are points in an assets lifespan where the deception mechanism of that market will break, creating abundant wealth for those who ride the trend. The key is identifying markets where the deception mechanism is broken. The recent uptrend in gold is one example of the trend and the euphoria surrounding it taking precedent over normal market function. That function is to deceive. If we are in a new bear market, as many suggest, then there will come a point in the trend where the deception mechanism breaks...
QUICK THOUGHTS
Real quick: The fact that the market refused to get up to the 1230-1240 level is a sure fire sign that too many individuals were looking to short up there and it didn't wanna make itself into a cheap trick. It also means that it had every intention of falling and wanted to do so in the least obvious way. A move up to 1230+ would have perhaps allowed too many to enjoy the ride, as there already a lot onboard the bear train. Also, the way in which it is running away to the downside in the face of obnoxiously bearish sentiment data is a very bearish sign. It means that the market is not flexing or showing its strength/tendency to deceive the way it should. These are matters of fundamental mechanisms that exist within the markets that are being overwhelmed by bears. A sign of a tremendously weak market. It wants lower. I'm holding onto FAZ and EDZ. I may add some SPXU today, at some...
THE ONLY TWO CONCERNS AN INVESTOR SHOULD HAVE CURRENTLY
This article also featured on Forbes As a normal investor who has colorful fantasies and nightmares regarding the financial markets, there is a better than even chance that following yesterday's route you have a flood of thoughts swirling around your head. The fact that all of the information contained in the entire world, along with the opinions that come in tandem with that information are at your fingerprints may seem like a blessing during times like this. However, it is more often than not a curse. Simplification is the only answer. There are only two things you need to be concerned with as an investor currently: 1. At what point should I raise more cash? 2. Where will be the point at which I should put that cash to work? That's it. Your problems have all been condensed into two basic questions that you must now answer. For reasons that I outlined in an article I wrote over the weekend, I believe that the S&P 500 is headed for 1160 on the downside, as a minimum target. This downside target is gaining increased credibility as I am not seeing the proper levels of panic amongst investors as of yet. The attitude remains one of "at what point can I buy in for a bounce" as opposed to "the thought of being long the stock market makes me want to vomit". What will get us to that vomit point is a continuing pattern of failures in the market that should take place over the next few weeks and possibly months. Nothing makes traders and investors give up on the long side like a continuing pattern of rallies that fail. That is exactly why you see so much chop around important market bottoms. That chop or volatility is the motion of an ocean of investors not being able to sustain the torment any longer. The fact that we will be experiencing rallies along the way means that investors will have multiple opportunities to lighten up on their long positions. In the midst of the snap back rally you will see a lot of false hope and optimistic expectations that the worst is behind us. It won't be. Barring some type of surprise intervention from the Fed, ECB or combination of the two, there is little chance of a sudden "V shaped" bottom taking place. The damage has simply been too great and there will be too many investors maneuvering into the markets during subsequent rallies. This maneuvering will inevitably cause the choppy, violent movement that is typical of bear raids on the stock market. It's a long, drawn out process that...