This Is Not The Spot To Be Buying Giant, Trade War Induced Spikes In The Market
For all of the euphoria surrounding tomorrow's market open on yet another trade war induced gap, it should be noted that the market is accelerating right into a reinforced concrete barrier. If the concrete barrier visualization is not enough, we have what is essentially a two day trading week coming up (nobody cares on Wednesday, market is closed on Thursday and everyone is gone on Friday) that will create liquidity gaps, making follow through a difficult endeavor. The S&P, in particular, remains in a mind-boggling resistance range that doesn't necessarily work well with liquidity gaps, lack of follow through and general holiday induced malaise in the markets. The resistance range faced at 3,000 plus requires the full participation and attention of Wall Street in order to be appropriately dealt with. For that reason, assuming an open to 2975 on the S&P 500 tomorrow, investors will looking to make anywhere from 25-50 points on the S&P in exchange for risk of approximately 50-75 points on the downside. A one to one risk/reward ratio at best, in other words. While the market may be setting the stage for a dramatic theatrical performance tomorrow morning, where investors are embraced with open arms, with promises of a perpetual feast in the offing, the market remains in a generally unfriendly position until the week of the 10th. Caveat Emptor mi hombre. Zenolytics now offers Turning Points and ETF Pro 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 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...
Financials Are Setting Up To Lead The Next Leg Of The Bull Market
It has been sometime since Zenolytics took a good look at financials. In fact, the last time a big call was made on the sector was February of last year, in a note titled Financials Are Setting Up To Lead The Markets Down. Since that last piece was published, financials have gone exactly nowhere. Well, let's be accurate here: they have declined by 2.85% as judged by XLF since February of 2018, making an investment in financials over the past 17 or so months about as noteworthy as an investment in a jar of peanut butter. The motionless nature of financials as an investment, however, is due for a rather abrupt change into the second half of the year as a number of factors are lining up in favor of the sector. Lest we forget that during the better part of 2018 the entirety of the financial corporate management community was licking their proverbial chops while salivating in embroidered leather buckets at the prospect of higher interest rates juicing corporate margins. The whole of the financial community from large all the way down to miniature sized companies were positioning themselves for the prosperous road ahead. Then the fall/winter of 2018 hit. The change in interest rates that is still with us to this day was dramatic in every way possible. From the manner in which the Fed pulled one of the biggest 180s in organized central bank history, to the way in which the long end of the curve is basically attempting to choke the Fed into submission, hoping to justify bond investors piling into assets that are yielding 2% in the face of an equity market in possession of an increasingly attractive earnings yield. While the entirety of the financial community was wringing their hands in anticipation of the prosperity to come, those hopes fell completely flat. The story here, however, is not that dreams were dashed and financial companies were positioned incorrectly for what was to come. The story here is how well financials have held up in the face of a completely unexpected outcome. In the midst of this comes news like what we received this past week. Major banks passed their stress tests, freeing up capital to pursue shareholder friendly endeavors, such as increasing dividends and buying back stock. And that's exactly what is happening. JP Morgan, Goldman Sachs, Bank of America and Citi to name a few all announced dividend increases and substantial stock buybacks. In what is a sector that has already experienced compression in earnings multiples, the prospect of large buybacks only makes valuations of these companies that much more attractive. Additionally,...
Some Random Thoughts On A Dull Market Day
Facebook's move into Libra and crypto create a really interesting dynamic moving forward for how money is treated in all its forms and uses. Aside from the obvious regulatory upheaval that one would expect initially, the potential good and evil applications of controlling both personal information and financial information on a transaction level are mind-numbing. One obvious question is does this make Bitcoin, Ether and the entire crypto ecosystem stronger or weaker? Does having what can potentially be a centralized, regulated player in Facebook make Bitcoin that much more appealing due to its decentralized, difficult to regulate nature? Or does it render other cryptos moot as Libra becomes the de facto crypto currency? Economic moral hazard aside, Facebook stock becomes that much more valuable given the high likelihood of success here. Wedbush came out with a $35 target on AMD today, trailing well behind our target of $41 for the stock. The dominant nature of AMD's offerings from both an economic and performance perspective won't allow for the stock to simply stop at its 2018 highs. New highs above $40 will be achieved this year. If you look at the market closely enough today, you can actually see, smell and hear it crawling to a grinding halt as the summer holiday season kicks into full gear. Zenolytics remains of the view that this will be a generally unfriendly, choppy market until after the 4th of July holiday. Financials as a sector look like they want to rip higher over the next few months, assuming a leadership role moving forward. This comes as optimism regarding the bond market reaches some sentiment highs not seen in years. In other words, interest rates on the long end are poised to move higher, which might just be what financials are looking forward to in the second half of the year. Zenolytics now offers Turning Points and ETF Pro 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 distribution or use would be...
Return Of The Unfriendly Market
Shortly after last week's Fed meeting, Zenolytics posted a short note titled, The Buying Window For Equities Reopens As Bidders Lurk. In the final paragraph of that note a target of 3,000+ on the S&P 500 was observed as being perfectly reasonable by early this week given the importance of the level the market was mounting the rally from, along with numerous other factors working in the bulls favor. The market cooperated for a time, moving from 2920 to a high of 2964 on Friday. That was, however, as much gas as the market had for this trip. Therein lies the problem: Everything was in the markets favor over the past several trading days to put together a substantial move: Sentiment Price level started from (thrust) Price level moving towards (attraction) Interest rates Trade news With all of the aforementioned positive factors, the 3,000 level - in all of its resistance laden glory - should have acted as a Star Trek level tractor beam, pulling the S&P up to this level for a decisive test of its will to move forward. Instead, the markets got off to a glorious start and completely fizzled just as the window for a rally closed. Now we are in a volatile news window involving the G20 meeting, only to be interrupted by fund managers shifting their portfolios every which way but the right way into the end of the quarter. In other words, things only get sloppy from here. Volatility squared. The message the market is sending after such an abject failure to take advantage of the perfect window to rally is that it continues to be in the mood to chop. And chop it will. With headline risk only increasing as the week comes to an end, and with a holiday shortened, light volume trading week coming to start July, put a fork in the market until the week of July 8th. It's going to be a choppy, torrid affair until that point, at the very least. Market leaders demonstrating considerable relative strength with perhaps a gold stock or two thrown in for good measure is the way of the wise for the next couple of weeks. Zenolytics now offers Turning Points and ETF Pro 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...
Gold Just Clarified Some Nagging Questions
Zenolytics touched on gold recently. On June 12th in a note titled The Enigma That Is Gold In 2019, the following observation was made: Late last year, Zenolytics put out an extensive note titled, Making The Case For Gold. Much of what was discussed in that piece remains highly relevant, if not more relevant today. However, the entire thesis behind gold needs two catalysts in order for the engine to function correctly: A U.S. Dollar that, at the very least, hints at some weakness Some type of event that impairs the risk appetite of investors Catalyst number one in the article from June 12th came into play this week: The US Dollar got pummeled, losing a key support area in the meantime. We all saw the reaction in gold. The yellow metal literally exploded, taking out numerous important resistance areas in the meantime, on some heavy participation by both bulls buying and shorts covering. No need for catalyst number two to take place at this juncture. What should have been a dead giveaway to the fact that gold had significant underlying strength for the entirety of the first half of 2019, up until the breakout point this week, is that it didn't care that the US Dollar kept persisting in its strength. Gold knew ahead of time that the Fed would be sacrificing the US Dollar in order to preserve the strength of the markets and hopefully the economy, as a result. All the meanwhile, global central banks are now pursuing inflationary policy that will favor hard assets over paper currency. What we now know is that inflationary trade may come alive sooner than most think. Gold just told us this. Hard assets will appreciate. Stocks should generally rise. Long end of the yield curve will explode. The trifecta of developed countries pursuing inflationary policy, a newfound lust for protectionism in trade and exploding government balance sheets worldwide is not something anyone in the current investment generation has experienced. Goggles and helmets required as we move deeper into the cave from here. Zenolytics now offers Turning Points and ETF Pro 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...
Past Week In Review: The Winds, They Are A Changing
There are certain weeks where you just feel the market Earth shifting beneath your feet. This was one of those weeks. Blame it on the Fed. Blame it on Dollar. Blame it on gold. Blame it on interest rates. Whatever it was that triggered the macro earthquake we felt this week looks very real and very persistent. The only question is what shape does the landscape take from here for all major assets classes? The Fed - They are now officially in an accommodating stance. Whether they are beholden to the bond market or to the President we will never know. What we do know is that the 180 they have made has been legendary in scope. The message of inflation or die is very clear. Bringing me to the next topic of conversation... The US Dollar - The Fed's message of inflate or die means death to the Dollar long-term. It took quite awhile for the Fed's message of inflation before all other considerations to resonate in the currency markets. However, with this week's significant technical breakdown in the Dollar, it seems that traders are finally getting it. King Dollar needs to come down in value, perhaps markedly so. A good segue into our next point of discussion.... Gold - The yellow metal broke out in a big way this week. Everything went and it went hard on the upside. There isn't anything to be observed in the breakout in gold or any of the gold miner related indices that says this is not a legitimate acceleration of trend to the upside that will bring with it new heights of valuation. With the Dollar being sacrificed by a Fed being led by the inflate or die mandate, it's simply a matter of how high will gold fly. Rates - Just as everyone was convinced rates were going perpetually higher (they went much lower) this time last year, there is a case to be made that everyone is wrong once again about rates. Back to the inflate or die mandate out of the Fed. While everyone believes that since economic activity slowing equates to lower rates, most market participants are not well versed on stagflationary economic dynamics. There is a case to be made for the next bout of QE, in whatever form it comes, resulting in much higher interest rates as deficits are in no position to support increasingly bloated governmental balance sheets. This means the Dollar is sacrificed, inflation soars and rates follow along with it. While investors were busy admiring the Slack IPO, debating U.S. policy towards Iran and wondering when semiconductor stocks would turnaround, the...
As Investors Are Set To Do The Happy Dance Above S&P 3000, Here Is The Reality Of That Level
Rounds numbers have an odd appeal among investors. Every major round number that is broken on the upside or downside is highlighted in flashing headlines and talked about among media pundits who attempt to create a meaning where there usually is none. The next major round number that is due for some attention among market enthusiasts is the 3,000 level on the S&P. Since Zenolytics believes a break above the 3,000 level will happen in the next couple of trading days, it's time to sit down and discuss the ramifications of such a move. While moving over 3,000 on the S&P will be celebrated by most every bullish observer, the reality of this level is it throws the market into a twisting, torrential downpour of significant historical resistance. This is the 2910 level on Barry Bonds era steroids with cocaine mixed in for good measure. This isn't just a simple round number exercise. In the case of S&P 3,000 it has significant technical meaning that has nothing to do with the round number. What does that mean? It means that once we get over this level, barring some type of surprise rate cut that allows the market to pierce the resistance like a Russian rocket, equities are going to have a lot of work to do. One of the consistent themes Zenolytics has been jumping on the conference room table about for the past few months is the choppy nature of summer trading that is to come. The S&P 3,000 level will only accentuate the choppiness with headline risk that will continue to astound in its propensity for the audacious. While this may be a case of looking ahead too far being that as of this moment there is nothing to be but bullish with the buying window that opened this week and the resulting blue skies until 3,000, it bears a warning in advance given the significance of the resistance at hand. In what shouldn't be a surprise to any observer of this site, the ultimate goal of this note is to remind you to prepare to zig while others are zagging. The happy dance coming at the 3,000 level will embody this concept entirely. Zenolytics now offers Turning Points and ETF Pro 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....
AMD Becomes A Buy Following 10% Pullback, With A $41 Price Target
It has been a little over a month since Zenolytics became boisterous about the prospects of AMD moving forward. The first note issued when the stock was trading in the $27 range, put an initial price target of $34 on the stock, seeing a test of that price level as being imminent. Shortly thereafter, on May 28th, Zenolytics once again went over the bubbling nature of AMD's stock price on the heels of new product announcements by the CEO of AMD at the Computex Conference, reiterating our $34 price target. The price target was met on June 10th, with a high of $34.30, followed by what has been a 10% plus slide since then. AMD's weakness in recent weeks has been a sympathy play on the overall weakness in the semiconductor index and the wobbly nature of the markets, in general. Zenolytics believes that secured footing for the markets should result in leadership qualities to emerge for names that have distinct advantages over their peers. AMD's advancements and advantages in the current semiconductor product cycle have created a natural leadership role for the company that will likely remain intact for the remainder of 2019. As a result, Zenolytics believes that the current 10% pullback represents a new buying opportunity for AMD following our earlier recommendation to exit at $34. With the productive nature of the pullback from a technical perspective and the aforementioned fundamental advancements, Zenolytics has a new price target of $41 for AMD over the intermediate term. Zenolytics now offers Turning Points and ETF Pro 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 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...
The Buying Window For Equities Reopens As Bidders Lurk
In Zenolytics running obsession with pointing out the perfect windows available to investors for buying and selling equities, a new buying window has opened this afternoon. We are now in the second day of a surprisingly calm effort by the S&P to overtake what has been a historically treacherous trajectory point. As it stands now, this trajectory with a history of so much malfeasance towards the market is sitting at 2910. The peculiarity of the markets reaction to this trajectory since yesterday should not be overlooked by investors. The markets had a substantial window here post-FOMC to put together some massive volatility off of this key trajectory point. Instead, equities are simply drifting around as if half of Wall Street has already taken off for summer vacation. This type of continued contraction of volatility runs contrary to the character of this important technical point. As a result, investors can gain key data into the markets character here. Very simply, there are bidders lurking. Their bids are consistent and deep. The fact that the market aren't be allowed any volatility whatsoever pre-FOMC was fine. However, post-FOMC? In the midst of such a historically important point of abstract volatility? This is simply downright bullish behavior for a market that is sitting above such an important technical point. The volatility will come. However, the odds just shifted enormously towards a range expansion to the upside targeting S&P 3000+ by early next week. Zenolytics now offers Turning Points and ETF Pro 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 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...
To Understand Why SNAP Will Keep Rising Investors Need To Understand This
Things should have gone a lot differently for shares of SNAP following a much vaunted IPO. After all, the company was touted as the next social media darling. It's CEO was touted as a cooler version Mark Zuckerberg. And perhaps most importantly, its product is ingrained in the fabric of teenage society like MTV in the 90s. SNAP as a company, however, screwed up somewhat badly. They went public before having a cogent means of monetizing their user base. Their advertising model simply didn't work. They pushed through a rushed redesign that didn't go over well with their users. There was a ton of turnover at the executive level. Increasing cash burn became an issue and the stock sold off to the 2018 lows in the $4 range. Investors need to understand that the SNAP of today is the company that should have IPO'd in March of 2017. Their advertising product is now functioning like it should have been in 2017. Advertisers are able to take advantage of the fact that SNAP reaches 90% of 13 to 24 year olds in a multitude of new and creative ways. The company is also taking control of costs at the corporate level, which was always a complaint of current and prospective investors. Additionally, the company has been increasing offerings such as introducing games and significant enhancements to its already substantial augmented reality product. The opening tick on SNAP when it IPO'd in March 2017 was $24. In the first iteration of SNAP's business model the $24 price only functioned as an attractive exit for insiders. In the current version of their business model that $24 price should function as a goal post for investors to where SNAP's stock is headed. When Zenolytics originally profiled SNAP last month when it was $11 per share the $24 IPO price was one of the factors that caused our price target to be 100% higher than the price back then. The analyst community is just now catching on as today's upgraded target on SNAP by BTIG analyst Rich Greenfield to $20 is the street high target, meaning that all of the street's price targets are not quite high enough. BTIG in today's report says "too many investors are ignoring Snap's recovery, which was driven by the overpromising/missed expectation cycle of the first two years after the IPO." Exactly right. Zenolytics continues to see SNAP as a $22 stock and it may get to that point a lot faster than investors think. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes...