The Silver Lining After Today’s Drop
Investors are frustrated, irrespective of their affiliations (bull or bear). And here is why it has become so frustrating for nearly everyone. This is technically driven slop. The technical nature of the market is on full display presently. "The lines" in this chart haven't moved to fit the market. The markets have moved to fit the lines. In other words, we are basically pinballing between important technical points until the market figures things out. The question everyone should be asking at this point is WHAT? What exactly is driving the market to become a technical zombie while it figures things out. Yields are falling. The USD uptrend has fully reversed. Market averages globally are doing relatively well, with some even hitting new all-time highs in recent weeks. The velocity of rate hikes is declining. The markets shouldn't be playing technical pinball right now. The only silver lining in all of this is that we can gather, with a great deal of confidence, is that once a break above the resistance areas that have been plaguing this market for many months takes place, a certain momentum should develop, at least for a time. Judging that momentum will be key to figuring out what takes place next. 4100-4200 on the SPX remains critical. 12000-12750 on the NDX also remains critical. 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 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...
Weekly Note Preview: Speed Is Of The Essence
Below is an excerpt from the 320th edition of Zenolytics Turning Points. This past week was right up there with our performance coming out of the March 2020 lows as well as some of the other major turning points over the past few years. Whereas during those turns we largely held onto positions, favoring a multi-month swing approach to trading, in the current climate it's critical to capture some of our profits until we get more technical clarity. Of course, we are still heavily long by any measure after taking off *** and ****. For that reason, I want to see technical clarity develop in the next couple of weeks, otherwise there will be further scaling back to around 100% long in the equity portfolio. What do I mean by technical clarity? You will see three separate highlights in the chart of the SPX above. The first green arrow from June of 2022 was when we fell into what I call no man's land. Ideally, the market would have been able to sustain the bottom end of the red band at around 3900. However, given the liquidity pressures brought on by the Fed, the market wanted a deeper reset tagging the enormous wall of support at the October lows, marked by the CPI reversal on October 13th. The full 12 page report is available to clients by visiting https://www.zenolytics.com/premium/ 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 the specific products, services,...
NOBODY SEES THIS?
Let's get right to the point. Here is the chart of the S&P with a horizontal line connecting what is roughly the 4100 level since May: I can count on one hand the number of investors who are bullish down here. In other words, investors are, by and large, being played. Why? The markets are doing absolutely nothing, except throwing an exceptional temper tantrum that is causing investors to bend to the whims of whatever they are being told is true by what is basically the echo chamber of social media driven financial news and analysis. Post FOMC in early May we were basically at the same levels where we started this week. Following Powell's uber-hawkish middle finger to investors worldwide the S&P closed at basically the same levels where we started this week. And after Powell's uber-dovish loving embrace of investors, the S&P closed at 4080. A gigantic nothing burger of a market that has done nothing except increase sales of Xanax for an investor class that can't see the forest for the trees. It took just two days of persistent selling this week for investors to forget the markets are doing absolutely nothing down here, ignorantly coming up with price targets in the low 3000-high 2000 range for where the S&P will bottom sometime in Q1/Q2. This is a critical juncture. As with every critical juncture in the markets, there is an abundance of information that is nothing other than misinformation and noise that is nearly impossible to separate from facts. During times like this, the most basic of analysis, such as what I have presented above works. Markets have done nothing since May, while everyone has spiraled into a suicidal economic analysis depressive schizophrenia the likes of which I have rarely witnessed in more than 20 years trading. Upside remains extraordinary. Guard your eyes and ears. 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...
The Inflation Trade Is Being Unwound Before Your Eyes
Some monumental moves in two major assets classes today while equities consolidated yesterday's gains. USD Index (DXY): A confirmation of the change of the trend taking place here with a close below the 200 day moving average. This is the first time in 18 months that the DXY has closed below its 200 day moving average, as the chart below demonstrates. And to further lob a flaming bag of fresh turds at the doorstep of every bear out there, yields were also pummeled today in poetic fashion: I highlighted the importance of the trend break for yields when it occurred during Thanksgiving week. What we have now are layers upon layers of confirmation that the inflation trade is disintegrating before our eyes. Not only will equities continue to respond to this by moving up towards 4500 on the SPX by year end, but Powell will also be responding by laying off the rate hikes past February, at the absolute latest. The game has changed. Make sure you're changing with it. 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 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...
The Path Forward
As outlined in yesterday's note, there were a handful of subtle clues going into today's Powell speech pointing to a run of this magnitude. You can find the text of Powell's speech in various places today, I'm not here to summarize what was said. The bottom line is that we are nearing the end of the rate hike cycle, with the possibility that a 50bp hike in December will be it for rate hikes, barring a final 25bp hike in February. Markets have been in the process of front running a pause since the October lows. Here is where the markets stand as of today, beginning with the S&P: Perfect move up over the 200 day moving average accompanied by a volume spike after a picturesque low volume consolidation. The recent consolidation only bolsters the argument that 4100 will fall in rapid fashion. I am expecting the SPX to consolidate around 4200 going into the FOMC in a couple weeks. From there, as Powell further rings the dovish bell, a price target of 4500 for the S&P by year end is not at all out of the question. Big volume breakout on the NDX today. Targeting 12500-13000 in the short-term. Lastly the USD Index: USD Index (DXY) is on the verge of another major downleg. The economic data over the next couple of days, combined with CPI data due prior to the FOMC decision should aide in getting this down much further, which will bolster risk assets significantly. Expecting December to set the table for a Q1 that will be shock and awe campaign for equities we have rarely witnessed. Prepare accordingly. 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...
Three Charts Demonstrating The Major Market Differences Between The August Powell Speech & The One Tomorrow
Put/call ratio first: The white arrow shows where the put/call ratio started the week of the Powell speech for August vs. present. Notice that going into the August speech, after a hunky dory post-FOMC conference in July, investors were actually looking forward to Powell giving them more ammunition on the upside. They were buying calls into the Jackson Hole speech without much hedging. Today it's the polar opposite. We have an uptrending put/call into Powell's speech tomorrow, as investors are hedging the speech. This type of pre-event hedging action typically leads to unwinds of those hedges once the event is finished, as the monster in the closet is a lot less scary once you open the door. The next two charts demonstrate why irrespective of how Powell comes across tomorrow, he will have to acknowledge that the future path of tightening will be of less consequence than what they have done the past few meetings. In other words, no more 75 bp hikes. The upward velocity of rate hikes is finished. Here is the USD: Uptrending in August. Downtrending at present. The foundation of the inflation argument has shifted. This means that there are very large amounts of capital restructuring their portfolios around a post-inflationary world. The restructuring of portfolios against such a massive macro trade as inflation has been over the past 12 months always begins with the largest market of all, which is the global currency market. Third are interest rates: Above trend with positive upside momentum in August. Below trend with positive downside momentum at present. Rates have now shifted from betting on greater inflation to betting on a timeline for rate hikes to end. All Powell has to say tomorrow is that the velocity of rate hikes is set to drop, confirming what both USD and rates are telling us. That alone will set off an unwind of all the hedges that have been taken going into tomorrow's speech. Remember, this isn't the market of August, June or March. Back then none of us had any idea how far Powell would go, or how high the velocity of rate hikes would get. Now that we are on the back end of the rate hiking curve, he can be as hawkish as he wants tomorrow, but he will have to acknowledge that the velocity of hikes is set to drop....and that is all it will take. 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...
So Here Is What Happened Today
Here is the NDX to best encapsulate today: An overall inconsequential day technically. Volume across the board on the Nasdaq was well below average. The volume for the NDX was in line with Thanksgiving week. In other words, sellers couldn't muster up anything more than holiday week volume on the sell side today. The Nasdaq and S&P both continue to consolidate in what has become a very attractive continuation pattern on the upside with this multi-week consolidation. NDX is setting up for a move to 13,000 or thereabouts in fairly short order. More importantly, what the market has done since the October lows is to demonstrate this it is more concerned with the forward outlook for inflation and rates, as opposed to the constant barrage of Fed talk. Further upside for equities and downside for rates is dependent on softer inflation data, which is a high probability in the days/weeks/months ahead. I expect investors will understand this after the PCE data on Thursday and the CPI due on the 13th. The combination of softer economic data, softer inflation data and a Fed that is slowing the pace of their hikes will be a potent recipe for significantly lower rates, translating to higher equity prices, especially in growth. As should be expected in the current state of bearish psychosis, it just took one bad day and investors are quickly jumping aboard the "this is a replay of the August top" bandwagon. Two stark differences that are not being mentioned, however. In August we did not have (1) Rates rolling over hard and/or (2) USD cratering. Today we have both. This is a structural change in the very foundation of the inflation argument. The last piece to fall in line will be equities. Bear in mind, with numerous Fed governors remaining hawkish today, yields were unchanged on the day. In other words, yields don't care about Fed talk any longer and neither should you, as an investor. That is all for now. 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...
Why Aren’t More Investors Talking About This Chart?
This was, by far, the most important technical development of last week if not of Q4, thus far: Long-term rates have broken their uptrend that started exactly around this time last year. They are currently targeting 3.1% in the short-term. The response from the majority of the investment community is crickets. Instead, investors are focusing on supposed bearish patterns in the major indices and a VIX that has been decimated, along with the usual suspects: Recession, inflation, China etc. It's the same old song. Never mind that the markets haven't moved at all since May, basically carving out what has been a complicated bottom that has upside to new highs and beyond. Never mind that the markets not moving since May has come against a backdrop of every single thing that could go right for bears going absolutely perfect. We have seen it all, from geopolitical conflict, threat of nuclear catastrophe, tightening, Fed hostility and so on. The market's response? Nothing. Same spot as May. Bears fumbled badly...It's been over for awhile, they just don't understand yet. This "bear market" has been a decimation of the excesses in the marketplace, including growth and crypto, while the major market averages consolidate preparing for new highs that are more imminent than most believe is possible. The Dow is already getting close, the S&P next up and when interest rates begin accelerating to the downside in the weeks ahead, the Nasdaq will join in, as well. I'll say it again, this is best long side setup in a decade plus, including the March 2020 bottom, which I called with a strongly worded note on March 29th, 2020 titled "It's Time For Investors To Go All In On Equities" while everyone was preparing for the next Great Depression. Bullish at S&P at 4026. Looking for 5000+ relatively soon. 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...
Pay Attention To The Details
We went to cash today. Sold NFLX and RBLX last week. TQQQ today. All of these positions did stellar over the week that we held them and will continue to do so into year end. However, this week in particular is where the bears have their last shot at making a statement. They will likely use mega-cap tech earnings as an excuse to do so before the Fed next week and the elections the week after ruin their party. The market is giving hints of what is to come. Per the usual, it is all reflected in price. Here is the S&P: It's the subtle clues that are often the most powerful. Not closing over 3800 today was one such clue. Putting together a spirited rally and closing barely more than 1% over last Tuesday's closing high (last week's high) is another. The market used a lot of energy to bounce from the support you see between 3600-3700. There should have been more oomph! by now. And it doesn't help that the NDX is staring right into significant resistance after the effort to rally over the past week: All of this makes for a market that will more than likely pullback into the end of this week. One more reset is needed before moving above 4000. To be absolutely, unequivocally clear....this does not change my intermediate term call of a market that is headed much higher into year end. Be patient with the market this week. There are still kinks to be ironed out. Earnings will be the excuse to do the dirty work. 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...
Investors Are Dealing With A Whole New Set Of Variables
The August high in the S&P should have never occurred. The market had all the momentum necessary to move up beyond some relatively trivial resistance levels, making its move to 4500ish. The fact that it did occur, slicing its way through every conceivable support level and marker on its way down to 3900 in a relatively short amount of time was the first indication that something wasn't right. Now we are beginning to catch glimpses of what the problem might be. Inflation isn't where any of us would like it, least of which the Fed. A 100 basis point hike is on the table for next week after today's CPI. Perhaps more jarringly, there is chatter now that a 4% target Fed Funds rate might not be enough. Let me say that again...a 4% Fed Funds rate isn't enough, meaning the target rate may end up being much higher. Further meaning that we don't know when this ends. And this is why we are in the situation we find ourselves in today more than anything else. Markets hate not knowing. As of today, there is a whole lot more that we don't know about the Fed, interest rate and inflation moving forward than a week, a month or even two months ago. You can see how well the market cleared resistance during August only to fail miserably into September. Now we have our wheels spinning in the mud, with the ultimate threat of running out of gas and seeing the markets make another leg lower over the next few weeks. This is a sloppy area. It's an area where excessive risk makes no sense, as there is a possibility for some real downside given the time of year and general environment we find ourselves in. We remain in cash. Looking to buy lower...perhaps significantly so. 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...