Are Investors About To Enter Valhalla?
When we last left off, I discussed the week of June 12th marking a short-term high for the SPX after coming eye to eye with key resistance at 4350. With the SPX putting in its worst weekly performance since early March this past week, it's fair to say that we are seeing the response I expected to this resistance level which now allows investors to judge the health of the markets after this recent runup, along with the potential for further gains. In the same note I referenced above, I discussed the first week of July being the time to pounce on the long side after the coming pullback. In the 354th edition of Turning Points this weekend I discussed the signals the market is sending following this recent pullback, along with why those signals are dictating increased long exposure into the middle of July, at the very least. The current consolidation at resistance is like nothing we have seen since the peak in late 2021/early 2022. In fact, this past week was such a data driven technical bonanza for the bulls that it's not entirely outrageous to say that a vertical ascent could take place into earnings season. The fear of missing out that will develop into early Q3 as investors fear a replay of their Q2 brain fart to remain short or in cash way longer than they should will be reason enough for a flamethrower to ignite the fuse of the market during what is a seasonally favorable period into mid-July. Unfortunately for such a large number of investors, one of my final tweets for 2022 still holds true, even after this recent runup. The other reason investors will be frothing at the mouth after stocks as we kick off Q3 is that Q1 earnings delivered such spectacular results that within a generation of front-runners, there will be a cold, hard sprint to get ahead of the next man to buy some stock prior to Q2 earnings being released. So essentially we have the perfect combination of technical, seasonal and event driven factors coming into fruition as we close out Q2 and enter Q3. Levering up with a mix of small-cap and large-cap names in the days ahead. Horns up. Paws down. 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...
The Market Setup For The Week Ahead Is More Clear Than Most Realize
Just sent clients the 350th edition of Turning Points going over the setup for the week ahead, along with the opportunities that will emerge as a result. This is a fascinating week coming up on a number of levels. As fortune would dictate, we are going into a pivotal week with CPI, PPI and Fed while sitting at an even more pivotal price level. In case you haven't been following along, I have been discussing the 4300 level for the SPX for a number of months now on both Twitter and here. It's THE most important technical point in the markets, dictating to a large degree market behavior not just for the rest of Q2, but well into Q3, and perhaps the remainder of 2023. We are encountering this price level just as volatility is set to expand this coming week with CPI, PPI, the Fed and Powell. Therein lies the problem for the markets. Unless this coming week is unidirectional to the upside, with the SPX closing at 4400+, there are little pathways to further upside for June. In other words, there is a very high probability that this week will mark a short-term peak for the SPX given all the factors that are working to create a reversal here. The only question is whether that short-term peak will turn into something more. As of now, I have a 2-3 week peak, lasting into the first week of July at the most before the bull makes it back into Q2 earnings. However, given the structure of the decline that is to come, that scenario can change very quickly. The market has sucked in enough participants now that it may just unleash some real pain for sometime to come. I don't necessarily favor this scenario, however, much like I have been doing for most of this year, I am keeping an open mind as to what may lie ahead. Bottomline: Contrary to what most everyone is expecting, there are very few pathways to a bullish outcome this week. The markets will suck investors into thinking otherwise. Don't fall for it. Truth in price comes from Thursday - Friday. How we close the week matters more than anything else. Guard your profits. 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...
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 First Half Of June Promises A Different Look From What Investors Have Recently Become Used To
While most everyone was convulsing in fear over the ramifications of a debt ceiling debacle, while also being paralyzed by the emotional abuse the market has handed out on a consistent basis for the past 18 months, the Zenolytics team (consisting of just me) ignored the noise, doing what we do best: That is identifying truth in price. Prior to the acceleration of trend in the NDX and the breakout in the SPX, about 1000 points ago and 200 points ago respectively, on May 18th I published a note on this site titled Here Is Why We Are In The Midst Of The Most Important Move Of 2023, With An Even More Critical Move Being Imminent. Now that most everyone has realized what we knew weeks ago, there is an argument to be made that the markets will be offended for a short period of time. The offensive nature of what has transpired comes in the form of investors believing that the markets will accommodate their sense of cowardice, by allowing a threat free jump into the water now that the danger of getting bitten by any number of fanged creatures has disappeared. Debt ceiling behind us. Earnings better than expected, much to the shock of nearly everyone except for us here. Fed is quickly moving to the rear view, with economic data having less of an impact. All of these macro factors are fantastic indicators of intermediate to long-term strength in the markets. However, over the short-term, the feeling of safety investors have recently experienced must be tested. There are numerous examples of investor comfort coming to a crescendo this past week. Here is one with the 2 and 5 day moving averages of the equity put/call ratio nearing their lows for 2023. And surprise surprise, the last time the put/call was at these levels in early February the S&P was testing the same trajectory we are about to test now. To be absolutely clear, I remain bullish throughout the remainder of this year. The surprises will continue to be to the upside. However, in the very near-term (next 2 weeks), there could be a bit of turbulence to throw everyone off until the markets begin to gain traction in anticipation of what is to come. I'll get to what is to come in a future note. In the meantime, approach new positions on the long side with caution and treat profits with care, while carefully guarding them. Have a good weekend. Zenolytics Turning Points is 300+ editions in and only getting better. Find out why institutions and...
Here Is Why We Are In the Midst Of The Most Important Market Move of 2023, With An Even More Critical Move Being Imminent
Here is the chart of the NDX as it accelerates away from a near 30 year trajectory (in white) that has acted as critical support/resistance for what has basically been a majority of the life of the Nasdaq 100 as an index. It has been a year now since the Nasdaq has been consolidating in, around, over and under the the key resistance point that we just blew away this week. The Nasdaq further confirmed the legitimacy of the move by exceeding the critical 13720 level. Why 13720? It was the August 2022 peak. That August peak ushered in a whole new regime of inflationary worries with further uncertainty about how long the Fed would continue their rate hiking campaign. This has been resolved as of today. The move we have seen in the Nasdaq this week is the most important technical move of 2023 to date. There is, however, a level upcoming on the S&P 500 that is even more critical than the 30 year trajectory on the Nasdaq 100. The red trajectory that currently sits at 4350 for the SPX is important for multiple reasons. First, it has been a key point of contention for the market for all of 2023. In fact, the technical reversal at the February highs off of this key technical level was why we went bearish at that those highs until the end of March when we switched back to the bull side. Secondly, exceeding the red trajectory puts the SPX in the midst of a series of key technical levels that will be prove to be a real test for the market. How it treats this impending test will give us a ton of price data revealing the strength and voracity of this baby bull run. Third, the first step to new all-time highs for the S&P begins at 4350. Not many technicians, if any at all, realize this fact. For this reason, accurately gauging how the market reacts to the 4350 level will be a huge advantage for those who interpret the markets correctly from there. We are presently in the midst of the first consequential set of price moves for 2023. In fact, what we are experiencing presently is the first set of consequential market moves not just for 2023, but since the middle of 2022, as well. The stakes have been raised considerably. Interpret what you see from this point forward wisely. 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. ...
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...
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...