The Reflexivity Reality

The Risk Observer wrote an opinion of Trex Company, Inc. on March 17, 2024.  It’s a company we have followed for nearly twenty years.   Great products.  

Nonetheless, recall our previous posting.    

Earnings Season and Nowhere To Hide.     Consider Kohl’s Corporation; then review the Earnings Call for Costco Wholesale Corporation which we consider the bellwether indicator of the United States’ economic condition.    

Now review a few points from latest BLS report on payrolls.     Non-subscribers and readers should analysis the entire report.    

Consider the labor composition in the past year:  1.2 million full-time jobs have been lost, replaced by 1.5 million part time jobs.     In May, 625K full-time jobs were lost in one month, replaced by 286K part-time.    

And, perhaps an election year factor to consider, since October 2019, native-born US workers have lost 1.4 million jobs; over the same period foreign-born workers have gained 3 million jobs.     Typically foreign-born workers are paid less than native-born US workers, thus contributing to a reduction of the operating expenses of certain corporations.    

Below is a review of the price levels of the benchmark S&P 500 versus Trex Company, Inc. over the past 84 days.     While no one can predict the future, an understanding of the past, distant or near, is of great use to analysts.    

09th June 2024

Source:  Risk Observer⁴ - Model   

The Risk Observer wrote an opinion of Trex Company, Inc. on March 17, 2024.  It’s a company we have followed for nearly twenty years.   Great products.  

Nonetheless, recall our previous posting.     “Rich valuation fundamentals combine with a TRO over-extended reflexivity algorithm that has initialized an inflection signal....”  

Again, Trex is breaking a support level.  

The Risk Observer wrote an opinion of Trex Company, Inc. on March 17, 2024.  It’s a company we have followed for nearly twenty years.   Great products.  

Nonetheless, recall our previous posting.     “Rich valuation fundamentals combine with a TRO over-extended reflexivity algorithm that has initialized an inflection signal....”  

Again, that has occurred.  

From the company’s recent news release:

“…  We are pleased to reaffirm our full year guidance for revenues of $1.215 billion to $1.235 billion and EBITDA margin to be in the range of 30.0% and 30.5%, representing year-on-year revenue growth of 12% at the midpoint.”  

“…  To supplement our consolidated financial statements reported on a GAAP basis, we provide the following non-GAAP financial measures…  Management believes these non-GAAP financial measures provide investors with additional meaningful financial information that should be considered when assessing our underlying business performance and trends.”  

Directly below is the daily chart.   Since March 17, 2024, the S&P 500, our favorite benchmark, has increased 2.02% while TREX has fallen (-8.03%).  

After all...  “In the long-term, technically… it’s the  macro economic  fundamentals.”  

Most important, understand that traders who do not think for themselves do not think at all.  

The Risk Observer wrote an opinion of Trex Company, Inc. on March 17, 2024.  It’s a company we have followed for nearly twenty years.   Great products.  

Nonetheless, recall our last posting of two weeks ago on April 6, 2024.     “Rich valuation fundamentals combine with a TRO over-extended reflexivity algorithm that has initialized an inflection signal....”  

Directly below is the daily chart.   Since April 6, 2024, the S&P 500, our favorite benchmark, has declined (-4.56%) while TREX has fallen more than twice that amount, a hefty (-9.22%).  

After all...  “In the long-term, technically… it’s the  macro economic  fundamentals.”  

Most important, understand that traders who do not think for themselves do not think at all.  

The Risk Observer wrote an opinion of Trex Company, Inc. on March 17, 2024.  It’s a company we have followed for nearly twenty years.   Great products.  

“Rich valuation fundamentals combine with a TRO over-extended reflexivity algorithm that has initialized an inflection signal;  we’re watching for two more cross-platform catalysts.”   

Directly below is the daily chart.  There is a possibility of a change of trend which we would blame on current and forward looking (into the summer) macro-economic conditions.   Watch to see if cyclical resistance is broken on the downside in the upcoming weeks.

After all....  “In the long-term, technically… it’s the fundamentals.”  

Most important, understand that traders who do not think for themselves do not think at all.  

Regional banks as a group – see the KBW Regional Banking Index – have just shown a downward reflexivity inflector; so let us see what happens in the near-term.   Any positive movements should be only momentary and not a trend change, particularly for small banks.  

The multitude of problems could flow through the financial system, but the mega banks should trade relatively better in the upcoming crisis as they will have the “opportunity” to absorb, with the Fed as their backstop, the collapsing or illiquid players.  

Readers with a sense of history recall the Bear Stearns house of cards fiasco; it was a $2 rubber deal for JP Morgan Chase in the very long run.   The financial services industry is reaching a stress level so that there could be a significant specific bank issue and material market capitalization reduction for such.  

As it is an American presidential election year, politicians on CSPAN will demand a mitigation of the visual liquidity and loan quality concerns via repackaging deals, a current point-in-time reshuffling of the deck as it were.   Which makes the more astute players of today’s stock market game of cards wonder… just who will be the next Jimmy Cayne?  

End of a stellar first quarter 2024.   Be wary of geopolitical driven false movements of the markets.   The Risk Observer believes caution is the best policy in this pre-election period of tremendous disinformation.  

Most important, understand that traders who do not think for themselves do not think at all.  

To be continued after the holiday week...  

Options Expiration is on Friday, 15 December 2023 and the Fed Interest Rate Decision is announced on Wednesday, 13 December 2023.   Be wary of false movements of the markets.   Then there are those who anticipate a potential Santa Claus rally in the last half of the month.   The Risk Observer believes caution is the best policy in days of great stress.  

But understand that traders who do not think for themselves do not think at all.