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Broad Market Outlook
We are starting to get into the parabolic phase in the broad markets, specifically with Nasdaq stocks. We are about a week and a half into the craziness, the last time we saw this type of action was going into the start of 2018. Which lasted for a month and the market rallied another 8% from the current highs at that time.
Before the correction that followed. Everyone complained about the correction, yet they were quick to forget about the 8% bonus on top of a monster year.
Right now it is nuts to buy these highs, which means we want to still hold on, we want to look for the exit when its completely rationale and sane to buy the new highs. Think of how nuts it was to buy TSLA at $500, yet how completely rational it was for people to justify buying it at $950?
We have seen this pattern over and over, most market participants are late to the party as always. Broadly speaking, we still want to be patient and focus on the real outs in each name, up those stops, hold great stock and continue to do what we do each and every day.
In some markets (mid and small) and sectors (healthcare and industrial's) we are seeing them respecting there retest of prior highs, which tends to lead to a period of consolation. Exactly what a healthy market needs to absorb the monster gains virtually every sector has had this year expect Energy.
As we get into the last few innings of this rally lets hold these winners for as much as they have and realize that we will still see new highs down the road!
Macro Rotation Outlook
The slow grind up has started to shift into high gear as we get parabolic on the weekly. Now before we rush for the exits, we have to remember that the crowd is much bigger then we expect, we are about 2 weeks into this parabolic move. These moves tend to go much farther then we can expect, just think of TSLA which was nuts at $500 was completely sane to buy at $950, it is still nuts to buy up here, it isn't sane just yet!
Last time we saw a parabolic move in the market was going into 2018 and we had 4 weeks of fun before the few weeks of pain.
We are starting to get into the parabolic mode however as you will see below, the last time we got like this, we had 4 weeks of this type of action.
The large caps are in 3rd place in this race, Nasdaq is leading, SPY is in second, and then the Mid and Small's are trailing behind. 280 is the out for now.
MDY Mid Cap Stocks
We can see the Mid Caps starting to respect the retest of 384 vs 364 as support, if we could see some consolation up here that would be a great sign!
IWM Small Caps
Small caps are still last in the race however they are still trying there best to get back to the retest! $160 is the out for now.
Sensitive - sectors that have moderate correlations to overall market conditions.
New highs are usually met with new highs until they don't and when they don't we will gladly get stopped out down through $260.
If we were to flip this chart upside down we would be dying to buy the $70 break, yet when its coming down to support, its usually going to flush lower. Reminds me a bunch like the telecom sector going into 2019. Once we can shake down through that low and sell off hard, say $5-$10 that would be max pessimism in this sector and would be the time to start looking for a deal.
We saw the little mickey flag break that fizzled, for now we can see it continue to respect the $160 retest as resistance and $152 as support, if this sector can continue to consolidate in this range, we should see new highs in time.
After a little pull back, telecom is back on course grinding back to that retest at $104, for now the out is vs $94.
Cyclical - sectors that are more sensitive overall market conditions.
Materials are still lagging the rest of the sectors as we have seen with the small caps relative to their peers. For now the real out is $125, if it can continue to consolidate in this range between $135 and $125, it will be an easy move back to highs when this sector is ready to join the party.
VCR Consumer Discretionary
After that little blip of a pull back, we have seen 3 strong weeks out of this sector, for now we continue to hold vs 186.
Fin names are starting to poke out of this mickey mouse flag however we know how that usually pans out. For now the out is vs 74.
REIT sector is on an absolute tear along with the utilities, which are defense/risk off sectors. Keep holding this winner with a stop vs 96.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Staples continue the grind to new highs, for now we can play some defense vs $160.
We saw Healthcare respect the retest perfectly, if we can start to see some consolation that would be a great sign to absorb the tear this sector has been on.
IBB Bio Tech
Bio's still setting up a nice wide flag between $124 and $112, hard to buy this $124 up here, we need to see this go side ways and consolidate.
Off to the races in this risk off sector, for now a stop below $150 and let it keep climbing!
The New Big Picture Set Up
This PFPT has been setting up for almost 2 years now, and we can see there are a few spots that we can look to add to this name.
For now I will be looking to enter a feeler above $128 vs $124.
After that I will look to add above $130 and then finally I will look to buy the new all time high break through $132.
Now we have to remember that the longer the consolation the longer the breakout, this has been setting up for 2 years, we should be looking to hold this for a move to $200 not $136.
Let's be patient and crush this trade!