Broad Market Outlook
Accountants, Bikers, Cops, Lawyers, other Financial Advisors, Tech Start Ups and basically anyone else I have came into connect in the last week/weeks have all been looking at the same two piles of trash - Energy and Airlines.
There reasoning all the same, its so low, it has to go higher as they dig there own grave with a smile. The one piece of information that I take very seriously is listening to others trading idea's and extremely serious when I know the person has no clue what is going on. Knowing the names this crowd is looking at is a huge key to avoid trades that are just never going to happen right now.
If you have been with us for a few years, you might remember that I hated AMD up until 2018 (when it was sub $20), the reason was simple if I spoke to 100 people, 95 wanted to buy AMD. Years later when AMD was going from $20 to $60, that crowd that all claimed to be long term holders were bag holding the next latest and greatest.
Right now we are seeing a similar trend with most people broadly speaking, wanting or hoping we go back to lows because as always the bottom dip buyers miss the bottom and chase the top. If you were to talk to 100 people about the market or even try 10, far more will be thinking we are going back to lows. Try it and let me know how many think we are going back to highs.
Looking at some of the sectors already back at highs is showing us what is most likely in store. Even the worst sector Energy is setting up with a 3rd times a charm set up.
It will be a grind, it will be choppy, there will be sell offs and more headlines however the market becomes aware of the same headline and eventually brushes it off and that has never changed. You don't care and your no longer afraid of raising/lowering rates, Trade War, Ebola, the same will happen here. The market has the memory of a gold fish. If we forget the headlines and focus on the charts they are showing us a consolidation under current resistance levels getting ready for there next legs.
When everyone is looking down, start to look up and vice versa, when those people who are telling you their buying USO and UAL start telling you that they want to buy the name you are in, start looking for an exit.
Macro Rotation Outlook
We can see the Large Caps are working on breaking this $240/$243 area of resistance vs this $226/$230 area of small support.
SPY continues to battle with $290 as it flags in a $20 range that should send it to $310 when it finally pushes through. Right now a far bigger majority that continues to get bigger and bigger with every market drop is further and further on the side lines. Now hoping for lows to finally take advantage yet you and I both know they wont. That crowd will chase when we are back at new highs though, that I can be much more certain of.
The trend is our friend until it isn't, continue to remind yourself why were we so scared to buy 7,000 when now, it looks so easy. That is why trying to find the bottom is so difficult. It only looks too easy after its too late.
Line in the sand is 8400, anything above it is fair game.
MDY Mid Caps
We can see Mid Caps as most other major markets and sectors continuing to battle with the gap fill area. Give it some time and we should push through that area higher.
IWM Small Caps
We can see the Small Caps continuing to flag under this $124 area, looks solid.
Sensitive - sectors that have moderate correlations to overall market conditions.
We can see Tech setting up wanting to push up through $235 with the current out being below $220.
3rd times a charm setting up in VDE up through $48, sector wise Energy posses by far the greatest risk however with that the reward can be just as high.
We can see a tighter spot to add above this $116 to start getting ready for the $120 area.
Telecom continues to inch higher, not much of a setup other then buying up through the recent high $84 vs $82.
Cyclical - sectors that are more sensitive overall market conditions.
We are seeing this similar textbook 3rd times a charm setting up in most of the sectors, in time we will be looking to add up through $110.
VCR Consumer Discretionary
Discretionary's making its second, lightly third-ish attempt at $172, it will probably need a bit more time, still a bit mickey.
We continue to see the clear line of resistance with higher lows continuing to form, a small area to add will be above $54, the next major area will be above $58 vs $50.
We can see a 3rd times a charm set up at $80 however we are also seeing a tighter spot to grab some more stock on tight risk.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
For most at first look might be expecting Staples to have the look of starting to "h" over, however I feel it starts to trade in this range $140 to $156 and eventually pushes higher.
Healthcare a few paces behind the bio's as they continue to inch back to highs, this could be the future showing us that most of health cares peers (other sectors) could follow suit.
IBB Bio Tech
Bio's showing us what might be in store in the future....new highs, just when most on the street are expecting new lows.
Utilities starting to flag and consolidate under this $132 area, give it some time for an add up through that area.
Big Picture Set Up
We have forgotten about one of our favorite stocks of 2020 and that tends to happen when they lose more then half there value in a few months. Now for a Blue Chip name that is a disaster for a recent IPO that's just a normal month of trading.
We are starting to see that YETI has been battling with this $26 and is currently setting up for a 3rd attempt back up through that level.