Broad Market Outlook
We got some great information this week has the overall markets and sectors started to break there steep up trends. The real test was on Thursday when the SPY was 3rd day down coming into recent support (270) level. That day short term really showed us if the market was faking it or the buyers were real.
If/when the buyers lose there hold that 270 break will be the key spot that could send us back into the 230 area and eventually back to lows, at first thought that sounds horrible, yet if you look back, the retest of the major lows in periods like we are in now. Were some of the best buys ever. That is worst case, or the bear case might be a better way to phrase that.
More then likely we continue to chop around in this 270-300 range, and push the upper and lower limits a bit, pushing down to 260 when people think the markets dead and flirting with 300+ to get the impatient traders to chase.
We are continuing to see the shift that the market has been taking to consolidate this move, support buy backs and buying up after 3 days down should be high on the priority list. The more we can practice this and make this a habit, will pay off down the road as well. If we all as a group continue to improve on this harder of a skill (then buying resistance). When we get back into a breakout market, we can continue to employ this skills to buy into the flags off support to be in and ready for the breakouts instead of having to be perfect every time.
If we as a group can continue to move our executions in that direction, the more profitable we all will become.
Macro Rotation Outlook
We can see a nice flag forming in the SPY with a hearty range of 270 to 300, a few years back it took 12 months for the SPY to advance 30 points now we can do that in 3 days. This 300 will be a key area however we are starting and continuing to see that buying up on the 3rd day down is becoming more of the move.
Large caps showing us they want to hold this 230 area, however just like we like to buy 3rd and 4th+ time at resistance, the more obvious this 230 support becomes the more likely it will get taken out. A shakeout of that area would not be the worst thing anyways, just a reminder that an obvious support buy tends to become the suckers buy.
Nasdaq like Tech are the exceptions to the rule in this market, for now the out is below 8800 as it tries to mickey mouse flag up here between that area and 9400.
MDY Mid Caps
The middle brother and little brother (small caps) looking like twins right now, 260 being support and 312 being resistance, except it to trade inside this range for the foreseeable future.
IWM Small Caps
Nice wide 20 point range in the small caps, we can see 115 is the area of support that is holding it up vs 135, could look to add up through 125 vs the low.
Sensitive - sectors that have moderate correlations to overall market conditions.
Tech has been the exception to the rule among the sector, while the rest have broken there steep up trends and started to trade sideways for the most part, Tech is still sticking to the trend.
Energy finally cracked the uptrend it has been on off of lows, and now could start to trade sideways between 40 and 50, if there was any sector that was more likely to retest the lows, it would be energy. Those major retest tend to be one of the highest risk reward buys if given the proper room, however if wrong, you need to get out of dodge fast.
We can see the Industrial's in a wide 20 point range with support at 100 and resistance at 120, we want to be looking to buy up off 100 instead of buying up through 120 for now.
Ideally we would like to see some more sideways action between 82 and 90 before the next leg, however we are aware that as the name or sector trades further and further from its low the smaller (more mickey) the flags or consolations get as people get impatient and rush in.
Cyclical - sectors that are more sensitive overall market conditions.
Materials continuing to digest the recent up move by continuing to flag between 100 and 116, the more we can look to buy up vs 100 instead of buying up through 112/116 the better.
VCR Consumer Discretionary
Discretionary's like Healthcare below are showing similar bullish patterns, buyers stepping up (higher lows) and a clear line of resistance this 180 level. Will be looking to add up through 180 vs 170.
Similar to the REIT's below, Fin names are starting to slowly drift back towards support which is currently around 47, it still wont not be much of a shot to retest the low of 42 which imo would be one of the best risk reward buys if you are willing to give it a few points room and a 6-12 month outlook.
REIT's coming into the prior area of support around 64 with the real area of resistance being 80, for now if we can look to buy up off 64 and look to add through 72, those could be good spots to be in and ready for the 80 breakout down the line.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
We are seeing for now that 140 is acting as support with the 150 area acting as resistance, the more we can buy up off support to prepare for the future breakout the better.
Healthcare showing us a textbook pattern with higher lows (buyers stepping up) and a clear line of resistance where the sellers are holding the line. Only a matter of time before one will win. Will be adding above 195 vs 184.
IBB Bio Tech
Wide range forming up here between 120 vs 136, if it can start to chop around in this range, would be looking to buy up vs 120 before I would want to chase 136 right now, no matter how hot the sector is.
The next spot I will be looking to add up through will be that 124 level, time will tell if it can hold the 112 area of support which could show us a better entry.
Big Picture Set Up
With bio techs leading the market higher, why fight the trend, we can see this AMGN flagging nicely under a sneaky buy back level through all time highs!