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Broad Market Outlook
The trend has finally been tested to the downside after the market saw a 7% pull back off all time highs. As we mentioned last week anything plus 340 in the SPY was to be treated as a bonus.
We did a great job respecting our stops last week and as a result was a cash raising week. The 6 months of solid green lights that we have been giving are starting to turn yellow, meaning its time to start moving that right foot off the floorboard and apply the brakes.
Too often we see traders try to rush back in after a few down days to get good deals that end up becoming even better deals had they been patient.
Do I feel that we are starting a major market reversal after the 60% plus run we have been on over the last half year? Probably not, as there are still too many participants on the side line preying to whoever they believe in to get get back in the market.
I'm in the camp that we start to digest and consolidate this move that we've been on, if that means between SPY 360 and SPY 330, 320, 310 or 300 that will we will find out in time.
We must embrace the pull backs and shake outs because that's the only way the market can push to new heights. We had a 35% crash this year followed by a 60% run right after. The bigger the shakeout, the grander the climb.
Broadly speaking (Big Picture wise) we spent the better half of the year dollar cost averaging on the way up which was painfully easy. This was the second time that we switch gears and started to lock in some profits in the most extended sectors.
The big focus this week was locking in profits in Tech (VGT) and Consumer Discretionary's (VCR) which were the best performing this year. We rotate out of some of the best performer (key word some*) and we let that cash sit as we find opportunities towards the bottom of our list.
The easiest way to follow this method is by sorting your sector positions from highest to lowest percent gain. The ones at the top of the list are the one you look to take profits in and take the proceeds and re balance those funds to the bottom of the list.
By doing this, you are always focus on locking in profits, keeping a balance portfolio and improving your cost basis. Virtually everyone does this backwards and this is why so few outperform.
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Macro Rotation Outlook
SPY
Dow Jones
Nasdaq
MDY Mid Caps
IWM Small Caps
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We are look for 1 more member trying to add a source of income drop shipping with us on Etsy, if interested shoot me a DM!
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Sector Rotation
Sensitive - sectors that have moderate correlations to overall market conditions.
VGT Tech
VDE Energy
VIS Industrial
VOX Telecom
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Cyclical - sectors that are more sensitive overall market conditions.
VAW Materials
VCR Consumer Discretionary
VFH Financials
VNQ REIT
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Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
VHT Healthcare
IBB Bio Tech
VPU Utilities
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Big Picture Set Up
GMED
GMED is showing us a clear level of resistance under 58 with higher lowers all 2020, we don't want to miss the 58/60 buy in this one as it could easy be a $100 stock down the road.
STE
STE still setting up under this $164, it might not be ready this week but in time could be a text book breakout.
IIVI
IIVI support buy back failed, it was started to look semi decent but on Thursday when it was opening near $42 we knew we were wrong with our idea. Shouted out to sell stops for getting us out a few cents under the figure in a wide name.
One of my worst trades in the last few months locking in a loss off over 6% hurt for a moment, but much rather take that then be stuck down 14% plus with no out in sight.
V
Stair case up, elevator down, the one mistake we made as a whole, or at least that I noticed from myself, was that I shook off the notice of what usually happens at every major retest (stock is met with resistance), as most were watching how crazy names like TSLA or AAPL could go, we took our eye off what we were in.
Hope a few took some off into that $214 area, still a great trade buying $200 and getting out $11 higher. Now most try to rush in on the way down, even if $200 hold for now, I could care less. We made the easy money, not looking to earn the hard bucks on the way down. If it can drop some more and hold up in the mid $180's then we can decide if its worth a support buy back or not.
MMM
MMM started to push up through the $168 resistance area but didn't have the momentum to push it much farther which is fine considering what happened at the end of last week.
Still keeping the $160 stop for the rest of my position.
