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Broad Market Outlook
The uptrend has broken, say that out loud, the overall uptrend in the market has broken. The broad market has increased by 63% in 6 months (with the heavy lifting done by a handful of names). The average annual return from the market has been about 10% a year including dividends, we were gifted with 6 years worth of returns over the last 6 months after the recent market crash.
Let's give the market a nice round of applause vs booing it after a few red days.
320 in the SPY would be around a 10% correction, where we could see buyers step in but in actuality even a drop back to 300 would be completely fine and somewhat realistic after we take into account that the market really only has gone so far thanks to a few names (AAPL AMZN MSFT FB GOOG) that make up 20% of the market.
Looking at these 5 leaders, they all look spent, tired, and hoping for some time to recovery and sit on the side lines. After playing hard offense for the past half year, they earned it.
This week we started to notice that the idea exchanging was sparse where VIX was mentioned a handful of times. Back during the prop trading days our manager use to say:
"If your best idea is to trade VIX, just go home and safe yourself from the damage you are about to cause yourself"
That's PG version but you get the gist, avoid fighting the lower highs and lower lows market. These markets are short and brief, the last market crash barely last a month. We are barely a week in, give the market a hall pass, scan some set ups, if you can't find anything worth taking. Shift that focus on something else for the short window of red that we are in. So when the red sea's calm, your ready to start executing.
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Macro Rotation Outlook
SPY
Dow Jones
Nasdaq
MDY Mid Caps
IWM Small Caps
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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
APPN
Still a long way from testing or shaking out any recent support, as it continues to drift down we can lower the buy stop price point that is on our radar, first we wanted to buy 64, after rejecting 60, we can bring down our buy stop entry point a few points.
GMED
GMED is still flagging under $58 and given that it will most likely pull back and test this gap fill, meaning that we can find a better price to sneak in compared to just having to buy 58 when its ready.
IQV
IQV finally broke that $165 however didn't have the follow through to take it higher, if it still wants to stay inside the flag and turn back up through $165 could be worth a shot.
LMT
LMT has been flagging out under this $400 for a year now and recently it has been the tightest under said level vs 380. Starting to buy some up through 390 vs 380 and will add up through 400.
TRV
TRV has been flagging under this downtrend break for quite some time now vs a pretty defined area of support. It is only a matter of time before the buyers or sellers take control. If it wants to break higher, I will be buying up through $116 vs $112.
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