Broad Market Outlook
Since the start of November we have been blessed with one of the best markets we have seen following the amazing market we had off the lows in March.
Remember when you thought those 10% down days would never end, now we can't get a 2% down day if our life depended on it.
During that period when there was max fear in the air, we are getting back towards max greed. In the last 75 trading days, you couldn't even count on each finger the down days we've had.
I know because I've been deleting thousands of screenshots of your millions of dollars worth of PnL posts and recently had to start doing screen recordings because the screenshots were too much.
Yet this week, something changed.
There wasn't 30 to 40 PnL posts daily but actually a few red ones or none to show at all. Yet the market didn't sell off, or anything really significant by looking at the S&P's daily chart.
The externals look fine but under the hood maybe the markets engine is running hot. As much as I could careless about what talking heads say on TV when they start to say "buy everything" or "the only bear case is there's no case" we are often getting near a short term top.
Just when everyone says we have to go lower, we go higher, just when everyone brags we're going higher, the opposite tends to occur.
We have all gone through enough corrections as a group now that we know how to step off the gas after the first down day and to give the market at least a week to settle out.
So we are not to be worried the slightest when the next correction occurs but more open minded to when that day does finally arrive.
As you look around at your peers continuing to act like fools, let them. Trying to talk sense to the crowd is a lose lose situation. Focus on what you know and the rest will fall into place.
For my own trading, I have been way more concentrated into individual ideas while equally unattached to said positions. I bought a lot of BABA Monday by Wednesday I was out most break even.
Then tried my hand at AMZN buying and adding to $3320, by Friday was selling most of my stock for a $.10 loss per share in Amazon which is a feat itself.
I took 2 big swings last week and for the most part still have every dollar I started the week with.
I am not trying to get chopped up in a dozen ideas and hope you don't either.
Focus on your top idea for the week and take your swing, if you miss, keep the miss as cost effective as possible while the market looks that it can be starting to overheat.
Do You Have The Patience to Make It On the Leader Board?
Macro Rotation Outlook
MDY Mid Caps
IWM Small Caps
Sensitive - sectors that have moderate correlations to overall market conditions.
Cyclical - sectors that are more sensitive overall market conditions.
VCR Consumer Discretionary
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
IBB Bio Tech
Big Picture Set Up
We saw what we wanted to see in BABA, a clear line of resistance at 270 in a tight flag vs 260, we forget about the recent very quick 30% run it went on off lows.
After the breakout was quickly reversed, it started to flash red lights that this was not the breakout we were hoping for as it continued to show us we were buying the top of a short term move.
As a result most of us got out before the following 2% gap down. I took off 90% of my position and got lucky avoiding that gap down. As of Friday we saw the $270 still showing his hand.
This is when the stock needs time to shake out and reset. Let's give it time and we will sneak back in up off support vs having to be perfect buying $270.
CI is forming a massive flag to buy in time, we still need to give it time to develop. For now keep this one on the radar.
One of the most beautiful flags I have seen in some time, just soaking up this wide range over the last few months preparing for the blue sky breakout.
Recently we can see this stock forming a new smaller area of support, through $92 this is a cant miss trade.
With my recent add in SNAP (very small), almost have to laugh for a moment on some of my most notable purchases in this name. During the IPO in the mid $20's, down at $5 when it was the most hated, keeping a sub $22 cost basis for this run up this year. Only to start buying at $66.
We often say how hard it is to teach long term trading because even for us, we forget to add to these winners before the name is just a tad to ripe.
Will SNAP going higher then $66 in time, I am sure it will, yet was that the best price for me to start adding to my winner? Probably not. Just a few hundred percent late to some better adds.