Broad Market Outlook
We got the impressive run up we needed to finally clear that year long base we were stuck in. But now, we need and are getting the cooling off pull back to set us up for the next push higher down the road. We saw this across the board this week in the S&P, DOW 30 and the Nasdaq names all pulling back very controlled.
At the start of each pull back, we often want to tell ourselves that the first area of support is going to hold as the market or stock is going to turn on a dime and rip back higher. Since the pull back is often orderly at the start, most are not seeing it for what it can turn into. Its only when the pull back becomes obvious that people get fearful and run for the exits causing those shakeout or dramatic moves at the end of the pull backs.
As 430 was the key breakout area in the SPY on the way up, most will hope 430 will hold on the way down. The problem with that is that is a mere 10 points off the current high when the market has rallied more then 60 points off its major pivot low of 380 going back to March.
Most traders want 430 to hold when in reality, we will probably neeed to see a pull back to 410 area before the dust really settles and the next run up begins.
As the slow fade starts, as the story starts to spread the fear levels go up. Or should I say, the greed levels go down.
As a team everyone has been doing very well taking advantage of the extremely greedy move we have gotten from the market the last few months. But as this dial continues to pulls back, we want to play more defense and protect the profits we have made during this recent run up.
There are still some solid set ups that can be found in the market as the credit card names such as V and MA have been flagging nicely as the market pulls back slowly. INTU has been basing nicely under 460 for a year now, IDXX has been bull flagging under 500 for just as long and even MNST has been forming a nice blue sky breakout under 60.
There are still some solid individual set ups out there to take advantage of. As the market pulls back, this is a time to be extremely selective with your executions. The last few months was a time where putting on risk broadly you were rewarded when it was not as obvious. Now that the base break is becoming obvious and the market pulls back, you want to narrow your focus to your main idea or ideas for the week ahead.
As the summer trading starts to cool for the short term, embrace it as eventually with time, summer heats up as the fun times are just around the corner.
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Sensitive - sectors that have moderate correlations to overall market conditions.
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Cyclical - sectors that are more sensitive overall market conditions.
Defensive - sectors that tend to outperforming during sub par market conditions.
Big Picture Set Up's
IDXX has been bull flagging for the entire year under this 500 level, as it recently shook out the prior pivot low and is climbing back towards the breakout level, it looks like a tough buy given the run up but it might have what it needs to finally break this bull flag to the upside.
INTU has been forming this base breakthrough 460 for quite some time now, for now would give it room vs 440. It might need to shake lower first but we do not want to miss that 460 base break when the time comes.
Got ticked into MA late on Friday through the $380 area with a stop vs the LOD of $372. Looking for a move through $390 and trying to have stock for that move.
MNST has been flagging for a few months now showing us a clear blue sky breakout through $60 vs $58 for now. It might need a shakeout move lower before it will be really ready to go.
We got a nice 3 day move from this MRK so far as we were buying up through the $110 area of the mini base that formed. If we can get some more follow through next week the goal would be to sell the retest of $120 if not and this is the short term high of the move will move on if it trades below $113.
V setting up for a little bull flag breakout up through $230 vs $224 for now, we do have the $236 area to battle with but this tight flag is giving us a little sneaky entry in the mean time.
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