Broad Market Outlook
In the last week, I have had more people reach out to me regarding the market then I can ever remember. Most of the conversations were "I want to sell and buy lower" or "I want to sell and be in cash for a long time", mainly a panicky vibe. When asked why they wanted to do that, the answer was something like "everyone else is doing it".
Which reminded me of the theory of relative peak intelligence, people do stupid things but they always think that they're smart at that time, or smart enough.
"Everyone is selling?" (Thought)
"I better sell before everyone else to get a better price"
Yet when we look over our bad decisions in retrospect we see that in the moment, they didn't seem so bad. (Take a moment and think of some bad decisions you've made, didn't they seem smart at that time)
Two weeks ago, buying the retest of macro support to me seemed like the smartest thing I could do, and now, it looks comically stupid.
We don't plan to lose money, put on bad trades or make poor business decisions, yet in time we look back and wonder what on earth were we thinking. Right now a great majority of market participants are making the best decisions that they can make relative to there peak intelligence on the matter.
When it comes to investing there are risks, if we expect to make money and want to take credit for the up days, we have to be accountable and understanding that we will see some red days and they too, are our own fault.
I will leave you with one last point to think on, remember when the market broke out and was hitting new highs every day, the thought of hitting new lows was preposterous, yet it happened in time. Now that we are hitting new lows isn't the thought of hitting new highs in time, even crazier?
Macro Rotation Outlook
After blowing through the macro level of support, for now seems the Dow will pin ball down every thousand points or 10 points in DIA, until its finds it footing, right now its still very difficult to buy any Dow 30 name if if that's hard, buying a mid or small cap is that much harder.
We can see buyers stepped in at the retest for all of a day, there is an old lesson that is hitting me in the face, when you call a price you want on the way down and can get it, its going lower.
Looking at this chart after the breakout of $8,000, everything above it was really gravy, so when people talk about the market crashing, really we just gave back a lot of paper profits.
MDY Mid Cap Stocks
Mid caps are right back to $220 which was a major area of support going back to the summer of 2016 when we ripped down into this area and the world was ending at that time too. We snapped back and reversed most of the move before coming back to that level 2 more times before putting in a low and ripping higher. Given how more panic'ed most people are, this should be a wild year.
IWM Small Caps
$120 in time can be a great spot to get back in, however if we take out $90, really the next major area in the small caps is $60.
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Sensitive - sectors that have moderate correlations to overall market conditions.
The sector leader still holding up the best so far, however in the scheme of things anything above $220 was a bonus, if we take out $180 to the down side, the retest of the 2019 low seem like a lay up.
Energy might be past the panic mode and entering into capitulation.
2019 retest failed next up will see if the $80 can hold that has been a price we have not seen in quite some time.
Telecom shook the 2019 low and held it briefly however it still seems there is a bit more downside in store.
Cyclical - sectors that are more sensitive overall market conditions.
So far Material's are holding up vs that 2016 low of $80 however as we have seen, most sectors are running through those major levels.
VCR Consumer Discretionary
For now Discretionary's are holding the 2017 pivot, however the real area to keep an eye on seems to be $100, if peoples spending is really put in a bind, the fun spending (discretionary) will be the first to get cut.
Next key spot to keep an eye on will be the $40 area in the financial names.
Tried the buy back vs major support and as we saw it got smoked, next real area to keep an eye on is $48.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Like we saw with Utilities,with it "h" back to the $125 level, expect to see a hard break, what is interesting is that most are stocking up on years worth of consumer staples, yet puking the companies they are stocking up on.
We are continuously learning that the more attempts at support the less likely they will hold. In time up through $150 and $156 will be spot I will look to buy.
IBB Bio Tech
Bio's for now are respecting the low it put in at $92 and is starting to form a nice wide range under the gap fill of $106 down to the lows at $92.
We saw utilities "h" over hard on Friday, was almost too easy to spoke and a great reminder then if you are buying anything on a bounce and it comes back to your price, get out of dodge.
The New Big Picture Set Up
I've spoke to more people about the market in the last week then I probably have in the last year. 9/10 of the conversations where how can I get out of X, while 1/10 were how can I get into Y. The gift and the curse of being a trader is that we tend to jump the gun and want to get in or out too soon. As much as we want to get back in, most are still rushing for the exit's, once the pathway is clear, we should be able to stroll back in with ease.
We are seeing herd mentality and panic in the streets, which does not equal rational investing decisions. A little patience goes a long way.