Broad Market Outlook
As the broad market continues to form this bullish wedge, it almost feels misleading with the overall weak action we saw across the board on Friday. Except, of course, the 10 Year closing green.
As this bullish wedge continues to form, as its trading almost in lock step with our kindergraden level drawing of the pattern.
We should not be too surprised if the week ahead is bound to be a weak one overall. As this pattern continues to develop the ranges should continue to consoldate giving us less room to work with. But before we get too far ahead of what's down the road, its best to focus on the next turn, not the 4th or 5th one.
For now we can see sellers creating resistance at 450 in the S&P with buyers lately supporting the 430 area. We most likely will need to see a break lower then 430 as this pattern tends to show us lower highs and lower lows in the short term.
As much as we know to avoid chasing the Monday morning gap up, lets also avoid rushing into a Monday morning gap down that looks to be reversing and filling the gap.
Sector wise, Energy continues to lead as it is a mere 2% away from all time highs, yet jumping onto that bangwagon now would be like finally getting to the bar after last call was announced.
The Industrials are a great example as to why chasing the end of the Energy rally often yields more risk then return.
After rallying to new all time highs, they have since started to form a stage 4 break down. Which takes this sector off the focus list as well.
Utilties, REITs and Small Caps are hibernating in there own macro stage 1 bases and should be avoided in the short term as well.
As you can tell, we really have the pick of the litter when it comes to trying to find some relative strenght.
Let's give this market some time this week to shake itself out so we can find a pocket of strength to position us for the following few weeks ahead.
Macro Rotation Outlook
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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
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