Broad Market Outlook
This is our new wide 20% range in the SPY between 220 and 260 as the pivot lows and pivot highs are starting to show themselves we can take advantage before they become too obvious.
We saw a similar range at the end of 2018, in the beginning we were not aware, then we were able to take notice, after the range became too obvious that anyone could spot it, a new trend had to start forming. Remember we traded in that range for 3 months.
As we run through the markets and sectors, the new ranges are continuing to show themselves, mostly showing us clear levels of resistance, while the support levels still are weak other then the Small Caps that really defended its low.
This week and into the next if we drift, drop, or crash back into those prior lows, that will be important information to see. Do they get bid up (forming a higher low) where re buying the prior low is not possible (a great sign), do they hold very close and bounce (ok sign), do they shake the level causing most to chase (ok sign) or does it smoke the low and head lower (bad sign unless short).
It is good to have game plans ready for each, if we hold what names do you want to buy, if we take the lows what names do you want to lighten up in?
For now I am most in the camp that we stay in this wide range, potentially push the lows and highs just a bit to shake people out and cause them to chase. Meaning that I will be looking for buys in the green zone, holding them through the orange and looking to sell into the red zone, know full and well that at some point most of us will be looking to buy through the red zone.
For now we have to take advantage of this range when presented with the best opportunities, that is up off support.
Its hard to remember that in 2017 it took a year of trading to rise from $220 to $260, a range that we are trading in a mere week.
Be patient and know the names and prices you want to buy.
Macro Rotation Outlook
Wide 25% range forming, we can see how 226 is resistance for now and 180 is the low, if we break down through 200, we want to look to buy up vs the 180 area.
Most were looking for buys at SPY 260, yet the select few who were buying at SPY 220 were the ones who were best rewarded. Let's be on the hunt to buy up after a few down days not the reverse.
Big 1200 point range here, we can see that 8,000 is resistance exactly the same level that was resistance in the past. The market is quick to forget that 8k to 10k was a gift no one was expecting.
MDY Mid Caps
This range might look small, yet it is almost a 30% range from bottom to top, when charts get this stretched its hard to remember that a few down days can be a 15% loss. This is why we want to look to buy up off the prior lows if given the chance.
IWM Small Caps
The weakest so far, the first one to show some legs, we can see how the buyers defended this $96 level with all they had, as the small caps drift back near that area, could look to buy up if it holds.
Sensitive - sectors that have moderate correlations to overall market conditions.
We can see resistance forming in $220 textbook, next we need to keep an eye to see if the buyers are still down in the $180 area, this is a 20% range, so we want to remember to buy up off support, not through resistance.
Energy has been beat up, jumped, stabbed and spit on but its not out of the fight just yet. Seems for now most of the destruction has been done, this 10 range between $30 to $40 is still a big one percentage wise. $30 to $40 is a 33% gain and $40 to $30 is a 25% drop. We don't want to be rushing to buy $40 just yet.
We can see resistance at $116 clear as day, next we need to keep an eye if it can hold up above $90.
Telecom is starting to trade in a range and more importantly showed that there are buyers defending $66 for now.
Cyclical - sectors that are more sensitive overall market conditions.
Materials are starting to show us that $100 is resistance and $80 is support. Let's keep an eye out if it gets down near $80 to buy up.
VCR Consumer Discretionary
As you will see with the staples (below) they were able to hold up near the upper end of this range much better then the discretionary sector has been able to. We want to see how it does retesting the $120 lows.
We can see more of a range starting to take shape between $42 and $54, lets keep an eye to see if $42 holds.
We are seeing an almost 20 point range forming between $55 and $72, in time we will be buying up through $72 however for now we want to see if that retest of lows will hold and buy up from there if given the chance.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Of all the defensive sectors, the staples are looking the best with this little baby flag forming, it still can break that of course. People will be putting more of there hard earned money towards the staples (the stuff most need) vs the discretionary (the stuff most want).
Wide 30 point range between $138 and $168, we want to be looking to buy up near the lower end of this range.
IBB Bio Tech
Wide 20 point range between $92 and $110, recent buy was in the middle of the range around $100, if we pull back near the $90s will look to buy up.
We can see the wide range from $96 to $127 forming in this sector. We want to be looking to buy up through $100 vs the lows.
Big Picture Set Up
SGEN has been flagging under this $120 for a new months now and you could see how it has not cared about the market sell off. The real out for now seems to be vs $108 however on a day 1 entry in this market we want to see follow through immediately.