Broad Market Outlook
The Nasdaq is less then 12% away from all time highs, Biotech's hit new all time highs, Healthcare is less then 5% away from all time highs and most sectors are forming clear resistance levels or forming mickey mouse flags trying to inch higher clawing back the losses of March.
In March everyone knew the market was going lower for the next year and guess what (we already know) it did the opposite and ripped higher. All the talking heads claimed it would take 2 to 3 years to get back to highs, and we are barely into the next quarter and we are inching back to those prior highs in mere weeks. Just think of how your overall mindset has changed about the market since the market hit the fan.
Back in March, it was the world is ending everything is going to zero, and now its damn the market needs to slow down so I can get back in. This has been teaching a great lesson on why we focus on having accounts with different strategies and time frames.
You have an account to trade aiming for Alpha (trading account, IRA) and another with the focus on trying to stay in the market continuing to dollar cost average no matter what your personal opinion is (401k).
That way if you are crushing the market like Casey, she is probably outperforming her 401k right now, that's great. If you are not crushing it or feel flat footed trying to get back in, then your longer term account is picked up the slack. Right now for me, my longer term accounts that buy every week no matter what are doing a majority of my heavy lifting with me having to feel flat footed.
We always talk about how the market gets so easy until everyone is in to pull the rug, which we saw and we continue to see how the majority still cannot make rational decisions. Think of all those people you know who puked out of the market at lows. Continue to stretch that rational decision making muscle in that brain of yours.
For the rest of your investing career, the market will zip and zap, rip and dip, drop and crash, rebound and hit new highs more then we can imagine, especially when we can't. If you have strategies in place to handle the chop and the rough seas you will do far better then the emotional and rash trader.
Macro Rotation Outlook
Nasdaq is inching right back to the prior pivot of 9,000 and is basically a chip shot away from retesting all time highs, just say that last part out loud to realize how crazy that is.
The Dow and SPY are trading almost mirror like as the large caps continue to bounce back just a few days behind the Tech space.
The SPY is continuing to defy what everyone wants as it continues to drift higher, with the next battle ground being $290 then $300, then were basically back in all time high territory. Economy shut down, market could give no one care.
MDY Mid Caps
Like the Small Caps below, the Mid Caps are forming a mickey mouse flag as they continue to try to claw back all the ground they lost in March.
IWM Small Caps
Small Caps are starting to form a mickey mouse flag after poking its head above $120, its still taking its time down here as it slowly trying to claw back all it lost in March.
Sensitive - sectors that have moderate correlations to overall market conditions.
Tech continues to inch higher really with nothing in its way till $250 then after that the retest of $275, and just like the $225 breakout earlier this year, if it properly sets up, who is to say this can't be near $400 in a year or two?
As we have seen with the other leading sectors, 3rd times a charm does not discriminate, we are starting to see the Energy sector start to base out under $48 vs $40. From a risk reward standpoint, this sector still yields the best potential upside. This could be a potential 100% gain in a year however the downside comes along with it, where the downside could easily be 20,30,40%.
Industrial's are still poking there head above the resistance level that has been setting up all of April, just have to give it some time as this Mickey Mouse flag continues to form between $120 and $110.
We are continuing to see the downward slope being much steeper and the bounce back a bit more draw out, it seems so easy to have bought $70 a month ago, yet it the moment so hard. Remember that the next time the market drops.
Cyclical - sectors that are more sensitive overall market conditions.
Materials are starting to turn the once resistance level of $99 into support as it continues to form a Mickey Mouse flag as it continues to inch back towards highs. Stop $99.
VCR Consumer Discretionary
Discretionary's broke that 3rd times a charm resistance level and have not looked back, showing us that people may claim to only be focusing on needs, yet really most peoples shopping patterns are not going to really change much. Stop vs $160.
Financials like the REIT's showing us a clear line of resistance and buyers stepping up to buy the pull back (higher pivot lows) in time we should see a breakout up through $58 vs $50.
We can see the REIT's continuing to battle with $80, as it continues to pull back mildly we could expect a breakout at the next attempt up through $80.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Staples still inching there way back to highs, behind healthcare and the bios, right ow we can see a clear out vs $147.50.
Healthcare right behind the bio's gunning to retest the all time highs, this shake out and eventually breakout should send VHT into the high $200s down the road.
IBB Bio Tech
Bio's were the first sector to take out recent highs, with the next target being the 2015 high, in time we should see a move down the road toward the $160s after this shakeout.
We can see that Utilities broke the 3rd times a charm level at $128 and is starting to form a mickey mouse flag under $136 as it continues to work its way back towards highs.
Big Picture Set Up
This ESPR is a bit more of a wild name then the typical Large Cap name, as we can see this name has been holding up and flagging under this $40 area for the past month or two and we have seen how this has been a battle ground in the past. In time when this is ready for a move up through $40 it could be ready for a move back to those prior highs.
Stop $34 for now