Broad Market Outlook
As we hit new all time highs in the S&P last week, the new area of resistance that may start to form will be this 380 level, short term support has been 360 that leaves us with a 5% trading range.
Given the current trend we have been on since November the chip shot to SPY 400 seems more likely then a dramatic move lower to an area of significant support such as SPY 320 which is a correction plus away.
This gives us a great time to prepare for when that day arrives.
This 35% drop in a month might not even seem like a big deal to you now, yet in March, it was a terrifying few weeks, especially if you were new to the market as something no one expected send the market tumbling.
Spoiler alert, the next crash will also be from something you or I never could image being the reason. This we can't prepare for other then following the charts and knowing when to raise cash and how long at minimum to wait on the side lines.
With the market stair steeping higher and most of my long term accounts fully invested (personal red flag), this is often a time when things look great, and we expect them to get even better.
This can be a great time to double check where the fire exits are before the next fire starts. In the market it is not a matter of if but when that day comes.
Before the last major drop we had a clear as day line of sand to raise cash and most of us did.
Right now the fire exits are at SPY 360, if we see a hard break below that level, it will be the time to raise some cash and wait a few weeks. If not, this was a fake fire drill and we will continue to stay long and strong.
In 2019 the crash lasted two months
In 2020 the last crash lasted a month
Given most peoples lack of impatience related to there investments, one could expect the trend of shorter crashes to continue.
It is always easier to go over this before the panic sets in so we can prepare rationally then react emotionally.
From a swing trading standpoint, all is the same, scan for the best charts and buy with the trend.
For some of the longer term buys (ETF's), I will start to place some stops near key areas of support mentioned below looking to raise cash in my highest cost basis positions while continuing to hold the lower cost basis positions regardless of what the market does.
Now before you get scared, remember we already had 2 corrections near the end of 2020 when we were hitting new highs that you don't even remember.
The next correction should not be scary, it should be a time to take advantage.
We need the shake outs for the breakouts to follow, like the one we are in currently.
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Macro Rotation Outlook
MDY Mid Caps
IWM Small Caps
Sensitive - sectors that have moderate correlations to overall market conditions.
Cyclical - sectors that are more sensitive overall market conditions.
VCR Consumer Discretionary
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
IBB Bio Tech
Big Picture Set Up
Stop vs $100 for now in this ABC from the $98 buy, if this $104 low is the new pivot, will look to up the stop vs that area this week.
AMZN has been consolidating in this area for quite some time now, will look to add above $3200 vs $3000.
DGX is still flagging under this $128 level vs $116 for now, one to keep on the radar.
Will add about $256 as FB comes back to retest its prior $240 low, if it can shake $240 it has a better chance of a sharper move higher, if it wants to continue to respect $240, could expect a slower grind higher vs that area.
FBHS setting up for its 5th attempt at $91, all the while forming higher lowers, for now the proper area would be vs $84.
GOOGL has been flagging since its last earnings, will look to add up through $1775 if its ready to break out of this flag.
NVR has been showing support around $3900 recently, looking to add up through $4050 and $4100 for a move back to highs in time vs $3900.
ODFL flagging under this $210 for the 3rd time, earnings in a few weeks but if it can have a run up to new highs before then, will be adding above $210 vs $200.
New highs tend to be met with new highs, in the short term we should expect a flush of that $47.50 area however if you are in sub $30, its just noise. Give it time.
For now will be adding above $197 vs this low, if it continues to come back into support vs $188. Will look for another trade it in.