Broad Market Outlook
It seemed like only a few weeks ago, when the feeling that the hard money trading enviroment was here to stay. Yet last week the market showed us that it really was just a few dog days of summer.
With the market retracing the last leg of its run higher (from 460 down to 430) it felt like a bigger retracement or even correction was in the cards. Yet the buyers stepping in to defend the 430 area of support and put us on a new path away from lower price action.
It seems we should expect a consoldating market for the time being, even across most sectors, the story seems to be the same. Small caps, Mid Caps, Tech and Material stocks are all showing a very similar start of a new bull flag to form.
We want to remember that when we are in this consoldating market. We need to be thinking of taking profits into resistance when things look great while increasing our confidence to add into support when things look scary.
Now the first time this occurs its often the hardest to do or see at the time. Just like two weeks ago when the market was dropping daily into 430, it was hard to be extremely bullish. However now we can see the pattern starting to develop, the more obvious these patterns become the ability to profit tends to squeeze with each attempt at those major inflection points. As more traders become aware of the new trend. We want to take full advantage when the trend is not as obvious to most yet.
For the week ahead we should be planning to take profits if the overall market can tag 460. It may even push a few points higher to make us second guess the idea of taking profits, yet that seems to be the wise move in the short term.
Enegry stock continue to be the quiet leader in this market as they seem to be the next sector on the list to test new all time highs.
While Utilities and REIT's are on the avoid list as they continue to "h" over or are sitting in long term bases that needs months to develop.
Macro Rotation Outlook
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Sensitive - sectors that have moderate correlations to overall market conditions.
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
INCY has been in this stage 1 base all summer as we can see 66 is the clear exit of this stage 1 base. It may still need some time to develop further but one that we want to keep on the radar.
ORLY has been bull flagging all summer under this 960 area and recently we can see the buyers have been holding up and defending this 920 area. Keeping this breakout on the radar for the week ahead.
Nick Neef and myself got into this UFPI last week and so far its been doing exactly what we could wish from a blue sky break out, and thats breakout to new all time highs. For now the stop is vs 103 with a short term target of 110 for now.
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